<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 12, 1996
KAUFMAN AND BROAD HOME CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1-9195 95-3666267
(STATE OR OTHER JURISDICTION OF (COMMISSION (IRS EMPLOYER
INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
10990 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90024
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 231-4000
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 1, 1996, certain subsidiaries of Kaufman and Broad Home
Corporation (the "Company" or "KBHC"), acquired all of the general and limited
partnership interests in Rayco, Ltd., a Texas-based builder of single-family
homes. Kaufman and Broad of San Antonio, Inc., acquired the general partnership
interest in Rayco, Ltd., a Texas limited partnership, from Rayco Management,
LLC, and Kaufman and Broad Holdings, Inc. acquired the limited partnership
interest from the Ray Ellison Grandchildren Trust. In addition to purchasing
Rayco, Ltd., Kaufman and Broad of San Antonio, Inc. acquired all of the issued
and outstanding shares of Satex Properties, Inc., and San Antonio Title Company,
and Kaufman and Broad Mortgage Company acquired all of the issued and
outstanding shares of Texas Homestead Mortgage Company (collectively, the
"Affiliates"). At March 1, 1996, the total purchase price of Rayco, Ltd. and the
Affiliates was estimated to be approximately $104.3 million, comprised of $80
million in cash paid on the closing date and the assumption of $24.3 million in
debt. The total purchase price was based on the net book values of the entities
purchased and the assumption of certain debt and is subject to adjustment based
on the closing balance sheets of Rayco, Ltd. and the Affiliates as of February
29, 1996 which will be finalized before May 14, 1996. To the extent the purchase
price is adjusted on such basis, any difference will be settled between the
parties. While it is anticipated that there will be adjustments to the purchase
price, the Company does not expect such adjustments to be material. The
acquisition of Rayco, Ltd. and the Affiliates was consummated pursuant to a
Purchase Agreement dated as of January 22, 1996, as amended, among Ray Ellison
Industries, Inc., Rayco Management, LLC, the Ray Ellison Grandchildren Trust,
John H. Wilome, Jack E. Biegler, Jack Robinson and the Company (the "Purchase
Agreement"). For a more complete understanding of the structure of the
transaction, reference should be made to the Purchase Agreement which is
attached to this report as Exhibit 2.1.
Rayco, Ltd. is a homebuilder and neighborhood developer, with substantially
all of its operations in the San Antonio metropolitan area. It is San Antonio's
largest single-family homebuilder, currently commanding approximately 45% of the
market. For the year ended December 31, 1995, Rayco, Ltd. delivered 2,585 homes
and generated revenues of $236.2 million.
The acquisition consideration for Rayco, Ltd. and the Affiliates was
determined by arm's-length negotiations between the parties to the Purchase
Agreement. This transaction will be accounted for as a purchase.
In connection with the acquisition of Rayco, Ltd. and the Affiliates, the
Company amended its existing domestic unsecured revolving credit agreement with
various banks to increase the borrowing capacity thereunder to $630 million from
$500 million. The additional $130 million of financing obtained by the Company
consists of a $110 million term loan facility, to be used to finance the
acquisition of Rayco, Ltd. and the Affiliates, and to refinance existing
indebtedness of Rayco, Ltd., and a $20 million revolving credit facility to be
used for general working capital requirements. The amendment to the Company's
credit facility set forth in the Fourth Amended and Restated Loan Agreement
dated February 28, 1996 among the Company, Bank of America National Trust and
Savings Association, The First National Bank of Chicago, Credit Lyonnais Los
Angeles Branch and NationsBank of Texas, N.A., as managing agents and various
other banks, provides for a maximum repayment term of 18 months for the
additional $130 million of borrowing capacity obtained.
ITEM 7(a). FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Included herein are the historical audited financial statements of Rayco,
Ltd. listed in the index below. The historical audited financial statements of
the Affiliates have not been included as they are not considered significant
pursuant to Securities and Exchange Commission guidelines.
INDEX TO FINANCIAL STATEMENTS OF RAYCO, LTD.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HISTORICAL FINANCIAL STATEMENTS OF RAYCO, LTD.
Report of Independent Auditors........................................................ 3
Balance Sheets as of December 31, 1995 and 1994....................................... 4
Statements of Income for the years ended December 31, 1995, 1994 and 1993............. 5
Statements of Partners' Equity for the years ended December 31, 1995, 1994 and 1993... 6
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993......... 7
Notes to Financial Statements......................................................... 8
</TABLE>
2
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
The Partners
Rayco, Ltd. (A Limited Partnership)
We have audited the accompanying balance sheets of Rayco, Ltd. as of
December 31, 1995 and 1994, and the related statements of income, partners'
equity, and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Rayco, Ltd. at December 31,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
San Antonio, Texas
January 30, 1996
3
<PAGE> 4
RAYCO, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash.............................................................. $ 1,173,002 $ 1,770,801
Trade accounts receivable......................................... 2,563,115 2,420,037
Accounts and notes receivable -- affiliates....................... 178,153
Inventories:
Single-family residences........................................ 30,360,991 29,089,465
Residential lots completed or in progress....................... 32,358,443 36,068,200
Building products and materials................................. 1,382,848 1,773,686
----------- -----------
64,102,282 66,931,351
Property and equipment............................................ 8,633,661 7,849,795
Less accumulated depreciation..................................... 3,178,425 2,717,872
----------- -----------
5,455,236 5,131,923
Deposits and other assets......................................... 559,433 1,969,857
----------- -----------
Total assets............................................ $74,031,221 $78,223,969
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Construction notes payable...................................... $19,662,500 $14,578,068
Acquisition and development notes payable....................... 5,442,569
Accounts payable -- trade....................................... 6,641,952 7,045,885
Accrued expenses................................................ 5,948,505 4,887,901
Accounts and notes payable -- affiliates........................ 189,294
Improved real estate notes payable.............................. 462,230 521,628
Deposits and other liabilities.................................. 918,715 1,097,811
----------- -----------
Total liabilities....................................... 33,633,902 33,763,156
Commitments and contingencies
Partners' equity.................................................. 40,397,319 44,460,813
----------- -----------
Total liabilities and partners' equity.................. $74,031,221 $78,223,969
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
RAYCO, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
Revenues:
Single-family residence sales.................... $235,970,111 $230,625,622 $204,897,270
Other............................................ 227,731 194,931 201,454
------------ ------------ ------------
Total revenues........................... 236,197,842 230,820,553 205,098,724
Expenses:
Cost of residences............................... 180,418,463 174,635,259 157,542,823
Sales and marketing.............................. 19,165,554 19,952,801 20,288,402
General and administrative....................... 9,732,353 10,682,970 8,177,619
------------ ------------ ------------
209,316,370 205,271,030 186,008,844
------------ ------------ ------------
Income from operations............................. 26,881,472 25,549,523 19,089,880
Interest expense................................... 444,466 478,547 496,695
------------ ------------ ------------
Net income......................................... $ 26,437,006 $ 25,070,976 $ 18,593,185
============ ============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
RAYCO, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
GENERAL LIMITED PARTNERS'
PARTNER PARTNER EQUITY
----------- ------------ ------------
<S> <C> <C> <C>
Balance at January 1, 1993........................ $ 184,816 $ 21,611,836 $ 21,796,652
Net income...................................... 371,864 18,221,321 18,593,185
Distribution.................................... (60,000) (2,940,000) (3,000,000)
----------- ------------ ------------
Balance at December 31, 1993...................... 496,680 36,893,157 37,389,837
Net income...................................... 501,420 24,569,556 25,070,976
Distribution.................................... (360,000) (17,640,000) (18,000,000)
----------- ------------ ------------
Balance at December 31, 1994...................... 638,100 43,822,713 44,460,813
Net income...................................... 8,367,385 18,069,621 26,437,006
Distribution.................................... (8,163,840) (22,336,660) (30,500,500)
----------- ------------ ------------
Balance at December 31, 1995...................... $ 841,645 $ 39,555,674 $ 40,397,319
=========== ============ ============
</TABLE>
See accompanying notes.
6
<PAGE> 7
RAYCO, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income......................................... $ 26,437,006 $ 25,070,976 $ 18,593,185
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation..................................... 956,901 825,013 898,835
Changes in operating assets and liabilities:
Inventories................................... 2,829,069 1,829,298 (15,609,794)
Trade accounts receivable..................... (143,078) 327,489 386,763
Deposits and other assets..................... 1,410,424 83,351 (413,287)
Accounts payable -- trade..................... (403,933) (1,321,235) 2,312,767
Accrued expenses.............................. 1,060,604 1,036,838 1,636,626
Deposits and other liabilities................ (179,096) 230,516 (122,907)
------------ ------------ ------------
Net cash provided by operating activities.......... 31,967,897 28,082,246 7,682,188
INVESTING ACTIVITIES
Property and equipment purchases................... (1,280,214) (1,065,807) (1,311,742)
FINANCING ACTIVITIES
Distributions paid................................. (30,500,500) (18,000,000) (3,000,000)
Net decrease in accounts and note
payable/receivable -- affiliates................. (367,447) (585,766) (10,544,954)
Payments on improved real estate notes payable..... (59,398) (134,413) (53,609)
Borrowings on improved real estate notes payable... 76,106
Net borrowings (payments) on construction notes
payable.......................................... 11,824,389 (2,647,320) 1,765,552
Payments on construction notes payable............. (6,739,957)
Borrowings under acquisition and development notes
payable.......................................... 8,344,248 12,242,438
Payments on acquisition and development notes
payable.......................................... (5,442,569) (13,153,041) (11,352,234)
------------ ------------ ------------
Net cash used in financing activities.............. (31,285,482) (26,176,292) (10,866,701)
------------ ------------ ------------
Change in cash..................................... (597,799) 840,147 (4,496,255)
Cash at beginning of year.......................... 1,770,801 930,654 5,426,909
------------ ------------ ------------
Cash at end of year................................ $ 1,173,002 $ 1,770,801 $ 930,654
============ ============ ============
</TABLE>
See accompanying notes.
7
<PAGE> 8
RAYCO, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Rayco, Ltd. (the Company) is a Texas limited partnership. The Company is a
homebuilder and neighborhood developer with substantially all operations in the
San Antonio metropolitan area.
Trade Accounts Receivable
The Company considers accounts receivable to be fully collectible; accordingly,
no allowance for doubtful accounts is required. If amounts become uncollectible,
they will be charged to operations when that determination is made.
Inventories
Single-family residences are stated principally at accumulated actual costs,
based upon the specific-identification method. Residential lots are stated at
accumulated cost not to exceed net realizable value. Building products and
materials are stated at the lower of cost (first-in, first-out method) or
market.
Interest Capitalization
Interest is capitalized on lot development and single-family residential
construction costs during the development and construction period. Interest on
debt directly related to lot development and single-family construction is
specifically identified and capitalized, whereas interest on the remaining
eligible inventory that is not financed through directly related debt is
capitalized using an allocation method based on the Company's actual interest
costs.
Property and Equipment
Property and equipment are stated at cost. The Company provides for depreciation
in amounts sufficient to relate the cost of depreciable assets to operations
over their estimated service lives on the straight-line method.
Income Taxes
As a partnership, the Company is not subject to federal or state income taxes.
The income of the Company is reported by the general and limited partners of
Rayco, Ltd.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. RELATED PARTY TRANSACTIONS
The Company is primarily owned by a Trust and has advances to and from various
affiliated entities for working capital purposes. At December 31, 1995 and 1994,
the balance of these advances was $178,153 and ($189,294), respectively,
consisting of net advances and repayments. All borrowings are for working
capital purposes and bear interest at the prime rate. The notes are due on
demand. Net interest expense incurred on these advances for the years ended
December 31, 1995, 1994 and 1993 was $331,930, $367,083 and $1,154,286,
respectively.
A majority of the Company's homebuyers use an affiliated company to originate
the mortgage loans. The Company maintains the servicing rights to the mortgage
loans and immediately sells the servicing rights to unrelated third parties. An
affiliated title company acts as the closing agent for the majority of the
Company's house sales.
8
<PAGE> 9
RAYCO, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
2. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company provides general and administrative services, including computer and
office facilities, legal, and other administrative functions for affiliated
companies. For the years ended December 31, 1995, 1994 and 1993 general and
administrative expense is shown net of $308,000, $60,000 and $426,000,
respectively, received from affiliates.
3. BORROWINGS
In January 1995, the Company entered into a loan agreement with a financial
institution to finance the construction of single-family residential units and
residential lots. The proceeds from this facility were used to pay off all
construction and acquisition and development notes payable. The agreement
consists of a $35,000,000 revolving line-of-credit, collateralized by the
Company's single-family residential units and residential lots. Interest is
payable monthly at prime plus 1%, and the borrowings are due on May 31, 1998.
The bank reviews the line annually, and has the option to extend the agreement
for an additional year. The Company is required, among other things, to maintain
certain financial statement ratios and a minimum net worth and is subject to
limitations on acquisitions, inventories, indebtedness, and partnership
distributions. Borrowings outstanding as of December 31, 1995 were $19,662,500.
The various loan agreements at December 31, 1994 are summarized as follows:
<TABLE>
<S> <C>
$27,000,000 revolving line of credit, interest payable monthly
at prime plus 1%, due May 1995................................ $ 7,838,111
$10,000,000 revolving line of credit, interest payable monthly
at prime plus 1 1/2% due July 1995............................ 2,841,500
$15,000,000 revolving line of credit, interest payable monthly
at prime plus 2%, due February 1995........................... 3,898,457
-----------
$14,578,068
===========
</TABLE>
Substantially all of the Company's single-family residential units are under
sales contracts to home buyers prior to construction and are pledged as
collateral for the above-described notes. Certain of the above debt is
guaranteed by the general and limited partners of Rayco, Ltd.
As of December 31, 1994, the Company had various loan agreements with financial
institutions to finance the acquisition and development of residential lots as
follows:
<TABLE>
<S> <C>
Lot acquisition loans, with interest payable at maturity at prime
plus 2%, due from October 1994 to February 1996................ $1,632,093
Lot acquisition note, with interest payable monthly at prime plus
1% (computed annually on January 1), due January 1, 1997....... 1,121,769
Other lot acquisition and development notes, with rates ranging
from prime plus 1% to 10% fixed, due from January 1994 to
November 1998.................................................. 2,688,707
----------
$5,442,569
==========
</TABLE>
Substantially all of the Company's residential lot inventory is pledged as
collateral.
Additional borrowings are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Note payable, collateralized by the Company's primary
office facility, due in monthly installments of
$13,396, including principal plus interest at 10.25%,
due January 2001..................................... $462,230 $521,628
======== ========
</TABLE>
9
<PAGE> 10
RAYCO, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
3. BORROWINGS (CONTINUED)
Minimum maturities on the office facility note are as follows:
<TABLE>
<S> <C>
1996.............................................................. $ 77,864
1997.............................................................. 79,881
1998.............................................................. 88,465
1999.............................................................. 97,971
2000.............................................................. 108,499
Thereafter........................................................ 9,550
--------
$462,230
========
</TABLE>
4. CAPITALIZED INTEREST
Interest expense for the years ended December 31, 1995, 1994 and 1993 is net of
$1,540,019, $1,152,210 and $1,988,067, respectively, in capitalized interest.
Payments for interest totaled $1,984,485 for 1995, $1,653,155 for 1994 and
$2,476,920 for 1993.
5. COMMITMENTS AND CONTINGENCIES
The Company has a lease agreement with an outside party for the rental of a home
products showroom facility. The minimum future rentals, payable monthly, amount
to $110,900 annually through 1997. Rent expense was $110,900 for each of the
years ended December 31, 1995, 1994 and 1993.
At December 31, 1995, the Company has provided letters of credit amounting to
approximately $1,433,300. The letters of credit are collateralized by GNMA
securities owned by an affiliated company. Additionally, the Company has a
$2,000,000 line of credit (zero balance as of December 31, 1995) which utilizes
the above mentioned securities as collateral.
The Company is subject to litigation in the ordinary course of business.
Management believes that the outcome of any pending litigation will not have a
materially adverse effect on the Company's business.
6. GENERAL AND ADMINISTRATIVE EXPENSES
In 1995, the Company recorded the cash surrender value relating to years prior
to 1995 of certain officers' life insurance policies and reduced general and
administrative expenses by approximately $910,000.
7. SUBSEQUENT EVENTS
On January 22, 1996, the Company's partners signed an agreement to sell their
total interests in Rayco, Ltd. to Kaufman and Broad Home Corporation. The sale
is to be completed at the end of February 1996, subject to certain conditions.
8. EXECUTIVE EMPLOYMENT AGREEMENT
Certain of the Company's executive officers participate in an employment
agreement with the Company's general and limited partner and other affiliated
companies. The agreement provides that such executive officers are entitled to
share in approximately 14% of partnership distributions.
10
<PAGE> 11
ITEM 7(b). PRO FORMA FINANCIAL INFORMATION.
KAUFMAN AND BROAD HOME CORPORATION
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Effective March 1, 1996, subsidiaries of Kaufman and Broad Home Corporation
purchased all of the general and limited partnership interests in Rayco, Ltd. In
addition, the Company purchased all of the issued and outstanding shares of
certain insignificant affiliates of Rayco, Ltd. The total purchase price of
Rayco, Ltd. and the Affiliates was based on the net book values of the entities
purchased and the assumption of certain debt. At March 1, 1996, the total
purchase price was estimated to be approximately $104.3 million, comprised of
$80 million in cash paid on the closing date and the assumption of $24.3 million
of debt. The total purchase price is subject to adjustment based on the final
closing balance sheets of Rayco, Ltd. and the Affiliates as of February 29,
1996. To the extent the purchase price is adjusted in connection with the
closing date balance sheets, any difference will be settled between the parties.
The following Kaufman and Broad Home Corporation unaudited pro forma
combined financial statements and related notes give effect to the acquisition
of Rayco, Ltd. and the Affiliates as a purchase. The Kaufman and Broad Home
Corporation unaudited pro forma combined balance sheet assumes that the
acquisition was completed as of November 30, 1995 and the Kaufman and Broad Home
Corporation unaudited pro forma combined statement of income assumes that the
acquisition was completed on December 1, 1994 for the year ended November 30,
1995. The historical financial statements of Rayco, Ltd. and the Affiliates are
for the year ended December 31, 1995 and accordingly, the historical information
for the calendar year of Rayco, Ltd. and the Affiliates has been combined with
the fiscal year of Kaufman and Broad Home Corporation for the purpose of the pro
forma presentation.
For purposes of the pro forma financial statements, the purchase price of
Rayco, Ltd. and the Affiliates was determined based on the net book values and
debt levels of those entities at December 31, 1995, resulting in a total
purchase price of approximately $104.5 million. The actual final purchase price
of Rayco, Ltd. and the Affiliates will be based on the net book values and debt
levels of those entities at February 29, 1996. The Company does not expect the
final purchase price to vary materially from that presented in the unaudited pro
forma combined financial statements.
The Kaufman and Broad Home Corporation unaudited pro forma combined
financial statements are presented for illustrative purposes only and are not
necessarily indicative of the consolidated financial position or consolidated
results of operations of Kaufman and Broad Home Corporation that would have been
reported had the acquisition occurred on the date indicated, nor do they
represent a forecast of the consolidated financial position of the Company at
any future date or the consolidated results of operations of the Company for any
future period. Furthermore, no effect has been given in the Kaufman and Broad
Home Corporation unaudited pro forma combined statement of income for operating
and synergistic benefits that may be realized through the combination of the
entities. Amounts allocated to the assets and liabilities of Rayco, Ltd. and the
Affiliates will be based on their estimated fair market values as of the
acquisition closing date. Such fair market values have not been determined at
this time. The Kaufman and Broad Home Corporation unaudited pro forma combined
financial statements, including the notes thereto, should be read in conjunction
with the historical financial statements and related notes of Rayco, Ltd.,
included herein, and the Company's historical consolidated financial statements
and related notes.
11
<PAGE> 12
KAUFMAN AND BROAD HOME CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
NOVEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
KBHC RAYCO, LTD. AFFILIATES
NOVEMBER 30, DECEMBER 31, DECEMBER 31, PRO FORMA PRO FORMA
1995 1995 1995(a) ADJUSTMENTS COMBINED
------------ ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
CONSTRUCTION:
Cash and cash equivalents................ $ 24,793 $ 1,173 $ 134 $ $ 26,100
Trade and other receivables.............. 111,620 2,741 222 114,583
Inventories.............................. 1,059,179 64,102 1,123,281
Investments in unconsolidated joint
ventures............................... 21,154 21,154
Other assets............................. 52,462 6,015 828 42,000(b) 101,305
---------- ---------- ---------- ---------- ----------
1,269,208 74,031 1,184 42,000 1,386,423
---------- ---------- ---------- ---------- ----------
MORTGAGE BANKING:
Cash and cash equivalents................ 18,589 903 19,492
Receivables:
First mortgages and mortgage-backed
securities.......................... 97,672 97,672
First mortgages held under commitment
of sale and other receivables....... 181,764 1,016 182,780
Other assets............................. 6,946 81 7,027
---------- ---------- ---------- ---------- ----------
304,971 2,000 306,971
---------- ---------- ---------- ---------- ----------
Total assets............................... $1,574,179 $ 74,031 $ 3,184 $ 42,000 $1,693,394
========== ========== ========== ========== ==========
LIABILITIES & EQUITY
CONSTRUCTION:
Accounts payable......................... $ 156,097 $ 6,642 $ 190 $ $ 162,929
Accrued expenses and other liabilities... 90,237 6,867 183 97,287
Mortgages and notes payable.............. 639,575 20,125 83,209(c) 742,909
---------- ---------- ---------- ---------- ----------
885,909 33,634 373 83,209 1,003,125
---------- ---------- ---------- ---------- ----------
MORTGAGE BANKING:
Accounts payable and accrued expenses.... 9,661 883 10,544
Notes payable............................ 151,000 1,116(c) 152,116
Collateralized mortgage obligations
secured by mortgage-backed
securities............................. 84,764 84,764
---------- ---------- ---------- ---------- ----------
245,425 883 1,116 247,424
---------- ---------- ---------- ---------- ----------
Deferred income taxes...................... 24,448 24,448
---------- ---------- ---------- ---------- ----------
Minority interests in consolidated joint
ventures................................. 2,919 2,919
---------- ---------- ---------- ---------- ----------
Partners' equity........................... 40,397 (40,397)(d)
Series B convertible preferred stock....... 1,300 1,300
Common stock............................... 32,347 106 (106)(d) 32,347
Paid-in capital............................ 188,839 4,768 (4,768)(d) 188,839
Retained earnings.......................... 190,749 (2,946) 2,946 (d) 190,749
Cumulative foreign currency translation
adjustments.............................. 2,243 2,243
---------- ---------- ---------- ---------- ----------
TOTAL EQUITY............................... 415,478 40,397 1,928 (42,325) 415,478
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES AND EQUITY............... $1,574,179 $ 74,031 $ 3,184 $ 42,000 $1,693,394
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
12
<PAGE> 13
KAUFMAN AND BROAD HOME CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED NOVEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KBHC RAYCO, LTD. AFFILIATES
NOVEMBER 30, DECEMBER 31, DECEMBER 31, PRO FORMA PRO FORMA
1995 1995 1995(a) ADJUSTMENTS COMBINED
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES...................... $ 1,396,526 $236,198 $ 8,191 $ (6,341)(e) $ 1,634,574
=========== ======== ======= ======== ===========
CONSTRUCTION:
Revenues.......................... 1,366,866 236,198 6,341 (6,341)(e) 1,603,064
Construction and land costs....... (1,119,405) (180,418) (1,299,823)
Selling, general and
administrative expenses........ (181,930) (28,898) (4,703) (2,059)(f) (217,590)
----------- --------- ------- -------- -----------
Operating income............... 65,531 26,882 1,638 (8,400) 85,651
Interest income................... 2,140 2,140
Interest expense, net of amounts
capitalized.................... (27,501) (445) (7,372)(g) (35,318)
Minority interests in pretax
income of consolidated joint
ventures....................... (584) (584)
Equity in pretax loss of
unconsolidated joint
ventures....................... (3,475) (3,475)
----------- --------- ------- -------- -----------
Construction pretax income........ 36,111 26,437 1,638 (15,772) 48,414
----------- --------- ------- -------- -----------
MORTGAGE BANKING:
Revenues:
Interest income................ 15,555 272 15,827
Other.......................... 14,105 1,578 15,683
----------- --------- ------- -------- -----------
29,660 1,850 31,510
Expenses:
Interest....................... (14,821) (228) (15,049)
General and administrative..... (5,491) (1,548) (7,039)
----------- --------- ------- -------- -----------
Mortgage banking pretax income.... 9,348 74 9,422
----------- --------- ------- -------- -----------
TOTAL PRETAX INCOME................. 45,459 26,437 1,712 (15,772) 57,836
Income taxes........................ (16,400) (609) (3,791)(h) (20,800)
----------- --------- ------- -------- -----------
NET INCOME.......................... $ 29,059 $ 26,437 $ 1,103 $(19,563) $ 37,036
=========== ========= ======= ======== ===========
EARNINGS PER SHARE.................. $ .73 $ .93(i)
=========== ===========
</TABLE>
See accompanying notes.
13
<PAGE> 14
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) This column includes combined amounts related to the following
insignificant affiliates of Rayco, Ltd. acquired by subsidiaries of
the Company: Satex Properties, Inc., Texas Homestead Mortgage
Company and San Antonio Title Company.
(b) This adjustment reflects the pro forma goodwill amount at November
30, 1995. The goodwill amount was assumed to be $42 million
(representing a $40 million premium paid over the net book values of
the acquired businesses and $2 million of other costs related to the
acquisition.) This amount does not include any adjustments that may
occur as a result of the allocation of the purchase price which will
be completed in accordance with APB Opinion No. 16, as amended.
(c) In connection with the acquisition, the Company amended its
existing domestic unsecured revolving credit agreement to increase
the borrowing capacity thereunder by $130 million. The Company then
borrowed $104.3 million under the amended facility to complete the
purchase of the acquired businesses. This pro forma adjustment
reflects the effect of that financing as if it had occurred as of
the November 30, 1995 balance sheet.
(d) This adjustment eliminates the equity of the businesses acquired as
of the date of acquisition.
(e) This adjustment reflects the elimination of revenues between Rayco,
Ltd. and the Affiliates as a result of combining the entities.
(f) The net adjustment of $2.1 million reflects the pro forma
amortization of goodwill (which is assumed to be amortized over a
five year period) of $8.4 million and the elimination of expenses
of $6.3 million between Rayco, Ltd. and the Affiliates.
(g) This adjustment reflects the pro forma effect on net interest
expense of the financing obtained for the acquisition. For purposes
of determining the pro forma effect on net interest expense, it was
assumed that none of the interest expense related to the acquisition
financing was capitalized. This adjustment also includes $1.5
million of amortization of costs related to the amendment of the
Company's existing credit facility to increase the Company's
borrowing capacity to finance the acquisition. Such costs are
assumed to be amortized over 18 months, the maximum term of the
acquisition financing obtained.
(h) This adjustment reflects the pro forma effect on consolidated income
tax expense due to the results of operations of Rayco, Ltd. and the
Affiliates, the pro forma amortization of goodwill and the pro forma
net interest expense associated with the acquisition indebtedness.
(i) The pro forma combined earnings per share is based on the weighted
average number of common and common equivalent shares of Kaufman
and Broad Home Corporation.
ITEM 7(c). EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<S> <C>
2.1 Purchase Agreement dated January 22, 1996 as amended by Amendment No. 1 to
Purchase Agreement dated February 9, 1996.
10.1 Fourth Amended and Restated Loan Agreement among the Company, Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch and NationsBank of Texas,
N.A., as managing agents and the banks listed therein, dated February 28,
1996.
23 Consent of Ernst & Young LLP.
</TABLE>
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated March 12, 1996
KAUFMAN AND BROAD HOME CORPORATION
Registrant
/s/ MICHAEL F. HENN
----------------------------------
Michael F. Henn
Senior Vice President and
Chief Financial Officer
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------------------------------------------------------------------------- ----
<C> <S> <C>
2.1 Purchase Agreement dated January 22, 1996 as amended by Amendment No. 1 to
Purchase Agreement dated February 9, 1996....................................
10.1 Fourth Amended and Restated Loan Agreement among the Company, Bank of America
National Trust and Savings Association, The First National Bank of Chicago,
Credit Lyonnais Los Angeles Branch and NationsBank of Texas, N.A., as
managing agents and the banks listed therein, dated February 28, 1996........
23 Consent of Ernst & Young LLP.................................................
</TABLE>
<PAGE> 1
EXHIBIT 2.1
________________________________________
PURCHASE AGREEMENT
________________________________________
FOR THE SALE OF
RAYCO, LTD.,
SATEX PROPERTIES, INC.,
TEXAS HOMESTEAD MORTGAGE COMPANY
AND
SAN ANTONIO TITLE CO.
DATED AS OF JANUARY 22, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1. Definitions .................................................................... 2
ARTICLE 2. Purchase and Sale ............................................................. 8
2.1. The Sale ....................................................................... 8
2.2. Purchase Price ................................................................. 9
2.3. Certain Closing Deliveries ..................................................... 9
2.4. Employment and Non-Competition Agreements ...................................... 10
2.5. Post-Closing Adjustments to Purchase Price ..................................... 10
2.6. Allocation of Purchase Price ................................................... 11
ARTICLE 3. Closing Date and Effective Time ................................................ 12
ARTICLE 4. Representations and Warranties ................................................. 12
4.1. Representations and Warranties by Industries ................................... 12
4.2. Representations and Warranties by the LLC ...................................... 28
4.3. Representations and Warranties by REGT ......................................... 42
4.4. Representations and Warranties by the Purchaser................................. 45
ARTICLE 5. Additional Agreements and Covenants ............................................ 47
5.1. Covenants of the Sellers ....................................................... 47
5.2. Covenants of the Purchaser ..................................................... 54
5.3. Environmental Assessments ...................................................... 57
5.4. Land Contracts ................................................................. 60
ARTICLE 6. Conditions to Closing .......................................................... 61
6.1. Conditions to the Obligations of the Purchaser ................................. 61
6.2. Conditions to the Obligations of the Sellers ................................... 62
ARTICLE 7. Taxes .......................................................................... 63
7.1. Tax Returns .................................................................... 63
7.2. Liability for Taxes ............................................................ 66
7.3. Section 754 Election ........................................................... 67
7.4. Tax Proceedings ................................................................ 67
7.5. Cooperation and Exchange of Information ........................................ 68
7.6. Threshold Amount; Limit on Liability ........................................... 69
7.7. Conflict........................................................................ 69
7.8. Section 338 Election ........................................................... 69
ARTICLE 8. Employee Benefits .............................................................. 70
8.1. Employees ...................................................................... 70
8.2. Service Credit to Company Employees............................................. 70
8.3. Termination of Company Employee Benefit Plans .................................. 70
8.4. Benefits Plans ................................................................. 71
8.5. Subsequent Dispositions ........................................................ 73
ARTICLE 9. Termination .................................................................... 73
9.1. Grounds for Termination ........................................................ 73
9.2. Effect of Termination .......................................................... 75
ARTICLE 10. Extent and Survival of Representations,
Warranties, Covenants and Agreements; Indemnification ........................... 77
10.1. Scope of Representations ....................................................... 77
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
10.2. Indemnification of the Purchaser ............................................... 78
10.3. Indemnification of the Sellers ................................................. 79
10.4. Survival ....................................................................... 80
10.5. Indemnification Procedures ..................................................... 80
10.6. Insurance Proceeds ............................................................. 83
ARTICLE 11. Brokers ........................................................................ 83
ARTICLE 12. Expenses ....................................................................... 84
ARTICLE 13. Notices; Miscellaneous ......................................................... 84
13.1. Notices ........................................................................ 84
13.2. Books and Records .............................................................. 85
13.3. Miscellaneous .................................................................. 86
SCHEDULES
Schedule 4.1.4 - Violations and Consents (Industries)
Schedule 4.1.5 - Defaults (Industries)
Schedule 4.1.7 - Changes (Industries)
Schedule 4.1.8 - Taxes (Industries)
Schedule 4.1.9 - Contracts, Agreements, Plans and Commitments (Industries)
Schedule 4.1.10 - Litigation (Industries)
Schedule 4.1.11 - Insurance (Industries)
Schedule 4.1.12 - Patents, Trademarks, Etc. (Industries)
Schedule 4.1.13 - Plans (Industries)
Schedule 4.1.14 - Encumbrances on Assets (Industries)
Schedule 4.1.16 - Environmental Matters (Industries)
Schedule 4.1.17 - Liabilities (Industries)
Schedule 4.1.19 - Intercompany Balances (Industries)
Schedule 4.1.28 - Employees (the Corporations)
Schedule 4.2.3 - Encumbrances on GP Interest and LP Interest
Schedule 4.2.4 - Violations and Consents (LLC)
Schedule 4.2.5 - Defaults (LLC)
Schedule 4.2.7 - Changes (LLC)
Schedule 4.2.8 - Taxes (Rayco)
Schedule 4.2.9 - Contracts, Agreements, Plans and Commitments (LLC)
Schedule 4.2.19 - Intercompany Balances (Rayco)
Schedule 4.2.25 - Warranty Claims (Rayco)
Schedule 4.2.10 - Litigation (LLC)
Schedule 4.2.11 - Insurance (LLC)
Schedule 4.2.12 - Patents, Trademarks, etc. (LLC)
Schedule 4.2.13 - Rayco Plans
Schedule 4.2.14 - Encumbrances (Rayco)
Schedule 4.2.16 - Environmental Matters (Rayco)
Schedule 4.2.17 - Liabilities (Rayco)
Schedule 4.2.23 - Flood Plains (Rayco)
Schedule 4.2.25 - Warranty Claims
Schedule 4.2.26 - Condemnation Proceedings
Schedule 4.2.28 - Employees (Rayco)
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
Schedule 4.3.3 - Encumbrances (REGT)
Schedule 4.3.4 - Violations and Consents (REGT)
Schedule 4.4.3 - Violations and Consents (Purchaser)
</TABLE>
-iii-
<PAGE> 5
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A - Form of Conveyance Agreement with respect to the GP Interest
Exhibit B - Form of Conveyance Agreement with respect to the LP Interest
Exhibit C - Form of Opinion of Counsel for the Sellers
Exhibit D-1 - Form of Opinion of Inside Counsel for the Purchaser
Exhibit D-2 - Form of Opinion of Outside Counsel to the Purchaser
Exhibit E-1 - Employment Agreement (Willome)
Exhibit E-2 - Employment Agreement (Biegler
Exhibit E-3 - Employment Agreement (Robinson)
</TABLE>
-iv-
<PAGE> 6
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement"), dated as of
January 22, 1996, among Ray Ellison Industries, Inc., a Delaware corporation
("Industries"), Rayco Management, L.L.C., a Texas limited liability company
(the "LLC"), and the Ray Ellison Grandchildren Trust ("REGT") (Industries, the
LLC and REGT being referred to herein collectively as the "Sellers"); John H.
Willome, Jack E. Biegler and Jack Robinson (collectively, the "Executive
Officers"); and Kaufman and Broad Home Corporation, a Delaware corporation (the
"Purchaser"),
W I T N E S S E T H:
WHEREAS, the LLC is the owner of a two percent general partner
interest (the "GP Interest") in Rayco, Ltd., a Texas limited partnership
("Rayco"), and is the sole general partner of Rayco; and
WHEREAS, REGT is the owner of a ninety eight percent limited
partner interest (the "LP Interest") in Rayco, and is the sole limited partner
of Rayco; and
WHEREAS, Industries is the owner of 1,000 shares (the "Satex
Shares") of capital stock, par value $1 per share ("Satex Stock"), of Satex
Properties, Inc., d/b/a World Wide Realty Better Homes and Gardens, a Texas
corporation ("Satex"), constituting all the issued and outstanding shares of
capital stock of Satex; and
WHEREAS, Industries is the owner of 100,000 shares (the "THMC
Shares") of capital stock, par value $1 per share ("THMC Stock"), of Texas
Homestead Mortgage Company, a Texas corporation ("THMC"), constituting all the
issued and outstanding shares of capital stock of THMC; and
WHEREAS, Industries is the owner of 3,125 shares (the "SATCO
Shares") of capital stock, par value $1 per share (the "SATCO Stock"), of San
Antonio Title Co., a Texas corporation ("SATCO"), constituting all the issued
and outstanding shares of capital stock of SATCO; and
WHEREAS, (i) the Purchaser desires to acquire the GP Interest
from the LLC, and the LLC desires to sell the GP Interest to the Purchaser,
(ii) the Purchaser desires to acquire the LP Interest from REGT, and REGT
desires to sell the LP Interest to the Purchaser, and (iii) the Purchaser
desires to acquire the Satex Shares, the THMC Shares and the SATCO Shares
(collectively, the "Shares") from Industries,
<PAGE> 7
and Industries desires to sell the Shares to the Purchaser, upon the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants, agreements and conditions
contained herein, the parties hereto hereby agree as follows:
ARTICLE 1.
Definitions
The terms set forth below in this Article 1 shall have the
meanings ascribed to them below or in the part of this Agreement referred to
below:
1995 Earnings Release: as defined in Section 4.4.7.
Adjusted Purchase Price: as defined in Section 2.5.
Affiliate: with respect to any person, means any person that
directly or indirectly controls, is controlled by or is under common control
with such person.
Agreed Rate: means the rate of interest per annum publicly
announced from time to time by Morgan Guaranty Trust Company of New York as its
prime commercial lending rate.
Agreement: as defined above in the preamble.
Assets: means Corporation Assets and Rayco Assets.
Balance Sheet Date: means (i) at all times prior to the end
of the Due Diligence Period, September 30, 1995, and (ii) at all times after
the end of the Due Diligence Period and the delivery of the Year-End Unaudited
Financial Statements, December 31, 1995.
Best Efforts: means a Person's best efforts in accordance
with reasonable commercial practice and without the incurrence of unreasonable
expense.
Claim Notice: as defined in Section 10.5.1.
Closing: as defined in Article 3.
Closing Date: as defined in Article 3.
Closing Date Balance Sheet: as defined in Section 2.5.
2
<PAGE> 8
Code: means the Internal Revenue Code of 1986, as amended, or
any successor law, and any regulations issued by the Internal Revenue Service
pursuant to the Internal Revenue Code or any successor law.
Commission: as defined in Section 4.4.7.
Company: means any of Rayco, Satex, THMC and SATCO
(collectively, the "Companies").
Company Employees: as defined in Section 8.1.
Confidentiality Agreement: as defined in Section 5.2.6.
Conveyance Agreements: means the conveyance agreement
substantially in the form of Exhibit A hereto with respect to the GP Interest
and the conveyance agreement substantially in the form of Exhibit B hereto with
respect to the LP Interest to be entered into between a Seller and a Purchaser
Entity pursuant to Section 2.3 hereof.
Corporations: means Satex, THMC and SATCO.
Corporation Assets: as defined in Section 4.1.14.
Due Diligence Period: means the period of time beginning at
8:00 a.m., C.S.T., on the date of this Agreement, and ending at 11:59 p.m.,
C.S.T., on February 5, 1996.
Election Period: as defined in Section 10.5.1.
Employment and Non-Competition Agreement: means (i) with
respect to John H. Willome an Employment and Non-Competition Agreement in the
form of Exhibit E-1 hereto, (ii) with respect to Jack E. Biegler, an Employment
and Non-Competition Agreement in the form of Exhibit E-2 hereto, and (iii) with
respect to Jack Robinson, an Employment and Non-Competition Agreement in the
form of Exhibit E-3 hereto.
Encumbrance: means any claim, lien, pledge, charge, security
interest, mortgage, easement, servitude, right of way, equitable interest,
option, right of first refusal or other restriction, including, without
limitation, any restriction on use, voting (in the case of any security),
transfer, receipt of income or exercise of any other attribute of ownership.
Environmental Breach: as defined in Section 5.3.3.
3
<PAGE> 9
Environmental Consultant: as defined in Section 5.3.6.
Environmental Due Diligence Period: means the period of time
beginning at 8:00 a.m., C.S.T., on the date of this Agreement, and ending at
11:59 p.m., C.S.T., on February 12, 1996.
Environmental Laws: means any and all laws, statutes,
ordinances, rules, regulations, orders, judicial or arbitral decisions or
determinations of any governmental authority or court pertaining to the
environment in effect in any jurisdiction in which any Company is conducting
business or where any of the properties or facilities of any Company is
located, including, without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"), the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Hazardous Materials
Transportation Act, as amended, the Resource Conservation and Recovery Act of
1976, as amended ("RCRA"), the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Texas Solid Waste Disposal Act,
the Texas Water Code and other comparable federal, state and local laws. The
term "hazardous substance" means any "hazardous waste," "hazardous substance,"
"pollutant," "contaminant," or "oil" as such terms are defined in any
Environmental Law, the term "release" has the meaning specified in the
Environmental Laws, and the terms "solid waste" and "disposal" have the
meanings specified in RCRA.
Environmental Statement: as defined in Section 5.3.3.
ERISA: means the Employee Retirement Income Security Act of
1974, as amended.
Excess Non-Remediation Properties: as defined in Section 5.3.5.
Exchange Act: means the Securities Exchange Act of 1934, as
amended.
Executive Officers: as defined above in the preamble.
Financial Statements: means the financial statements described
in Section 4.1.6 and Section 4.2.6.
Government Permits: as defined in Section 4.1.15.
GP Interest: as defined above in the preamble.
4
<PAGE> 10
Guaranty Federal: means Guaranty Federal Savings Bank, Dallas,
Texas.
HSR Act: means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
Identified Property: as defined in Section 5.3.6.
Indemnified Party: as defined in Section 10.5.1.
Indemnifying Party: as defined in Section 10.5.1.
Indemnity Notice: as defined in Section 10.5.4.
Industries: as defined above in the preamble.
Knowledge: with respect to an individual, means the personal
knowledge of a particular fact or other matter by such individual having had
actual notice at the time in question of such fact or other matter without any
obligation of inquiry or independent investigation. With respect to a Person
(other than an individual), "Knowledge" means the personal knowledge of a
particular fact or other matter only if (i) an individual who is serving as an
executive officer (or similar capacity) of such Person (which, in the case of
the Companies and the Sellers, are solely the Executive Officers) has Knowledge
of such fact or other matter, without attribution to such executive officer of
facts and matters within the personal Knowledge of any other Person, or (ii) an
individual who is serving as an executive officer (or similar capacity) of such
Person (which, in the case of the Companies and the Sellers, are solely the
Executive Officers) would have Knowledge of such fact or other matter if such
individual had made inquiry of other employees of such Person who would
reasonably be expected by such executive officer to have Knowledge of such fact
or other matter and who is primarily responsible for the operations of such
Person which are related to such fact or matter, without attribution to such
executive officer of facts or matters within the personal Knowledge of any
other Person who would not reasonably be expected by such executive officer to
have Knowledge of such fact or other matter or who is not primarily responsible
for the operations of such Person which are related to such fact or matter. No
executive officer of a Person (including the Executive Officers) shall have any
liability to any Person as a result of any actual or implied Knowledge or the
disclosure of such actual or implied Knowledge herein. Each of the Sellers and
the Purchaser represent to the other that each of them has caused its executive
officers to make inquiry of other employees of such Person who would
5
<PAGE> 11
reasonably be expected by such executive officer to have Knowledge of such fact
or matter.
Land Contracts: as defined in Section 5.4.
LLC: as defined above in the preamble.
LP Interest: as defined above in the preamble.
Material Adverse Effect: means (i) with respect to the
Companies, any material adverse effect on the business, financial condition,
results of operations or prospects of the Companies taken as a whole, (ii) with
respect to the Corporations, any material adverse effect on the business,
financial condition, results of operations or prospects of the Corporations
taken as a whole, (iii) with respect to Rayco, any material adverse effect on
the business, financial condition, results of operation or prospects of Rayco
taken as a whole, and (iv) with respect to the Purchaser or a Purchaser Entity,
any material adverse effect on the business, financial condition, results of
operations or prospects of the Purchaser taken as a whole.
Net Worth of the Companies: at any date, means the sum of the
combined stockholder's and partner's equity of each Company at such date, as
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied.
Non-Remediation Properties: as defined in Section 5.3.4.
Partners: means the LLC and REGT.
Partnership Agreement: means the Amended and Restated
Agreement of Limited Partnership of Rayco dated as of January 1, 1995.
Permitted Encumbrances: means (i) Encumbrances specifically
described in the Financial Statements, (ii) Encumbrances securing taxes,
assessments, governmental charges or levies, all of which are not yet due and
payable, or are being contested in good faith in the ordinary course of
business based upon a dispute as to the appropriate tax appraisal of a
particular property, so long as such contest does not involve any substantial
danger of the sale, forfeiture or loss of any material Assets, (iii)
Encumbrances securing the claims of materialmen, carriers, landlords and like
persons, all of which are not yet due and payable, or (iv) customary
restrictive covenants for subdivisions of the type developed by Rayco,
customary
6
<PAGE> 12
zoning restrictions and customary utility easements on or affecting (x) land
acquired for residential development and (y) residential real property.
Person: means any individual, firm, corporation, partnership,
joint venture, association, trust, unincorporated organization, government or
agency or subdivision thereof or any other entity.
Phase I Report or Phase II Report: as defined in Section
5.3.1.
Plan: as defined in Section 4.1.13(i).
Post-Closing Certificate: as defined in Section 2.5.
Pre-Closing Tax Period: as defined in Section 7.2.1.
Purchase Price: as defined in Section 2.2.
Purchaser: as defined above in the preamble.
Purchaser Entity: means any of the Purchaser and any
wholly-owned subsidiary of the Purchaser named in or designated pursuant to
Section 2.1 to purchase any of the Securities (collectively, the "Purchaser
Entities").
Purchaser Indemnified Loss: as defined in Section 10.2.
Purchaser's Due Authorization Notice: as defined in Section
5.2.3.
Purchaser's Notice of Breach: as defined in Section 5.2.3.
Purchaser's SEC Documents: as defined in Section 4.4.7.
Rayco: as defined above in the preamble.
Rayco Assets: as defined in Section 4.2.14.
Rayco Plan: as defined in Section 4.2.13(i).
REGT: as defined above in the preamble.
Remediation Agreement: as defined in Section 5.3.3.
SATCO, SATCO Stock and SATCO Shares: as defined above in the
preamble.
Satex, Satex Stock and Satex Shares: as defined above in the
preamble.
Securities: means the GP Interest, the LP Interest and the
Shares.
Securities Act: as defined in Section 4.4.7.
7
<PAGE> 13
Sellers: as defined above in the preamble.
Seller Affiliate: means any Affiliate of the Sellers other
than the Companies.
Seller Indemnified Loss: as defined in Section 10.3.
Shares: as defined above in the preamble.
Subsidiary: with respect to any Person, means any
corporation, partnership, joint venture, association or other business entity
more than 50% of the outstanding voting stock or other ownership interests
having ordinary voting power of which is owned, directly or indirectly, by such
Person, by one or more other Subsidiaries of such Person or by such Person and
one or more other Subsidiaries of such Person.
Taxes: as defined in Section 4.1.8.
Third Party Claim: as defined in Section 10.5.1.
THMC, THMC Stock and THMC Shares: as defined above in the
preamble.
Threshold Amount: as defined in Section 10.2.
Trust Agreement: as defined in Section 4.3.1.
Year-End Audited Financial Statements: as defined in Section
5.1.11.
Year-End Unaudited Financial Statements: as defined in
Section 5.1.11.
ARTICLE 2.
Purchase and Sale
2.1. The Sale. Upon the terms and subject to the conditions
of this Agreement, at the Closing the following transactions shall occur:
2.1.1 Industries shall sell, assign, transfer and deliver
to the Purchaser, or to (in whole or in part) a wholly-owned
subsidiary of the Purchaser designated in writing by the Purchaser,
and the Purchaser shall cause such Purchaser Entity to purchase and
acquire from Industries, the Satex Shares in consideration of $812,570
in cash;
2.1.2 Industries shall sell, assign, transfer and deliver
to the Purchaser, or to (in whole or in part) a wholly-owned
subsidiary of the Purchaser designated in writing by the Purchaser,
and
8
<PAGE> 14
the Purchaser shall cause such Purchaser Entity to purchase and
acquire from Industries, the THMC Shares in consideration of
$1,139,676 in cash;
2.1.3 Industries shall sell, assign, transfer and deliver
to the Purchaser, or to (in whole or in part) a wholly-owned
subsidiary of the Purchaser designated in writing by the Purchaser,
and the Purchaser shall cause such Purchaser Entity to purchase and
acquire from Industries, the SATCO Shares in consideration of $346,420
in cash; and
2.1.4 In consideration of $77,701,334 in cash, (i) the LLC
shall sell, assign and transfer to the Purchaser, or to (in whole or
in part) a wholly-owned subsidiary of the Purchaser designated in
writing by the Purchaser, and the Purchaser shall cause such Purchaser
Entity to purchase and acquire from the LLC, the GP Interest, and (ii)
REGT shall sell, assign and transfer to the Purchaser, or to (in whole
or in part) a wholly-owned subsidiary of the Purchaser designated in
writing by the Purchaser, and the Purchaser shall cause such Purchaser
Entity to purchase and acquire from REGT, the LP Interest;
provided, however, that any designation of a wholly-owned subsidiary of the
Purchaser by the Purchaser as a Purchaser Entity as provided above in this
Section 2.1 shall not relieve the Purchaser of any of its liability for the
agreements, representations, warranties and covenants of the Purchaser or any
Purchaser Entity contained or contemplated herein.
2.2 Purchase Price. The aggregate purchase price to be paid
by the Purchaser Entities for the Securities shall be $80 million cash (the
"Purchase Price").
2.3 Certain Closing Deliveries. Upon the terms and subject to
the conditions of this Agreement, at the Closing the following transactions
shall occur:
2.3.1 The LLC shall execute and deliver to the appropriate
Purchaser Entity, and the Purchaser shall cause the appropriate
Purchaser Entity to execute and deliver to the LLC, a Conveyance
Agreement substantially in the form of Exhibit A hereto with respect to
the GP Interest.
2.3.2 REGT shall execute and deliver to the appropriate
Purchaser Entity, and the Purchaser shall cause the appropriate
Purchaser Entity to execute and deliver to REGT, a
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Conveyance Agreement substantially in the form of Exhibit B hereto
with respect to the LP Interest.
2.3.3 Industries shall deliver to the appropriate Purchaser
Entity certificates representing the Shares, together with stock
powers executed in blank.
2.3.4 Each Purchaser Entity shall deliver its respective
portion of the Purchase Price to the appropriate Seller at Closing by
wire transfer in federal or other immediately available funds to an
account or accounts designated at least two business days prior to the
Closing Date by the Sellers.
2.4 Employment and Non-Competition Agreements. At the
Closing, (i) John H. Willome and Rayco shall execute and deliver an Employment
and Non-Competition Agreement in the form of Exhibit E-1, (ii) Jack E. Biegler
and Rayco shall execute and deliver an Employment and Non-Competition Agreement
in the form of Exhibit E-2, and (iii) Jack Robinson and Rayco shall execute and
deliver an Employment and Non-Competition Agreement in the form of Exhibit E-3.
2.5 Post-Closing Adjustments to Purchase Price. As soon as
practicable after the Closing, and in any event within 45 days following the
Closing Date, the Purchaser, at the Purchaser's cost and expense, shall cause
to be delivered to each of the Sellers a balance sheet of each of the Companies
as of the Closing Date, including the notes relating thereto, prepared in
accordance with generally accepted accounting principles (the "Closing Date
Balance Sheet") applied on a basis consistent with that used in preparation of
the Financial Statements, a statement of the Net Worth of the Companies as of
the Closing Date, and a certificate to the effect that such statement has been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with that used in the preparation of the Financial
Statements and the terms of this Agreement (the "Post-Closing Certificate").
Within 30 days following the delivery of such information, the Sellers shall
notify the Purchaser whether the Sellers agree or disagree with the
determination of the Net Worth of the Companies set forth in the Post-Closing
Certificate. If the Sellers disagree with such determination, the Closing Date
Balance Sheet shall be audited, and the Net Worth of the Companies as of the
Closing Date shall be determined by Ernst & Young or another independent public
accounting firm selected by mutual agreement of the Sellers and the
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Purchaser. The determination of the Net Worth of the Companies made by such
accounting firm shall be final and binding on the Purchaser and the Sellers and
the fees and expenses of such accounting firm shall be borne equally by the
Sellers and the Purchaser. If the Net Worth of the Companies as of the Closing
Date, as finally determined pursuant to this Section 2.5, is greater than $40
million, the Purchaser shall pay to the Sellers the amount of such excess, plus
interest thereon at the Agreed Rate from (and including) the Closing Date to
(but excluding) the date of such payment. If the Net Worth of the Companies as
of the Closing Date, as finally determined pursuant to this Section 2.5, is
less than $40 million, the Sellers shall pay to the Purchaser the amount of
such deficiency, plus interest thereon at the Agreed Rate from (and including)
the Closing Date to (but excluding) the date of such payment. The Purchase
Price plus the amount of such excess or less the amount of such deficiency (but
excluding the interest due on such excess or deficiency) shall be referred to
hereinafter as the "Adjusted Purchase Price." Any payment contemplated by this
Section 2.5 shall be made by wire transfer in federal or other immediately
available funds on or before the fifteenth day following the final
determination thereof.
2.6 Allocation of Purchase Price. The Adjusted Purchase
Price shall be allocated among the Securities as follows:
2.6.1 The consideration for the Satex Shares shall be an
amount of cash equal to the stockholder's equity of Satex as shown on
the Closing Date Balance Sheet.
2.6.2 The consideration for the THMC Shares shall be an
amount of cash equal to the stockholder's equity of THMC as shown on
the Closing Date Balance Sheet.
2.6.3 The consideration for the SATCO Shares shall be an
amount of cash equal to the stockholder's equity of SATCO as shown on
the Closing Date Balance Sheet.
2.6.4 The consideration for the GP Interest and the LP
Interest shall be all of the Adjusted Purchase Price less the
aggregate amount of cash consideration allocated to the Shares in
accordance with Sections 2.6.1, 2.6.2 and 2.6.3 above, and such
consideration shall be allocated among the GP Interest and the LP
Interest in accordance with the Partnership Agreement.
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ARTICLE 3.
Closing Date and Effective Time
The closing of the purchase and sale of the Securities
contemplated hereby (the "Closing") shall be held at the offices of Matthews &
Branscomb, 106 S. St. Mary's, Suite 800, San Antonio, Texas 78205, at 10:00
a.m., San Antonio, Texas time, on the later of (i) February 29, 1996, or (ii)
the date that is three business days after the waiting period (and any
extension thereof) under the HSR Act applicable to the transactions
contemplated herein shall have expired or been terminated, or at such other
place or time as the Purchaser and the Sellers may mutually agree. The date of
the Closing is referred to herein as the "Closing Date"; however, for purposes
of determining the anniversary date of the Closing Date, the Closing Date (if,
and only if, it is February 29, 1996) shall be deemed to be February 28, 1996.
ARTICLE 4.
Representations and Warranties
4.1 Representations and Warranties by Industries. Except as
otherwise disclosed in this Agreement or the Schedules attached hereto,
Industries hereby represents and warrants that:
4.1.1 Organization and Good Standing. Industries and each
of the Corporations is a corporation duly organized, validly existing
and in good standing under the laws of their respective jurisdictions
of incorporation, and each has all requisite corporate power and
authority to own and lease the properties and assets it currently owns
and leases and to carry on its business as such business is currently
conducted. The character of the properties and assets now owned or
leased by each Corporation and the nature of the business now
conducted by any Corporation does not require any Corporation to be
licensed or qualified to do business as a foreign corporation in any
jurisdiction. Industries heretofore has delivered or otherwise made
available to the Purchaser true, correct and complete copies of the
certificate of incorporation and by-laws, each as amended to the date
hereof, of each Corporation.
4.1.2 Corporate Authority; Authorization of Agreement.
Industries has all requisite corporate power and authority to execute
and deliver this Agreement and the various other
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agreements contemplated herein to which Industries is a party, to
consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof and thereof to be
performed by it. The execution and delivery by Industries of this
Agreement and the various other agreements contemplated herein to
which Industries is a party, the performance by Industries of all the
terms and conditions hereof and thereof to be performed by it and the
consummation of the transactions contemplated hereby and thereby have
been duly authorized and approved by all requisite corporate action on
the part of Industries. This Agreement constitutes, and the various
other agreements contemplated herein to which Industries is a party,
when executed and delivered, will constitute, the valid and binding
obligation of Industries enforceable against it in accordance with its
and their terms, except that the enforceability of this Agreement and
the various other agreements contemplated herein to which Industries
is a party is subject to applicable bankruptcy, insolvency or other
similar laws relating to or affecting the enforcement of creditors'
rights generally and to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at
law).
4.1.3 Capitalization. The authorized capital stock of
Satex consists solely of 100,000 shares of Satex Stock, of which
1,000 shares are issued and outstanding on the date hereof. The
authorized capital stock of THMC consists solely of 1,000,000 shares
of THMC Stock, of which 100,000 shares are issued and outstanding on
the date hereof. The authorized capital stock of SATCO consists
solely of 50,000 shares of SATCO Stock, of which 3,125 shares are
issued and outstanding on the date hereof. All such outstanding
shares of Satex Stock, THMC Stock and SATCO Stock are owned
beneficially and of record by Industries, free and clear of all
Encumbrances. Except as contemplated by this Agreement, there are no
outstanding subscriptions, options, convertible or exchangeable
securities, warrants, calls or other obligations of any kind issued or
granted by, or binding upon, Industries or any Corporation to purchase
or otherwise acquire any security of, equity interest in or other
ownership interest in any Corporation. The Shares have been duly
authorized and validly issued and are fully paid and nonassessable.
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Industries has full legal right to sell, assign and transfer the
Shares to the appropriate Purchaser Entity and will, upon delivery of
certificates representing the Shares to the appropriate Purchaser
Entity pursuant to the terms hereof, transfer to such Purchaser Entity
good and valid title to the Shares free and clear of any Encumbrances
created by or through Industries or any predecessor.
4.1.4 No Violation. Except as set forth in Schedule 4.1.4,
this Agreement and the execution and delivery hereof by Industries do
not, and the fulfillment and compliance with the terms and conditions
hereof and the consummation of the transactions contemplated hereby
will not:
(i) violate or conflict with any provision of the
certificate of incorporation or bylaws of Industries or any
Corporation;
(ii) violate or conflict with any provision of,
or, except with respect to the HSR Act, require any filing,
consent, authorization or approval under, any law or
administrative regulation (including, without limitation, any
Environmental Law) or any judicial, administrative or
arbitration order, award, judgment, writ, injunction or decree
applicable to or binding upon Industries or any Corporation;
(iii) conflict with, result in a breach of,
constitute a default under (whether with notice or the lapse
of time or both), or accelerate or permit the acceleration of
the performance required by, or require any consent,
authorization or approval under (a) any mortgage, indenture,
loan or credit agreement or any other material agreement or
instrument to which Industries or any Corporation is a party
or by which Industries or any Corporation is bound or to which
any of their respective properties is subject or (b) any
material lease, license, contract or other agreement or
instrument to which Industries or any Corporation is a party
or by which any of them is bound or to which any of their
respective properties is subject; or
(iv) result in the creation or imposition of any
Encumbrance (other than a Permitted Encumbrance) upon any
material assets of any Corporation.
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4.1.5 No Default: Compliance with Laws and Regulations.
Except as set forth on Schedule 4.1.5 or as disclosed in the Financial
Statements:
(i) No Corporation is in default under, and no
condition exists that with notice or lapse of time or both
would constitute a default under, (a) any mortgage, loan
agreement, indenture, evidence of indebtedness or other
instrument evidencing borrowed money to which any Corporation
is a party or by which any Corporation or any of its
properties is bound, (b) any judgment, order or injunction of
any court, arbitrator or governmental agency or (c) any other
material agreement, contract, lease, license or other
instrument; and
(ii) No Corporation is in violation in any
material respect of any law, regulation, order, judgment or
decree of any federal or state court or governmental authority
(including, without limitation, any law, regulation, order,
judgment or decree relating to immigration, labor or
employment matters) or any Government Permit applicable to its
respective businesses and operations.
4.1.6 Financial Statements of the Corporations. Industries
(a) heretofore has delivered to the Purchaser copies of (i) the
audited balance sheets of THMC and SATCO as of December 31, 1994, and
the related audited statements of income and cash flows for the year
ended December 31, 1994, including the notes relating thereto,
certified by Ernst & Young, independent public accountants, (ii) the
unaudited balance sheet of SATEX as of December 31, 1994, and the
related unaudited statement of income and cash flows for the year
ended December 31, 1994, and (iii) the unaudited balance sheet of each
Corporation as of September 30, 1995, and the related unaudited
statements of income and cash flows for the 9-month period then ended
and (b) will deliver to the Purchaser copies of the Year-End Unaudited
Financial Statements of the Corporations and the Year-End Audited
Financial Statements of the Corporations. Such financial statements
fairly present or, with respect to those financial statements to be
delivered hereunder, will fairly present, in accordance with the basis
of accounting described in the notes to such
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financial statements, the financial position of each of the
Corporations, as the case may be, as of the date indicated and the
results of operations and changes in the financial position of each of
the Corporations, as the case may be, for the period then ended. All
such financial statements have been or, with respect to those
financial statements to be delivered hereunder, will be prepared in
accordance with generally accepted accounting principles consistently
applied.
4.1.7 Absence of Certain Changes. Except as disclosed to
the Purchaser in this Agreement, the Financial Statements, Schedule
4.1.7 or in any other schedule to this Agreement, since the Balance
Sheet Date there has not been:
(i) any material adverse change in the business,
financial condition, results of operations or prospects of the
Corporations taken as a whole;
(ii) any damage, destruction or loss incurred or
suffered by the Corporations, whether covered by insurance or
not, which has had, or would reasonably be expected to have, a
Material Adverse Effect on the Corporations;
(iii) any change by any Corporation in accounting
methods or principles, except for changes required as a result
of changes in generally accepted accounting principles;
(iv) any issuance by any Corporation of any shares
of capital stock, or any repurchase or redemption by any
Corporation of any shares of its capital stock;
(v) any sale, lease or other disposition or
relinquishment of, or execution and delivery by any
Corporation of any agreement or commitment contemplating the
sale, lease or other disposition or relinquishment of,
properties and assets of such Corporation other than (a) the
sale or other disposition or relinquishment by any Corporation
of mortgages, mortgage-backed securities and related
documents in the ordinary course of business and (b) the sale,
lease or other disposition or relinquishment of properties or
assets by any Corporation in the ordinary course of business
in an amount, individually or in the aggregate, not in excess
of $20,000;
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(vi) any merger or consolidation of any
Corporation with any other corporation, person or entity or
any acquisition by any Corporation of the stock or business of
another corporation, partnership or other entity, or any
action taken or any commitment entered into with respect to or
in contemplation of any liquidation, dissolution,
recapitalization, reorganization or other winding up of the
business or operation of any Corporation;
(vii) any borrowing, agreement to borrow funds or
assumption, endorsement or guarantee of indebtedness by any
Corporation or any termination or material amendment of any
evidence of indebtedness, contract, agreement, deed, mortgage,
lease, license or other instrument, commitment or agreement to
which any Corporation is bound or by which any of them or
their respective properties is bound other than such
borrowing, agreement to borrow, termination or amendment that
is in the ordinary course of business and is, individually or
in the aggregate, not in excess of $20,000;
(viii) any declaration or payment of any dividend
on, or any other distribution with respect to, the equity
securities of any Corporation (except for dividends or
distributions as provided for in Section 5.1.8 of this
Agreement);
(ix) any increase in the compensation payable or
to become payable by any Corporation to the directors,
officers or employees of any Corporation (other than (a) as
the Corporations may be contractually obligated or (b) as
may be made in the ordinary course of business and consistent
with past practices as a result of normal annual employee
performance reviews; provided, however, that any increase
for any employee as a result of normal annual employee
performance reviews shall not exceed 5% of the compensation
paid by the relevant Corporation to such employee in the
year immediately preceding such increase), or any increase
in benefits or benefit plan costs (other than costs outside
of the control of the applicable Corporation), or any increase
in any bonus, insurance, pension, compensation or other
benefit plan made for or with or covering any directors,
officers or employees of any Corporation;
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(x) except as agreed to in writing by the
Purchaser, any employment, deferred compensation, consulting,
severance, indemnification or similar agreement entered into
or made by any Corporation with any of its directors, officers
or employees, or grant of any severance or termination pay to
any director, officer or employee of any Corporation, or any
collective bargaining agreement or other obligation to any
labor organization or employee incurred or entered into by any
Corporation;
(xi) any distribution of Plan assets, other than
distributions relating to the payment of benefits pursuant to
any Plan, made for the purpose of reducing the amount by which
the value of the assets of any such Plan at the time of
distribution exceeds the present value of all accrued benefits
(whether or not forfeitable) under such Plan at the time of
distribution;
(xii) any mortgage, pledge or Encumbrance (other
than Permitted Encumbrances) on any of the assets, tangible or
intangible, of any Corporation;
(xiii) any making of any loan, advance or capital
contribution to or investment in any Person (other than a loan
or advance in an amount not in excess of $10,000);
(xiv) any labor dispute, other than routine
individual grievances, or any activity or proceeding by a
labor union or representative thereof to organize any
employees of any Corporation or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with
respect to any employees of any Corporation; or
(xv) any contract or commitment to do any of the
foregoing or to take any action that, if taken prior to the
date hereof, would have made any representation or warranty in
this Section 4.1 incorrect in any material respect.
4.1.8 Taxes. For purposes of this Agreement, "Taxes" means
(a) all federal, foreign, state or local net or gross income (whether
measured by or based on income), gross receipts, sales, use, ad
valorem, valued-added, franchise, asset, withholding, payroll,
employment, registration, conveyancing, excise, property (real or
personal) or similar taxes, assessments, duties,
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fees, levies or other governmental charges, together with any interest
thereon, any penalties, additions to tax or additional amounts with
respect thereto and any interest in respect of such penalties,
additions or additional amounts and/or (b) liability for the payment
of any consolidated or combined tax or any obligation to indemnify
another Person on account of Taxes, including any interest thereon,
any penalties, additions to tax or additional amounts with respect
thereto and any interest in respect of such penalties, additions or
additional amounts, of the type described in clause (a) of this
sentence. The income, assets and operations of the Corporations have
been correctly reflected in all material Tax returns for all required
Pre-Closing Tax Periods. The Corporations and Industries have (or
will have by the due date for such return) caused timely to be filed
with the appropriate federal, state, local and other governmental
authorities all material returns, information returns or statements,
and reports with respect to Taxes required to be filed on or before
the Closing by, or with respect to, the Corporations for any
Pre-Closing Tax Period and have (or will have by the Closing) caused
to be paid or deposited or made adequate provision (in accordance with
generally accepted accounting principles) for the payment of all Taxes
due. Except as provided on Schedule 4.1.8, (i) there is no material
Tax related claim, audit, action, suit, proceeding or investigation
now pending or threatened against, with respect to or that could
directly impact any of the Corporations, (ii) neither Industries nor
any of the Corporations is subject to any agreement or consent
pursuant to Section 341(f) of the Code, (iii) there are no material
liens for Taxes upon the assets of any Corporation except liens for
current Taxes not yet due, (iv) Industries is not subject to
withholding under Section 1445 of the Code with respect to the
transactions contemplated hereunder, (v) none of the Corporations has
been a member of a consolidated or combined group other than one in
which Industries or Ellison, Inc. was the common parent and (vi) none
of the Corporations is under any contractual obligation to pay the
Taxes of another Person.
4.1.9 Contracts, Agreements, Plans and Commitments.
Schedule 4.1.9 sets forth a complete list of the following contracts,
agreements, plans and commitments to which any Corporation is a party
or by which any of them or any of their material properties are bound
as of
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the date hereof:
(i) any contract, commitment or agreement which
involves aggregate expenditures by any Corporation of more
than $100,000 per year (other than contracts, commitments or
agreements listed pursuant to any other provisions of this
Section 4.1.9);
(ii) any indenture, trust, loan agreement, note or
other agreement under which any Corporation has outstanding
indebtedness, obligations or liabilities (in each case,
contingent or otherwise) for borrowed money;
(iii) any lease or sublease for the use or
occupancy of real property which involves aggregate
expenditures by any Corporation of more than $50,000 per year,
together with a list of the location of such leased property,
the date of termination of such arrangements, the name of the
other party and the annual rental payments required to be made
for such arrangements;
(iv) any contract or agreement with Industries or
any Affiliate of Industries or any director or officer of
Industries or any of its Affiliates or any "associates" or
members of the "immediate family" (as such terms are
respectively defined in Rule 12b-2 and Rule 16a-1 of the
Exchange Act) of any such director or officer;
(v) any agreement that restricts the right of any
Corporation to engage in any type of business;
(vi) any guaranty, direct or indirect, by
Industries or any Affiliate of Industries, of any contract,
lease or agreement entered into by any Corporation;
(vii) any partnership, joint venture or other
similar agreement or arrangement;
(viii) any license, franchise or similar agreement;
(ix) any agreement relating to the acquisition or
disposition of any business or assets of a business in excess
of $10,000 (whether by merger, sale of stock, sale of assets or
otherwise);
(x) any agreement of surety, guarantee or
indemnification; and
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(xi) any other agreement, commitment, arrangement
or plan not made in the ordinary course of business that is
material to the Corporations taken as a whole.
To the Knowledge of Industries, each of such
contracts and agreements is in full force and effect and, except as
set forth on Schedule 4.1.9 or in the Financial Statements, no party is
in default under or in breach of, and no event has occurred that with
notice or lapse of time or both would constitute a default or breach
of, the terms, conditions or provisions of such contracts and
agreements.
4.1.10 Litigation. Except as set forth in Schedule 4.1.10:
(i) To the Knowledge of Industries, there are no
actions, suits, investigations or proceedings pending or
threatened against or affecting any Corporation or any of
their respective properties seeking (a) damages or (b) any
other relief that would delay, prevent or hinder the
consummation of the transactions contemplated by this
Agreement;
(ii) To the Knowledge of Industries, there is not
any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality
or arbitrator outstanding or pending relating specifically to
any Corporation which is not generally applicable to other
companies in the mortgage loan origination, title insurance
agency or residential real estate brokerage industries; and
(iii) To the Knowledge of Industries, no Corporation
is charged with a violation of, or threatened with a charge of
a violation of, any provision of any material law or
regulation relating to any aspect of its business.
4.1.11 Insurance. Schedule 4.1.11 sets forth a list of all
material insurance policies (other than title insurance policies) of
each Corporation, by which each Corporation or any of their respective
properties or assets are covered against losses, all of which are now
in full force and effect. There is no claim by any Corporation
pending under any such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or
in respect of which such underwriters have reserved their rights. All
premiums payable under all such
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policies and bonds have been paid timely and the Corporations have
otherwise complied fully with the terms and conditions of such
policies. Such policies are of the type and in amounts customarily
carried by Persons conducting businesses similar to those of the
Corporations. Industries does not have Knowledge of any threatened
termination of, premium increase with respect to, or material
alteration of coverage under, any of such policies. To the extent
that any such policy is owned or held by Industries or any Industries
Affiliate, it may be terminated after the Closing Date; provided,
however, that Industries agrees to (i) maintain such policies (or
policies of substantially the same nature) in full force and effect at
all times until the close of business on the Closing Date and (ii)
cooperate with the Purchaser in obtaining replacement insurance
policies at all times until the close of business on the Closing Date.
Neither SATCO nor any other Corporation is an insurer under any title
insurance policy.
4.1.12 Patents, Trademarks and Copyrights. Each Corporation
has the rights to use all material patents, trademarks, trade names,
service marks, trade secrets, copyrights and other proprietary
intellectual property rights necessary for the conduct of its
business. Except as set forth in Schedule 4.1.12, there is no
existing or, to the Knowledge of Industries, threatened infringement,
misuse or misappropriation by others of any such trademarks, trade
names, service marks, trade secrets, copyrights and other proprietary
intellectual property rights that is material to the Corporations
taken as a whole, there is no pending or threatened claim by any
Corporation against others for any such infringement, misuse or
misappropriation, and there is no pending proceeding involving any
claim, and no Corporation has Knowledge or has received any written
notice or claim, of any infringement, misuse or misappropriation by
any Corporation of any patent, trademark, trade name, service mark,
trade secret, copyright or other proprietary intellectual property
right owned by any third party.
4.1.13 Employee Benefit Matters. Schedule 4.1.13 sets forth
a list of all of the following (true and complete copies of which,
together with such other related documents as the Purchaser may
reasonably request, have been made available to the Purchaser):
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(i) (a) each "employee benefit plan", as such
term is defined in Section 3(3) of ERISA, which is covered by
Title I of ERISA, which is maintained, or otherwise
contributed to, by any Corporation or any Affiliate of any
Corporation for the benefit of the employees of any
Corporation (a "Plan"), and (b) if the Plan is funded through
a trust or any third party funding vehicle, a copy of the
trust or other funding agreement (including all amendments
thereto) and the latest financial statements thereof;
(ii) each management or employment contract or
contract for personal services between any Corporation or any
Affiliate of any Corporation and any officer, consultant,
director or employee of any Corporation that is not by its
terms terminable at will or on not more than 60 days' notice
without payment or penalty by any Corporation;
(iii) each other plan, contract or arrangement
providing for bonuses, pensions, deferred compensation,
retirement plan payments, profit sharing, incentive pay,
hospitalization or medical expense, insurance for any officer,
consultant, director, annuitant or employee of any Corporation
or members of their respective families (other than directors'
and officers' liability policies), whether or not insured;
(iv) each policy regarding severance, vacations
and sick time and each personnel manual; and
(v) each collective bargaining agreement or labor
contract or any other agreement to which any Corporation is a
party or which covers any employee of any Corporation.
Neither Industries, any Corporation, nor any
entity that, with any Corporation, would be treated as a single
employer under Section 414 of the Code maintains or contributes to, or
has within the past six years maintained or contributed to, any
employee benefit plan subject to Title IV of ERISA or Section 412 of
the Code, or any "multiemployer plan" as described in Section 3(37) of
ERISA. Each Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during
the period from its adoption to date. To the Knowledge
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of Industries, with respect to each Plan, such Plan and each Company
(i) is not in material violation of the requirements of the terms of
the Plan, ERISA, the Code or the Age Discrimination in Employment Act,
regulations issued thereunder, or other applicable law, and (ii) is
not in material violation of the reporting and disclosure requirements
of Title I of ERISA. To the Knowledge of Industries, there is no
circumstance that (i) has resulted in a material liability (whether or
not asserted as of the date hereof) of any Corporation arising under
or related to any other employee benefit plan (as defined in section
3(3) of ERISA), whether or not terminated prior to the date hereof,
which is not a Plan, or (ii) has resulted in a material adverse change
in the assets of any Plan (other than in connection with any
transaction contemplated by this Agreement) from those reflected on
the most recent annual report, actuarial valuation or financial
statements for such Plan furnished, or otherwise made available, to
the Purchaser, other than any such change that is necessary to comply
with applicable law. Except as agreed to in writing by the Purchaser,
there are no post-retirement medical or health plans in effect with
respect to employees of any Corporation, except as required by Section
4980B of the Code. Except as agreed to in writing by the Purchaser,
no employee of any Corporation will become entitled to any retirement,
severance or similar benefit or enhanced benefit solely as a result of
the transactions contemplated hereby.
4.1.14 Title to Assets. Except as set forth in Schedule
4.1.14, each Corporation has good and indefeasible title to all of its
real properties purported to be owned in fee, and good and
merchantable title to all of its other material properties and assets,
real and personal, reflected on the Financial Statements or purported
to have been acquired by it after the date thereof (except for assets
held under capitalized leases and properties and assets sold since the
date of the Financial Statements) (collectively, the "Corporation
Assets"), in each case free and clear of any Encumbrances other than
Permitted Encumbrances. To the Knowledge of Industries, there are no
events or developments affecting any such property or assets (whether
real or personal) pending or threatened, which might materially
detract from the value of such property or assets or materially
interfere with any present or intended use of any such property or
assets.
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4.1.15 Government Permits. Each Corporation has all
permits, licenses, consents and approvals ("Government Permits")
necessary under federal, state or local law to own, operate, use and
maintain its business in the manner in which it is now being
conducted, except for Government Permits the failure of which to be
obtained or given, individually and in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on
the Corporations. There are no proceedings pending, or to the
Knowledge of Industries threatened, that seek the revocation,
cancellation, suspension or modification of any material
Government Permit.
4.1.16 Environmental Compliance. Except as set forth in
Schedule 4.1.16, to the Knowledge of Industries, (a) neither any
Corporation nor any property owned or controlled by any Corporation is
subject to any existing, pending or threatened action, suit,
investigation, inquiry or proceeding by any governmental authority or
other third party under, or in violation of, or subject to any
remedial or other obligations under, any Environmental Law, (b) all
material notices, Government Permits, licenses or similar
authorizations, if any, required to be obtained or filed under any
Environmental Law in connection with the operations of the business of
each Corporation, including, without limitation, past or present
treatment, storage, disposal or release of a hazardous substance into
the environment, have been duly obtained or filed, (c) there has been
no release or disposal of any hazardous substances on the properties,
now or previously owned, leased or operated by any Corporation, or in
connection with the operation of the business of any Corporation
except in compliance with applicable Environmental Laws and in a
manner that would reasonably be expected not to result in any material
liability to any Corporation under any Environmental Law, (d) there
are not and have never been any underground storage tanks, radioactive
materials, or radon at any property now or previously owned or
operated by any Corporation, (e) all environmental assessments,
investigations, audits and similar documents relating to any property
now or previously owned or operated by any Corporation of which
Industries has Knowledge have been delivered to Purchaser prior to
Closing, (f) no property now or previously owned, leased or operated
by any Corporation is listed or proposed for listing, on the
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National Priorities List promulgated pursuant to CERCLA, on CERCLIS
(as defined in CERCLA) or on any similar federal, state or foreign
list of sites requiring investigation or clean-up.
4.1.17 Absence of Undisclosed Liabilities. Except as set
forth in Schedule 4.1.17 or in any other Schedule to this Agreement,
no Corporation has any outstanding liabilities (whether contingent or
otherwise) or indebtedness, current or long-term, other than
liabilities or indebtedness (i) reflected in the Financial Statements,
(ii) incurred since the date of such Financial Statements in the
ordinary course of business or (iii) that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect on the Corporations.
4.1.18 Books and Records. The books of account, minute
books, stock record books and other records of Industries and each
Corporation, all of which have been made available to the Purchaser,
are complete and correct in all material respects and have been
maintained in accordance with sound business practices.
4.1.19 Intercompany Accounts. Schedule 4.1.19 contains a
complete list of all intercompany balances as of the Balance Sheet
Date between Industries and its Affiliates, on the one hand, and any
Corporation on the other hand.
4.1.20 No Misstatements. None of the information set forth
in this Agreement (or in the Schedules attached hereto) with respect
to Industries or any of the Corporations contains any untrue statement
of a material fact or omits to state a material fact necessary in
order to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
4.1.21 Subsidiaries. None of the Corporations have any
equity interest in any other Person.
4.1.22 Endangered Species. To the Knowledge of Industries,
there are no endangered species or protected natural habitat, flora or
fauna located on any of the Corporations' real property. To the
Knowledge of Industries, no portions of such real estate are
designated as wetlands. To the Knowledge of Industries, none of the
Corporations have received any notice
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(formal or informal) regarding any of the matters described in the two
preceding sentences.
4.1.23 Flood Plains. To the Knowledge of Industries, none
of the Corporations' real property is located within a 100-year flood
plain as designated by any United States Governmental Entity.
4.1.24 Seismic Safety Problems. To the Knowledge of
Industries, no seismic safety problems relating to any of the
Corporations' real property would prevent or impair residential
development thereon.
4.1.25 No Latent Defects; Product Warranties; Product
Liability. To the Knowledge of Industries, there are no warranty
claims exceeding $5,000 per individual house pending or settled in or
which resulted in home repurchases during the period from January 1,
1995 to the date of this Agreement against any of the Corporations,
nor is there any basis for any such claims. None of the products sold
by any of the Corporations is covered by any guaranty, warranty or
other indemnity.
4.1.26 Condemnation Proceedings. To the Knowledge of
Industries, none of the Corporations nor Sellers has received any
notice of any condemnation or eminent domain proceedings, or
negotiations for the purchase of any real property in lieu of
condemnation, and no condemnation or eminent domain proceedings or
negotiations have been commended or threatened in connection with any
of the foregoing.
4.1.27 Moratorium. To the Knowledge of Industries, there
are no moratoriums (including, but not limited to, utility
moratoriums) or other restrictions by governmental entities
responsible for issuing approvals or according other entitlements with
respect to any real property owned or controlled by the Corporations.
4.1.28 Employees. Except as set forth on Schedule 4.1.28,
to the Knowledge of Industries, none of the employees of any
Corporation has indicated to Industries or any Corporation that he or
she intends to resign or retire as a result of the transactions
contemplated by this Agreement or otherwise within thirty (30) days
after the Closing Date.
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4.2. Representations and Warranties by the LLC. Except as
otherwise disclosed in this Agreement or the Schedules attached hereto, the LLC
hereby represents and warrants that:
4.2.1 Organization and Good Standing. The LLC is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Texas, and has all requisite
power and authority to own and lease the properties and assets it
currently owns and leases and to carry on its business as such
business is currently conducted. Rayco is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Texas, and has all requisite partnership power and authority
to own and lease the properties and assets it currently owns and
leases and to carry on its business as such business is currently
conducted. The character of the properties and assets now owned or
leased by the LLC or Rayco and the nature of the business now
conducted by them do not require either of them to be licensed or
qualified to do business as a foreign corporation or limited
partnership in any jurisdiction. The LLC heretofore has delivered or
otherwise made available to the Purchaser true, correct and complete
copies of the certificate of organization and regulations or
equivalent governing instruments (including, without limitation, the
Partnership Agreement), each as amended to the date hereof, of the LLC
and Rayco.
4.2.2 Authority; Authorization of Agreement. The LLC has
all requisite power and authority to execute and deliver this
Agreement and the various other agreement contemplated herein to which
the LLC is a party, to consummate the transactions contemplated hereby
and thereby and to perform all the terms and conditions hereof and
thereof to be performed by it. The execution and delivery by the LLC
of this Agreement and the various other agreements contemplated herein
to which the LLC is a party by the LLC, the performance by the LLC of
all the terms and conditions hereof and thereof to be performed by it
and the consummation of the transactions contemplated hereby and
thereby have been duly authorized and approved by all requisite action
on the part of the LLC. This Agreement constitutes, and the various
other agreements contemplated herein to which the LLC is a party, when
executed and delivered, will
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constitute, the valid and binding obligation of the LLC enforceable
against it in accordance with its and their terms, except that the
enforceability of this Agreement and the various other agreements
contemplated herein to which the LLC is a party is subject to
applicable bankruptcy, insolvency or other similar laws relating to or
affecting the enforcement of creditors' rights generally and to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
4.2.3 Partnership Interests. The LLC is the sole general
partner of Rayco and REGT is the sole limited partner of Rayco. The
GP Interest and the LP Interest constitute all of the outstanding
ownership interests in Rayco. Except as set forth in Schedule 4.2.3,
and subject to the applicable terms of the Partnership Agreement, the
LLC owns the GP Interest and REGT owns the LP Interest free and clear
of all Encumbrances. Except as contemplated by this Agreement, there
are no outstanding subscriptions, options, convertible or exchangeable
securities, warrants, calls or other obligations of any kind issued or
granted by, or binding upon, the LLC or Rayco to purchase or otherwise
acquire any security of, equity interest in or other ownership
interest in Rayco. Subject to the applicable terms of the Partnership
Agreement, the LLC has full legal right to sell, assign and transfer
the GP Interest to the appropriate Purchaser Entity and will, upon
delivery of the Conveyance Agreement with respect to the GP Interest
to such Purchaser Entity pursuant to the terms hereof (assuming
satisfaction of the conditions set forth in Section 6.2.7 hereof),
transfer to the appropriate Purchaser Entity good and valid title to
the GP Interest free and clear of any Encumbrances created by or
through the LLC or any predecessor.
4.2.4 No Violation. Except as set forth in Schedule 4.2.4,
this Agreement and the execution and delivery hereof by the LLC do
not, and the fulfillment and compliance with the terms and conditions
hereof and the consummation of the transactions contemplated hereby
will not:
(i) violate or conflict with any provision of the
certificate of organization, regulations or equivalent
governing instruments (including, without limitation, the
Partnership Agreement) of the LLC or Rayco;
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(ii) violate or conflict with any provision of, or,
except with respect to the HSR Act, require any filing,
consent, authorization or approval under, any law or
administrative regulation (including, without limitation, any
Environmental Law) or any judicial, administrative or
arbitration order, award, judgment, writ, injunction or decree
applicable to or binding upon the LLC or Rayco;
(iii) conflict with, result in a breach of,
constitute a default under (whether with notice or the lapse
of time or both), or accelerate or permit the acceleration of
the performance required by, or require any consent,
authorization or approval under (a) any mortgage, indenture,
loan or credit agreement or any other material agreement or
instrument to which the LLC or Rayco is a party or by which
the LLC or Rayco is bound or to which any of their respective
properties is subject or (b) any lease, license, contract or
other agreement or instrument to which the LLC or Rayco is a
party or by which any of them is bound or to which any of
their respective properties is subject; or
(iv) result in the creation or imposition of any
Encumbrance (other than a Permitted Encumbrance) upon any
material assets of the LLC or Rayco.
4.2.5 No Default; Compliance with Laws and Regulations.
Except as set forth on Schedule 4.2.5 or as disclosed in the Financial
Statements:
(i) Rayco is not in default under, and no condition
exists that with notice or lapse of time or both would
constitute a default under, (a) any mortgage, loan agreement,
indenture, evidence of indebtedness or other instrument
evidencing borrowed money to which Rayco is a party or by
which Rayco or any of its properties is bound, (b) any
judgment, order or injunction of any court, arbitrator or
governmental agency or (c) any other material agreement,
contract, lease, license or other instrument; and
(ii) Rayco is not in violation in any material
respect of any law, regulation, order, judgment or decree of
any federal or state court or governmental authority
(including, without limitation, any law, regulation, order,
judgment or decree relating to immigration,
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labor or employment matters) or any Government Permit
applicable to its businesses and operations, and in
particular, without limitation, Rayco is in compliance in all
material respects with all applicable building codes and
zoning requirements, any requirements to obtain a certificate
of occupancy and any other laws or regulations applicable
to the construction, sale and delivery of homes.
4.2.6 Rayco Financial Statements. The LLC (a) heretofore
has delivered to the Purchaser copies of (i) the audited balance sheet
of Rayco as of December 31, 1994, and the related audited statements
of operations, partners' equity and cash flows for the year ended
December 31, 1994, including the notes relating thereto, certified by
Ernst & Young, independent public accountants, and (ii) the unaudited
balance sheet of Rayco as of the Balance Sheet Date, and the related
unaudited statements of operations, partners' equity and cash flows
for the nine-month period then ended, and (b) will deliver to the
Purchaser copies of the Year-End Unaudited Financial Statements of
Rayco and copies of the Year-End Audited Financial Statements of
Rayco. Such financial statements fairly present or, with respect to
those financial statements to be delivered hereunder, will fairly
present, in accordance with the basis of accounting described in the
notes to such financial statements, the financial position of Rayco as
of the date indicated and the results of operations and changes in the
financial position of Rayco for the period then ended. All such
financial statements have been or, with respect to those financial
statements to be delivered hereunder, will be prepared in accordance
with generally accepted accounting principles consistently applied
(except to the extent set forth in the notes to such financial
statements).
4.2.7 Absence of Certain Changes. Except as disclosed to
the Purchaser in this Agreement, the Financial Statements, Schedule
4.2.7 or in any other schedule to this Agreement, since the Balance
Sheet Date there has not been:
(i) any material adverse change in the business,
financial condition, results of operations or prospects of
Rayco taken as a whole;
(ii) any damage, destruction or loss incurred or
suffered by Rayco, whether
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covered by insurance or not, which has had, or would
reasonably be expected to have, a Material Adverse Effect on
Rayco;
(iii) any change by Rayco in accounting methods or
principles, except for changes required as a result of changes
in generally accepted accounting principles;
(iv) any issuance by Rayco of any partnership or
ownership interests, or any repurchase or redemption by Rayco
of any partnership or ownership interests;
(v) any sale, lease or other disposition or
relinquishment of, or execution and delivery by Rayco of any
agreement or commitment contemplating the sale, lease or other
disposition or relinquishment of, properties and assets of
Rayco other than (a) the sale or other disposition of lots
improved with residences in the ordinary course of business
consistent with past practices, (b) the sale or other
disposition or relinquishment by Rayco of mortgages,
mortgage-backed securities and related documents in the
ordinary course of business and (c) the sale, lease or other
disposition or relinquishment of properties or assets by
Rayco in the ordinary course of business in an amount,
individually or in the aggregate, not in excess of $20,000;
(vi) any merger or consolidation of Rayco with any
other corporation, person or entity or any acquisition by
Rayco of the stock or business of another corporation,
partnership or other entity, or any action taken or any
commitment entered into with respect to or in contemplation
of any liquidation, dissolution, recapitalization,
reorganization or other winding up of the business or
operation of Rayco;
(vii) any borrowing, agreement to borrow funds or
assumption, endorsement or guarantee of indebtedness by Rayco
or any termination or material amendment of any evidence of
indebtedness, contract, agreement, deed, mortgage, lease,
license or other instrument, commitment or agreement to which
Rayco is bound or by which any of them or their respective
properties is bound other than such borrowing, agreement to
borrow, termination or amendment that is in the ordinary
course of business and is, individually or
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in the aggregate, not in excess of $20,000;
(viii) distribution with respect to the partnership
interests of Rayco (except for distributions as provided for
in Section 5.1.8 of this Agreement);
(ix) any increase in the compensation payable or to
become payable by Rayco to the directors, officers or
employees of Rayco (other than (a) as Rayco may be
contractually obligated or (b) as may be made in the ordinary
course of business and consistent with past practices as a
result of normal annual employee performance reviews,
provided, however, that any increase for any employee as a
result of normal annual employee performance reviews shall not
exceed 5% of the compensation paid by Rayco to such employee
in the year immediately preceding such increase), or any
increase in benefits or benefit plan costs (other than costs
outside of the control of Rayco), or any increase in any
bonus, insurance, pension, compensation or other benefit plan
made for or with or covering any directors, officers or
employees of Rayco;
(x) except as agreed to in writing by the Purchaser,
any employment, deferred compensation, consulting, severance,
indemnification or similar agreement entered into or made by
Rayco with any of its officers or employees, or grant of any
severance or termination pay to any of its officers or
employees, or any collective bargaining agreement or other
obligation to any labor organization or employee incurred or
entered into by Rayco;
(xi) any distribution of Plan assets, other than
distributions relating to the payment of benefits pursuant to
any Plan, made for the purpose of reducing the amount by which
the value of the assets of any such Plan at the time of
distribution exceeds the present value of the assets of any
such Plan at the time of distribution exceeds the present
value of all accrued benefits (whether or not forfeitable)
under such Plan at the time of distribution;
(xii) any mortgage, pledge or Encumbrance (other
than Permitted Encumbrances)
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on any of the assets, tangible or intangible, of Rayco;
(xiii) any making of any loan, advance or capital
contribution to or investment in any Person (other than a loan
or advance in an amount not in excess of $10,000);
(xiv) any labor dispute, other than routine
individual grievances, or any activity or proceeding by a
labor union or representative thereof to organize any
employees of Rayco or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to any
employees of Rayco; or
(xv) any contract or commitment to do any of the
foregoing or to take any action that, if taken prior to the
date hereof, would have made any representation or warranty in
this Section 4.2 incorrect in any material respect.
4.2.8 Taxes. Rayco has (or will have by the due date for
such return) caused timely to be filed with the appropriate federal,
state, local and other governmental authorities all material returns,
information returns or statements, and reports with respect to Taxes
required to be filed for any Pre-Closing Tax Period by or with respect
to Rayco. Rayco is and always has been taxed as a "partnership" for
U.S. federal income tax purposes. Except as provided on Schedule
4.2.8, (i) there is no material Tax related claim, audit, action,
suit, proceeding or investigation now pending or threatened against,
with respect to or that could directly impact Rayco, (ii) there are
no material liens for Taxes upon the assets of Rayco except liens for
current Taxes not yet due, (iii) none of Rayco, the LLC or REGT is
subject to withholding under Section 1445 of the Code with respect to
the transactions contemplated hereunder, and (iv) Rayco is not under
any contractual obligation to pay the Taxes of another Person.
4.2.9 Contracts, Agreements, Plans and Commitments.
Schedule 4.2.9 sets forth a complete list of the following contracts,
agreements, plans and commitments to which Rayco is a party or by
which Rayco or any of its material properties are bound as of the date
hereof:
(i) any contract, commitment or agreement which
involves aggregate expenditures by Rayco of more than $100,000
per year (other than contracts, commitments or
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agreements listed pursuant to any other provisions of this
Section 4.2.9);
(ii) any indenture, trust, loan agreement, note or
other agreement under which Rayco has outstanding
indebtedness, obligations or liabilities (in each case,
contingent or otherwise) for borrowed money in an amount in
excess of $100,000;
(iii) any lease or sublease for the use or occupancy
of real property which involves aggregate expenditures by
Rayco of more than $50,000 per year, together with a list of
the location of such leased property, the date of termination
of such arrangements, the name of the other party and the
annual rental payments required to be made for such
arrangements;
(iv) any contract or agreement with the LLC or any
Affiliate of the LLC or any director or officer of the LLC or
any of its Affiliates or any "associates" or members of the
immediate family" (as such terms are respectively defined in
Rule 12b-2 and Rule 16a-1 of the Exchange Act) of any such
director or officer;
(v) any agreement that restricts the right of
Rayco to engage in any type of business;
(vi) any guaranty, direct or indirect, of the LLC
or any Affiliate of the LLC of any contract, lease or
agreement entered into by Rayco; and
(vii) any partnership, joint venture or other
similar agreement or arrangement;
(viii) any license, franchise or similar agreement;
(ix) any agreement relating to the acquisition or
disposition of any business or assets of a business in excess
of $10,000 (whether by merger, sale of stock, sale of assets
or otherwise);
(x) any agreement of surety, guarantee or
indemnification; and
(xi) any other agreement, commitment, arrangement
or plan not made in the ordinary course of business that is
material to Rayco taken as a whole.
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To the Knowledge of the LLC, each of such contracts
and agreements is in full force and effect and,
except as set forth on Schedule 4.2.9 or in the
Financial Statements, no party is in default under
or in breach of, and no event has occurred that with
notice or lapse of time or both would constitute a
default or breach of, the terms, conditions or
provisions of such contracts and agreements, except
for such failures to be in full force and effect,
defaults or breaches that, individually or in the
aggregate, would not reasonably be expected to have
a Material Adverse Effect.
4.2.10 Litigation. Except as set forth in
Schedule 4.2.10:
(i) To the Knowledge of the LLC, there are no
actions, suits, investigations or proceedings pending or
threatened against or affecting Rayco or any of its respective
properties seeking (a) damages or (b) any other relief that
would delay, prevent or hinder the consummation of the
transactions contemplated by this Agreement;
(ii) To the Knowledge of the LLC, there is not any
judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality
or arbitrator outstanding or pending relating specifically to
Rayco which is not generally applicable to other companies in
the single-family homebuilding industry; and
(iii) To the Knowledge of the LLC, Rayco is not
charged with a violation of or threatened with a charge of a
violation of, any provision of any material law or regulation
relating to any aspect of its business.
11 Insurance. Schedule 4.2.11 sets forth a list of all
material insurance policies (other than title insurance policies) of
Rayco by which Rayco or any of its properties or assets are covered
against losses, all of which are now in full force and effect. There
is no claim by Rayco pending under any such policies as to which
coverage has been questioned, denied or disputed by the underwriters
of such policies or in respect of which such underwriters have
reserved their rights. All premiums payable under all such policies
and bonds have been paid timely and Rayco has otherwise complied fully
with the terms and conditions of such policies. Such policies are of
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the type and in amounts customarily carried by Persons conducting
businesses similar to those of Rayco. The LLC does not have Knowledge
of any threatened termination of, premium increase with respect to, or
material alteration of coverage under, any of such policies. To the
extent that any such policy is owned or held by the LLC or any LLC
Affiliate, it may be terminated after the Closing Date; provided,
however, that the LLC agrees to (i) maintain such policies (or
policies of substantially the same nature) in full force and effect at
all times until the close of business on the Closing Date and
(ii) cooperate with the Purchaser in obtaining replacement insurance
policies at all times until the close of business on the Closing Date.
4.2.12 Patents, Trademarks and Copyrights. Rayco has the
right to use all material patents, trademarks, trade names, service
marks, trade secrets, copyrights and other proprietary intellectual
property rights necessary for the conduct of its business.
Except as set forth in Schedule 4.2.12, there is no existing or, to
the Knowledge of the LLC, threatened infringement, misuse or
misappropriation by others of any such trademarks, trade names,
service marks, trade secrets, copyrights and other proprietary
intellectual property rights that is material to Rayco, there is no
pending or threatened claim by Rayco against others for any such
infringement, misuse or misappropriation, and there is no pending
proceeding involving any claim, and Rayco has no Knowledge of and has
not received any written notice or claim, of any infringement, misuse
or misappropriation by Rayco of any patent, trademark, trade name,
service mark, trade secret, copyright or other proprietary
intellectual property right owned by any third party.
4.2.13 Employee Benefit Matters. Schedule 4.2.13 sets forth
a list of all of the following (true and complete copies of which,
together with such other related documents as the Purchaser may
reasonably request, have been made available to the Purchaser):
(i) (a) each "employee benefit plan", as
such term is defined in Section 3(3) of ERISA, which is
covered by Title I of ERISA, which is maintained, or otherwise
contributed to, by Rayco or any Affiliate of Rayco for the
benefit of the employees of Rayco (a "Rayco Plan"), and (b) if
the Rayco Plan is funded through a trust or any third party
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funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial
statements thereof;
(ii) each management or employment contract or
contract for personal services between Rayco or any Affiliate
of Rayco and any officer, consultant, director or employee of
Rayco that is not by its terms terminable at will or on not
more than 60 days' notice without payment or penalty by Rayco;
(iii) each other plan, contract or arrangement
providing for bonuses, pensions, deferred compensation,
retirement plan payments, profit sharing, incentive pay,
hospitalization or medical expense, insurance for any officer,
consultant, director, annuitant or employee of Rayco or
members of their respective families (other than directors'
and officers' liability policies), whether or not insured;
(iv) each policy regarding severance, vacations
and sick time and each personnel manual; and
(v) each collective bargaining agreement or labor
contract or any other agreement to which Rayco is a party or
which covers any employee of Rayco.
Neither Rayco nor any entity that, with
Rayco, would be treated as a single employer under Section 414 of the
Code maintains or contributes to, or has within the past six years
maintained or contributed to, any employee benefit plan subject to
Title IV of ERISA or Section 412 of the Code, or any "multiemployer
plan" as described in Section 3(37) of ERISA. Each Rayco Plan which
is intended to be qualified under Section 401(a) of the Code is so
qualified and has been so qualified during the period from its
adoption to date. To the Knowledge of the LLC, with respect to each
Rayco Plan, each of such Plan and Rayco (i) is not in material
violation of the requirements of the terms of such Plan, ERISA, the
Code or the Age Discrimination in Employment Act, regulations issued
thereunder or other applicable law, and (ii) is not in material
violation of the reporting and disclosure requirements of Title I of
ERISA. To the Knowledge of the LLC, there is no circumstance that
(i) has resulted in a material liability (whether or not asserted as
of the date
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hereof) of Rayco arising under or related to any other employee
benefit plan (as defined in section 3(3) of ERISA), whether or not
terminated prior to the date hereof, which is not a Rayco Plan, or
(ii) has resulted in a material adverse change in the assets of any
Rayco Plan (other than in connection with any transaction contemplated
by this Agreement) from those reflected on the most recent annual
report, actuarial valuation or financial statements for such Rayco
Plan furnished, or otherwise made available, to the Purchaser, other
than any such change that is necessary to comply with applicable law.
Except as agreed to in writing by the Purchaser, there are no
post-retirement medical or health plans in effect with respect to
employees of Rayco, except as required by Section 4980B of the Code.
Except as greed to in writing by the Purchaser, no employee of Rayco
will become entitled to any retirement, severance or similar benefit
or enhanced benefit solely as a result of the transactions
contemplated hereby.
4.2.14 Title to Assets. Except as set forth in Schedule
4.2.14, Rayco has good and indefeasible title to all of its real
properties purported to be owned in fee, and good and merchantable
title to all of its other material properties and assets, real and
personal, reflected on the Financial Statements or purported to have
been acquired by it after the date thereof (except for assets held
under capitalized leases and properties and assets sold since the date
of the Financial Statements) (collectively, the "Rayco Assets"), in
each case free and clear of any Encumbrances other than Permitted
Encumbrances. To the Knowledge of the LLC, there are no events or
developments affecting any such property or assets (whether real or
personal) pending or threatened, which might materially detract from
the value of such property or assets or materially interfere with any
present or intended use of any such property or assets.
4.2.15 Government Permits. Rayco has all Government Permits
necessary under federal, state or local law to construct, own,
operate, use and maintain its home construction business in the manner
in which it is now being conducted, except for Government Permits the
failure of which to be obtained or given, individually and in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. There are no proceedings pending, or to the Knowledge of the
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LLC threatened, that seek the revocation, cancellation, suspension or
modification of any material Government Permit.
4.2.16 Environmental Compliance. Except as set forth in
Schedule 4.2.16, to the Knowledge of the LLC, (a) neither Rayco nor
any property owned or controlled by Rayco is subject to any existing,
pending or threatened action, suit, investigation, inquiry or
proceeding by any governmental authority or other third party under,
or in violation of, or subject to any remedial or other obligations
under, any Environmental Law, (b) all material notices, Government
ermits, licenses or similar authorizations, if any, required to be
obtained or filed under any Environmental Law in connection with the
operations of the business of Rayco, including, without limitation,
past or present treatment, storage, disposal or release of a hazardous
substance into the environment, have been duly obtained or filed, (c)
there has been no release or disposal of hazardous substances on the
properties, now or previously owned, leased or operated by Rayco, or
in connection with the operation of the business of Rayco except in
compliance with applicable Environmental Laws and in a manner that
would reasonably be expected not to result in any material liability
to Rayco under any Environmental Law, (d) there are not and have never
been any underground storage tanks, radioactive materials, or radon at
any property now or previously owned or operated by Rayco, (e) all
environmental assessments, investigations, audits and similar
documents relating to any property now or previously owned or operated
by Rayco of which the LLC has Knowledge have been delivered to
Purchaser prior to Closing, (f) no property now or previously owned,
leased or operated by Rayco is listed or proposed for listing, on the
National Priorities List promulgated pursuant to CERCLA, on CERCLIS
(as defined in CERCLA) or on any similar federal, state or foreign
list of sites requiring investigation or clean-up.
4.2.17 Absence of Undisclosed Liabilities. Except as set
forth in Schedule 4.2.17 or in any other Schedule to this Agreement,
Rayco has no outstanding liabilities (whether contingent or otherwise)
or indebtedness, current or long-term, other than liabilities or
indebtedness (i) reflected in the Financial Statements, (ii) incurred
since the date of such Financial Statements in the ordinary
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course of business or (iii) that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on
Rayco.
4.2.18 Books and Records. The books of account and other
records of the LLC and Rayco, all of which have been made available to
the Purchaser, are complete and correct in all material respects and
have been maintained in accordance with sound business practices.
4.2.19 Intercompany Accounts. Schedule 4.2.19 contains a
complete list of all intercompany balances as of the Balance Sheet Date
between the Sellers and their Affiliates, on the one hand, and Rayco
on the other hand.
4.2.20 No Misstatements. None of the information set
forth in this Agreement (or in the Schedules attached hereto) with
respect to Rayco contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances in which
they were made, not misleading.
4.2.21 Subsidiaries. Rayco does not have any equity
interest in any other Person.
4.2.22 Endangered Species. To the Knowledge of the LLC,
there are no endangered species or protected natural habitat, flora or
fauna located on any of Rayco's real property. To the Knowledge of
the LLC, no portions of such real estate are designated as wetlands.
To the Knowledge of the LLC, Rayco has not received any notice (formal
or informal) regarding any of the matters described in the two
preceding sentences.
4.2.23 Flood Plains. Except as shown on Schedule
4.2.23, to the Knowledge of the LLC, none of Rayco's real property is
located within a 100-year flood plain as designated by any United
States Governmental Entity.
4.2.24 Seismic Safety Problems. To the Knowledge of the
LLC, no seismic safety problems relating to any of Rayco's real
property would prevent or impair residential development thereon.
4.2.25 No Latent Defects; Product Warranties; Product
Liability. Except as set forth in Schedule 4.2.25, to the Knowledge
of the LLC, there are no warranty claims exceeding $5,000 per
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individual house pending or settled in or which resulted in home
repurchases during the period from January 1, 1995 to the date of this
Agreement against Rayco, nor is there any basis for any such claims.
None of the products sold by Rayco is covered by any guaranty,
warranty or other indemnity other than the applicable standard terms
of sale or lease for Rayco, copies of which are included in Schedule
4.2.25.
4.2.26 Condemnation Proceedings. Except as shown on
Schedule 4.2.26, to the Knowledge of the LLC, neither Rayco nor any of
the Sellers has received any notice of any material condemnation or
eminent domain proceedings, or negotiations for the purchase of any
real property in lieu of condemnation, and no material condemnation or
eminent domain proceedings or negotiations have been commended or
threatened in connection with any of the foregoing.
4.2.27 Moratorium. To the Knowledge of the LLC, there are
no moratoriums (including, but not limited to, utility moratoriums) or
other restrictions by governmental entities responsible for issuing
approvals or according other entitlements with respect to any real
property owned or controlled by Rayco, except for restrictions which
in the past have been encountered by Rayco in the ordinary course of
business.
4.2.28 Employees. Except as set forth on Schedule 4.2.28,
to the Knowledge of the LLC, none of the employees of Rayco has
indicated to the LLC or Rayco that he or she intends to resign or
retire as a result of the transactions contemplated by this Agreement
or otherwise within thirty (30) days after the Closing Date.
4.3 Representations and Warranties by REGT. Except as
otherwise disclosed in this Agreement or in the Schedules attached
hereto, REGT hereby represents and warrants that:
4.3.1 Organization and Existence. REGT is a trust
organized and existing under the terms of a Trust Agreement dated
March 9, 1982 (the "Trust Agreement"), and has all requisite power and
authority to own the properties and assets it currently owns and to
carry on the business it currently conducts. REGT heretofore has
delivered or otherwise made available to the Purchaser true, correct
and complete copies of the governing instruments (including, without
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limitation, the Trust Agreement), each as amended to the date hereof,
of REGT.
4.3.2 Authority and Approval. REGT has all
requisite power and authority to execute and deliver this Agreement
and the various other agreements contemplated herein to which REGT is
a party, to consummate the transactions contemplated hereby and
thereby and to perform all the terms and conditions hereof and
thereof to be performed by it. The execution and delivery by
REGT of this Agreement and the various other agreements
contemplated herein to which REGT is a party, the performance
by REGT of all the terms and conditions hereof and thereof to
be performed by it and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and
approved by all requisite actions on the part of REGT. This
Agreement constitutes the various other agreements
contemplated herein to which REGT is a party, when executed
and delivered by REGT, will constitute, the valid and binding
obligation of REGT enforceable against it in accordance with
its terms, except that the enforceability of this Agreement
and the various other agreements contemplated herein to which
REGT is a party is subject to applicable bankruptcy,
insolvency or other similar laws relating to or affecting the
enforcement of creditors' rights generally and to general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
4.3.3 Partnership Interest. REGT is the sole
limited partner of Rayco. Except as set forth in Schedule 4.3.3, and
subject to the applicable terms of the Partnership Agreement, REGT
owns the LP Interest free and clear of all Encumbrances. Except as
contemplated by this Agreement, there are no outstanding
subscriptions, options, convertible or exchangeable securities,
warrants, calls or other obligations of any kind issued or granted by,
or binding upon, REGT to purchase or otherwise acquire any security
of, equity interest in or other ownership interest in Rayco. Subject
to the applicable terms of the Partnership Agreement, REGT has full
legal right to sell, assign and transfer the LP Interest to the
appropriate Purchaser Entity and will, upon delivery of the
Conveyance Agreement with respect to the LP Interest to the
appropriate Purchaser Entity pursuant to the terms hereof (assuming
satisfaction of the conditions set forth in Section
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6.2.7 hereof), transfer to such Purchaser Entity good and valid title
to the LP Interest free and clear of any Encumbrances created
by or through REGT or any predecessor.
4.3.4 No Violation. Except as set forth in Schedule 4.3.4,
this Agreement and the execution and delivery hereof by REGT do not,
and the fulfillment and compliance with the terms and conditions
hereof and the consummation of the transactions contemplated hereby
will not:
(i) violate or conflict with any provision of the
Trust Agreement or the Partnership Agreement;
(ii) violate or conflict with any provision of,
or, except with respect to the HSR Act, require any filing,
consent, authorization or approval under, any law or
administrative regulation (including, without limitation, any
Environmental Law) or any judicial, administrative or
arbitration order, award, judgment, writ, injunction or decree
applicable to or binding upon REGT;
(iii) conflict with, result in a breach of,
constitute a default under (whether with notice or the lapse
of time or both), or accelerate or permit the acceleration of
the performance required by, or require any consent,
authorization or approval under (a) any mortgage, indenture,
loan or credit agreement or any material agreement to which
REGT or Rayco is a party or by which REGT or Rayco is bound or
to which any of REGT's or Rayco's properties are subject or
(b) any lease, license, contract or other agreement or
instrument to which Rayco is a party or by which Rayco is
bound or to which any of its properties is subject; or
(iv) result in the creation or imposition of any
Encumbrance (other than a Permitted Encumbrance) upon any
material assets of Rayco.
4.3.5 Books and Records. The books of account, minutes
books and other records of REGT, all of which have been made available
to the Purchaser, are complete and correct in all material respects
and have been maintained in accordance with sound business practices.
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4.4. Representations and Warranties by the Purchaser.
Except as otherwise disclosed in this Agreement or in the Schedules attached
hereto, the Purchaser hereby represents and warrants that:
4.4.1 Organization and Existence. Each Purchaser Entity is
a corporation duly organized, validly existing and in good standing
under the laws of their respective jurisdictions of incorporation, and
each has all requisite corporate power and authority to own and lease
the properties and assets it currently owns and leases and to carry on
its business as such business is currently conducted. Each Purchaser
Entity (other than the Purchaser) is a wholly owned subsidiary of the
Purchaser.
4.4.2 Authority and Approval. Upon the due authorization
and approval by the Boards of Directors of each Purchaser Entity of
(a) the execution and delivery by each Purchaser Entity of this
Agreement and the various other agreements contemplated herein to
which each Purchaser Entity is a party, (ii) the performance by each
Purchaser Entity of all the terms and conditions hereof and thereof to
be performed by it, and (iii) the consummation of the transactions
contemplated hereby and thereby, (a) each Purchaser Entity will have
all requisite corporate power and authority to execute and deliver
this Agreement and the various other agreements contemplated herein to
which each Purchaser Entity is a party, to consummate the transactions
contemplated hereby and thereby and to perform all the terms and
conditions hereof and thereof to be performed by it, (b) the execution
and delivery by each Purchaser Entity of this Agreement and the
various other agreements contemplated herein to which each Purchaser
Entity is a party, the performance by it of all the terms and
conditions hereof and thereof to be performed by it and the
consummation of the transactions contemplated hereby and thereby will
be duly authorized and approved by all requisite corporate action on
the part of each Purchaser Entity; and (c) this Agreement will
constitute, and the various other agreements contemplated herein to
which each Purchaser Entity is a party will, when executed and
delivered, constitute,the valid and binding obligation of each
Purchaser Entity enforceable against it in accordance with its terms,
except that the enforceability of this Agreement and the various other
agreements contemplated herein to
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which each Purchaser Entity is a party is subject to applicable
bankruptcy, insolvency or other similar laws relating to or affecting
the enforcement of creditors' rights generally and to general
principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
4.4.3 No Violation. Except as set forth on Schedule 4.4.3,
upon the due authorization and approval by the Boards of Directors of
the Purchaser Entities of (i) the execution and delivery by the
Purchaser Entities of this Agreement and the various other agreements
herein to which the Purchaser Entities are a party, (ii) the
performance by the Purchaser Entities of all the terms and conditions
hereof and thereof to be performed by them, and (iii) the consummation
of the transactions contemplated hereby and thereby, this Agreement
and the execution and delivery hereof by the Purchaser Entities do
not, and the fulfillment and compliance with the terms and conditions
hereof and the consummation of the transactions contemplated hereby
will not:
(i) violate or conflict with any provision of the
certificate of incorporation or bylaws of any Purchaser Entity;
(ii) violate or conflict with any provision of,
or, except with respect to the HSR Act, require any filing,
consent, authorization or approval under, any law or
administrative regulation (including, without limitation, any
Environmental Law) or any judicial, administrative or
arbitration order, award, judgment, writ, injunction or decree
applicable to or binding upon any Purchaser Entity; or
(iii) conflict with, result in a breach of,
constitute a default under (whether with notice or
the lapse of time or both), or accelerate or permit
the acceleration of the performance required by, or
require any consent, authorization or approval under
(a) any ortgage, indenture, loan or credit agreement
or any other material agreement or instrument to
which any Purchaser Entity is a party or by which any
Purchaser Entity is bound or to which any of their
respective properties is subject or (b) any material
lease, license, contract or other agreement or
instrument to which any Purchaser Entity is a party
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or by which any of them is bound or to which any of their
respective properties is subject.
4.4.4 Funds Available. Each Purchaser Entity has, or
will have prior to the Closing Date, sufficient cash, available lines
of credit or other sources of immediately available funds to enable
it to make payment of its respective portion of the Purchase Price.
4.4.5 Litigation. There are no actions, suits or
proceedings pending or, to the Knowledge of the Purchaser, threatened
against the Purchaser or any of its Subsidiaries that would delay,
prevent or hinder the consummation of the transactions contemplated by
this Agreement.
4.4.6 Investment. The Purchaser (i) understands that the
Securities have not been, and will not be, registered under the
Securities Act of 1933, as amended, or under any state securities
laws, and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving a public offering,
(ii) is acquiring the Securities solely for its own account and for
investment purposes, and not with a view to the distribution thereof,
(iii) is a sophisticated investor with knowledge and experience in
business and financial matters, (iv) has had the opportunity to obtain
such information concerning the Companies as it desired in order to
evaluate the risks of purchasing and owning the Securities, and (v) is
able to bear the economic risk and lack of liquidity inherent in
owning and holding the Securities.
ARTICLE 5.
Additional Agreements and Covenants
5.1. Covenants of the Sellers. Industries, the LLC and REGT,
respectively, covenant and agree with the Purchaser as follows:
5.1.1 Certain Changes. Except as expressly may be
permitted hereunder, contemplated hereby or set forth in the Schedules
hereto, from the date hereof until the Closing Date, without first
obtaining the written consent of the Purchaser (which consent shall
not be unreasonably withheld), Industries covenants that no
Corporation will and the LLC covenants that Rayco will not and will
not agree or commit to:
(i) make any material change in the conduct of
its business or operations;
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(ii) terminate or amend in any material respect
any contract, agreement or plan required to be disclosed
pursuant to Section 4.1.9, 4.1.13, 4.2.9 or 4.2.13 except both
in the ordinary course of business and consistent with past
practices or waive, release, grant or transfer any material
rights of value thereunder;
(iii) declare, set aside or pay any dividends, or
make any distributions, in respect of, or issue any of, its
equity securities, ownership interests or securities
convertible into its equity securities or ownership interests
(except for dividends or distributions paid as provided for in
Section 5.1.8 of this Agreement), or repurchase, redeem or
otherwise acquire any such securities or make or propose to
make any other change in its capitalization;
(iv) merge into or with or consolidate with any
other Person or acquire all or substantially all of the
business or assets of any other Person;
(v) make any change in its certificate of
incorporation, certificate of organization, regulations, or
bylaws or equivalent governing instruments (including, without
limitation, the Partnership Agreement);
(vi) purchase any securities of or make any
investments in any other Person;
(vii) other than pursuant to the requirements of
existing contracts or commitments, sell, lease or otherwise
dispose of any of their assets or properties (except assets
and properties sold, leased or otherwise disposed of both in
the ordinary course of business and consistent with past
practices, including, but not limited to, the sale of
residential properties and mortgage loans);
(viii) create, incur, assume or guarantee any
long-term debt or capitalized lease obligation or, except as
may be required under existing creditor or other financing
agreements and as may be made in the ordinary course of
business consistent with past practices, create, incur, assume
or guarantee any material short-term debt;
(ix) except as agreed to in writing by the
Purchaser, enter into any
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employment, deferred compensation, consulting, severance,
indemnification agreement or similar agreement, pay any
bonuses to directors, officers or employees other than those
already accrued in the Financial Statements and made in the
ordinary course of business consistent with past practices,
increase the compensation of any of its employees other than
as Rayco may be contractually obligated by such agreements or
as may be made in the ordinary course of business consistent
with past practices and as a result of the normal annual
employee performance reviews (provided, however, that any
increase for any employee as a result of normal annual
employee performance reviews shall not exceed 5% of the
compensation paid by the relevant Corporation to such employee
in the year immediately preceding such increase), or execute
any collective bargaining agreement or otherwise incur any
obligation to any labor organization or employee;
(x) mortgage, pledge or subject to any other
Encumbrance (except Permitted Encumbrances and Encumbrances
required under existing credit or other financing agreements)
any of its assets, tangible or intangible;
(xi) take any action or enter into any commitment
with respect to or in contemplation of any
liquidation, dissolution, recapitalization,
reorganization or other winding up of its
business or operation;
(xii) enter into any contracts or leases or make
any further additions to its property not in the ordinary
course of business and consistent with past practices;
(xiii) enter into any material settlement (which is
hereby deemed not to include settlements involving the
expenditure of less than $50,000 in any one event) of any
pending or threatened litigation;
(xiv) make or change any material tax election,
change a tax period or method of accounting, file an amended
return, settle any material tax claim or extend any period of
limitations; or
(xv) commit itself to do any of the foregoing;
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provided, however, that the parties acknowledge that this Section
5.1.1 shall not restrict Rayco from making acquisitions of undeveloped
or platted individual lots consistent with prior practice or tracts of
land as provided for in Section 5.4 below. Industries, the LLC and
REGT will not and will not permit any Company to (a) take or agree or
commit to take any action that would make any representation and
warranty hereunder inaccurate in any respect at, or as of any time
prior to, the Closing Date or (b) omit or agree to commit to omit to
take any action necessary to prevent any such representation or
warranty from being inaccurate in any respect at any such time.
5.1.2 Operation of Business. From the date hereof until
the Closing Date, except as permitted hereunder or contemplated hereby
or as consented to in writing by the Purchaser (which consent shall
not be unreasonably withheld), Industries covenants that it shall
cause each Corporation to and the LLC covenants that it shall cause
Rayco to (i) carry on their respective business in the usual and
ordinary course and (ii) use their Best Efforts to preserve and
maintain their respective business organization, employees and
advantageous business relationships, with the end that its goodwill
and going business shall be unimpaired at the Closing Date.
5.1.3 Access. Industries shall cause each Corporation and
the LLC shall cause Rayco to (i) afford to the Purchaser and its legal
counsel, accountants and other authorized representatives, at the
Purchaser's sole expense, risk and cost, reasonable access from the
date hereof until the Closing Date, during normal business hours, to
their respective personnel, properties, books and records (including,
without limitation, copies of title insurance policies, purchase
contracts, warranty records, insurance claims files and litigation
files), and (ii) furnish to the Purchaser such additional financial
and operating data and other information as it may reasonably request
to the extent that such access and disclosure would not violate the
terms of any agreement to which Industries, the LLC, Rayco or any
Corporation is bound or any applicable law or regulation; provided,
however, that the confidentiality of any data or information so
acquired by the Purchaser shall be maintained by the Purchaser and its
representatives in accordance with Section 5.2.6.
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5.1.4 Antitrust Notification. The Sellers shall as
promptly as practicable file with the Federal Trade Commission and the
Department of Justice the notification and report form required for
the transactions contemplated hereby and any supplemental information
which may be reasonably requested in connection therewith pursuant to
the HSR Act.
5.1.5 Best Efforts. The Sellers shall use their
respective Best Efforts to obtain the satisfaction of the conditions
to Closing set forth in Section 6.1 hereof.
5.1.6 Confidentiality. After the Closing Date, the
Sellers shall not, directly or indirectly, disclose or provide to any
other person any non-public information of a confidential nature
concerning the business or operations of any Company, except as is
required in governmental filings or judicial, administrative or
arbitration proceedings.
5.1.7 Public Announcements. At all times until the
Closing Date, the Sellers shall promptly advise, and obtain the
approval of (which approval shall not be unreasonably withheld), the
Purchaser before issuing, or permitting any of the Sellers' directors,
officers, employees, trustees or agents to issue, any press release
or other public statement with respect to this Agreement or the
transactions contemplated hereby.
5.1.8 Dividends. Prior to the Closing Date, the Sellers
shall cause the Companies to pay or make cash dividends or
distributions in accordance with applicable legal requirements so that
on the Closing Date the Net Worth of the Companies shall be as close
as reasonably possible to $40 million. It is understood and agreed to
by the Purchaser that (i) the source of the cash funds to be
distributed as dividends by the Sellers will be funds drawn down under
Rayco's loan agreement with Guaranty Federal, (ii) the Sellers'
compliance with this Section 5.1.8 may violate the Companies' minimum
net worth covenants contained in their existing credit or financing
agreements, and (iii) prior to Closing, the Purchaser in cooperation
with the Sellers shall use its best efforts to take the action
necessary to satisfy the condition to Closing set forth in Section
6.2.7.
5.1.9 Intercompany Accounts. All intercompany balances
between the Sellers and their
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Affiliates on the one hand and the Companies on the other hand will be
reduced to zero prior to the Closing Date.
5.1.10 Notices of Certain Events. Prior to the Closing
Date, the Sellers shall promptly notify the Purchaser of: (a) any
notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement; (b) any notice or other
communication from any governmental or regulatory agency or authority
in connection with the transactions contemplated by this Agreement;
and (c) any actions, suits, claims, investigations or proceedings
commenced or, to its Knowledge threatened against, relating to or
involving or otherwise affecting Industries, LLC, REGT or any Company
that, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Sections 4.1.10 and 4.2.10
above or that relate to the consummation of the transactions
contemplated by this Agreement.
5.1.11 Resignations. At or prior to the Closing Date,
the Sellers will deliver to the Purchaser the resignations of all
directors of any Corporation.
5.1.12 Year-End Financial Statements. At least five
calendar days prior to the end of the Due Diligence Period, the
Sellers will deliver to the Purchaser copies of (i) the unaudited
balance sheets of each of the Corporations as of December 31, 1995,
and the related unaudited statements of income and cash flow for the
year ended December 31, 1995, including the notes relating thereto,
and (ii) the unaudited balance sheet of Rayco as of December 31, 1995,
and the related unaudited statements of operations, partners' equity
and cash flows for the year ended December 31, 1995, including the
notes related thereto (collectively, the "Year-End Unaudited Financial
Statements"). On or before February 20, 1996, the Sellers will
deliver to the Purchaser copies of (i) the audited balance sheets of
each of the Corporations as of December 31, 1995, and the related
audited statements of income and cash flows for the year ended
December 31, 1995, including the notes relating thereto, certified by
Ernst & Young, independent public accountants, and (ii) the audited
balance sheet of Rayco as of December 31, 1995, and the related
audited
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statements of operations, partners' equity and cash flows for the year
ended December 31, 1995, including the notes related thereto,
certified by Ernst & Young, independent public accountants
(collectively, the "Year-End Audited Financial Statements").
5.1.13 Negotiations. From the date hereof until the earlier
of the termination of this Agreement or the Closing Date, none of the
Sellers, nor any representative, director, officer, agent or advisor
of any of the Sellers shall, in any way, encourage, solicit, negotiate
or propose to enter into or continue any negotiations, or enter into
any agreement or understandings with any party which provides for or
relates to (i) the disposition of the Securities, (ii) the sale of all
or any material assets or any substantial portion of the assets of the
Companies or Rayco, or (iii) any business combination or merger of any
of the Companies with or into any other party. The Sellers shall
promptly inform the Purchaser of the receipt of any proposals (but not
any of the terms of such proposals contained therein other than
whether the proposed purchase price is the same as or higher or lower
than the Purchase Price) which are received by any of the Sellers and
relate to any transaction or proposed transaction of the type
described in the preceding sentence.
5.1.14 Fairness Opinion. From the date hereof until (and
including) January 31, 1996, the REGT shall exercise best efforts to
obtain during such period a written opinion from Dillon Read & Co.,
Inc. that the consideration to be received by the Sellers in the
transactions contemplated by this Agreement is within a range of
fairness from a financial point of view; however, it is agreed and
understood by the Purchaser that the REGT can not guarantee, and does
not represent, warrant or covenant, that it will be able to obtain
such written opinion or that it will be able to obtain such written
opinion within such time period.
5.1.15 Right to Match. If prior to the first anniversary of
the date of termination of this Agreement by the Sellers pursuant to
Section 9.1.9, any of the Sellers receive a bona fide offer from any
Person to purchase a majority of the partnership interests in or
assets of Rayco which the Sellers wish to accept (or if any of the
Sellers have made an offer to any Person to sell a majority of the
partnership interests in or assets of Rayco, which such Person wishes
to accept),
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then, prior to the acceptance of any such offer, the Sellers shall (a)
promptly notify the Purchaser of that offer (including the terms of
that offer) and (b) for a period of 30 days commencing on the date on
which the Purchaser is notified of that offer, offer to sell such
partnership interests or assets solely to the Purchaser on the same
terms on which the Sellers propose to sell such partnership interests
or assets to that Person.
5.2. Covenants of the Purchaser. The Purchaser covenants
and agrees with the Sellers as follows:
5.2.1 Antitrust Notification. The Purchaser shall as
promptly as practicable file with the Federal Trade Commission and the
Department of Justice the notification and report form required for
the transactions contemplated hereby and any supplemental information
which may be reasonably requested in connection therewith pursuant to
the HSR Act.
5.2.2 Best Efforts. The Purchaser shall use its Best
Efforts to obtain the satisfaction of the conditions to Closing set
forth in Section 6.2.
5.2.3 Notification. Promptly after obtaining Knowledge,
but in any event prior to the Closing Date, the Purchaser shall notify
the Sellers in writing of any actual breach by any of the Sellers or
the Companies of any representation, warranty or covenant made herein
(including, without limitation, any representation, warranty or
covenant contained or made in the Schedules attached hereto and the
various other agreements contemplated herein to which any of the
Sellers is a party) (the "Purchaser's Notice of Breach"). Prior to
the end of the Due Diligence Period, the Purchaser shall notify each
of the Sellers in writing of whether the Boards of Directors of the
Purchaser and the Purchaser Entities have duly authorized and approved
the execution and delivery by the Purchaser and the Purchaser Entities
of this Agreement and the various other agreements contemplated herein
to which each of the Purchaser and the Purchaser Entities is a party,
the performance by the Purchaser and the Purchaser Entities of all the
terms and conditions hereof and thereof to be performed by each of
them and the consummation of the transactions contemplated hereby and
thereby (the "Purchaser's Notice of Due Authorization").
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5.2.4 Preservation of Books and Records. For a period of
seven years after the Closing Date, the Purchaser shall (i) preserve
and retain the corporate, accounting, legal, auditing and other books
and records of each Company (including, but not limited to, any
documents relating to any governmental or non-governmental actions,
suits, proceedings or investigations arising out of the conduct of the
business and operations of each Company prior to the Closing Date) and
(ii) make such books and records available at the then current
administrative headquarters of each Company to the Sellers (and their
successors and assigns) and any shareholders, officers, employees,
trustees, beneficiaries, agents and other Affiliates of the Sellers
(and their successors and assigns), upon reasonable notice and at
reasonable times, it being understood that any such person shall be
entitled to make and retain copies of any such books and records as it
shall deem necessary, provided that such person agrees to keep such
information confidential in accordance with Section 5.1.6. The
Purchaser agrees to permit representatives of such person to meet with
employees of the Purchaser and each Company on a mutually convenient
basis in order to enable such Person to obtain additional information
and explanations of any materials provided pursuant to this Section
5.2.4.
5.2.5 Public Announcements. At all times until the Closing
Date, the Purchaser shall promptly advise, and obtain the approval of
(which approval shall not be unreasonably withheld), the Sellers
before issuing, or permitting any of the Purchaser's directors,
officers, employees, agents or Subsidiaries to issue, any press
release or other public statement or filing with respect to this
Agreement or the transactions contemplated hereby except as required
by applicable law or the rules of the New York Stock Exchange.
5.2.6 Confidential Information. In the event that this
Agreement is terminated or, if not terminated, until the Closing Date,
the confidentiality of any data or information received by the
Purchaser regarding the business and assets of any Company shall be
maintained by the Purchaser and its representatives in accordance with
the Confidentiality Agreement dated December 7, 1995, executed by the
Purchaser (the "Confidentiality Agreement").
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5.2.7 Names. The Purchaser acknowledges and covenants that
neither it nor any of its Affiliates will at any time use the names
Ray Ellison or Ray Ellison Industries, Inc., or any variant thereof,
except, after the Closing, the name Rayco or any other name used by
any Company during the ordinary course of business prior to the
Closing, or any variant thereof (collectively, the "Rayco Tradenames")
may be used by the Purchaser or any of its Affiliates after the
Closing. Each of the Sellers acknowledges and covenants that neither
it nor any of its Affiliates will at any time after the Closing use
any Rayco Tradenames.
5.2.8 Notices of Certain Events. Prior to the Closing
Date, the Purchaser shall promptly notify the Seller of: (a) any
notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement; (b) any notice or other
communication from any governmental or regulatory agency or authority
in connection with the transactions contemplated by this Agreement;
and (c) any actions, suits, claims, investigations or proceedings
commenced or, to its Knowledge threatened against, relating to or
involving or otherwise affecting the Purchaser that relate to the
consummation of the transactions contemplated by this Agreement.
5.2.9 Collateral Substitution. First State Bank of
Bandera, Texas has issued letters of credit in favor of the City of
San Antonio, Texas, which letters of credit can be drawn upon if Rayco
fails to meet certain commitments to complete residential
subdivisions. A Rayco Affiliate has pledged collateral as security
for such letters of credit. On or before the Closing Date, the
parties to this Agreement shall use their best efforts to cause the
collateral which has been pledged to secure such letters of credit,
which collateral will have a value of not more than $1.5 million, to
be released or substituted. In the event the Purchaser is unable to
obtain the release or substitution of such collateral, the Purchaser
shall indemnify and hold harmless the Rayco Affiliate and the Sellers
against any loss, damage or expense (including reasonable attorneys'
fees) sustained by the Rayco Affiliate and the Sellers as a result of
its failure to obtain such release or substitution.
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5.3 Environmental Assessments.
5.3.1 The Purchaser may, at the Purchaser's sole cost,
obtain a Phase I Environmental Report (a "Phase I Report") on any
property owned or occupied by a Company. The Purchaser may, at the
Purchaser's sole cost, obtain a Phase II Environmental Report (a
"Phase II Report) on any property which, as a result of a Phase I
Report, the Purchaser determines requires further assessment. Any
Phase I Report and any Phase II Report shall be prepared by a
registered professional engineer, shall be issued in favor of both the
Purchaser and the Company which owns or occupies the property which is
the subject of the report, and shall be delivered to the Purchaser and
the Sellers.
5.3.2 Industries and the LLC each covenant that they shall
cause the Companies, at the Companies sole cost, to (i) supply to the
Purchaser historical and operational information which is in the
possession of a Company and which relates to any property which is the
subject of a Phase I Report, and (ii) permit representatives of the
Purchaser to conduct the assessments contemplated by Section 5.3.1
provided such assessments do not unreasonably disrupt the business or
operations of any Company. The Purchaser shall cause any damages
resulting from any such assessment to be repaired at Purchaser's sole
cost, and agrees to indemnify and hold the Sellers and the Companies
harmless from any loss, cost, expense or liability incurred by any
Seller or any Company relating to or arising out of the conduct of any
assessment and which results primarily from any act of the Purchaser,
any representative of the Purchaser, or any person or entity retained
by the Purchaser to conduct or assist in such assessment.
5.3.3 Prior to the end of the Environmental Due Diligence
Period, the Purchaser may deliver to the Sellers a written statement
(the "Environmental Statement") identifying any condition on any
property owned or occupied by a Company or relating to a Company's
business which, in the reasonable opinion of the Purchaser, could lead
to liability under any Environmental Law (an "Environmental Breach").
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5.3.4 (a) If the Purchaser delivers an Environmental
Statement prior to the end of the Environmental Due Diligence Period
and both of the conditions set forth in clauses (i) and (ii) below are
satisfied:
(i) the aggregate book value of all Identified
Properties is $3 million or less, and
(ii) the estimated cost of resolving the
Environmental Breaches at the Identified Properties, as
determined by an Environmental Consultant, is $3 million or
less,
then Industries or the LLC, as the case may be, and the Purchaser
agree to negotiate in good faith in an attempt to reach a mutually
acceptable written agreement with respect to any Identified Property
concerning (A) the remediation or other action necessary to resolve
any or all of the Environmental Breaches specified in the
Environmental Statement with respect to such Identified Property and
(B) the party or parties which will be responsible for the costs of
such remediation or other action (a "Remediation Agreement").
(b) With respect to those Identified Properties for
which a Remediation Agreement has not been executed ("Non-Remediation
Properties") pursuant to Section 5.3.4(a) above, either the Purchaser
may require the Sellers to, or the Sellers may elect to, withdraw such
Non-Remediation Properties from the Companies, in which case (i) the
Sellers shall jointly and severally indemnify the Purchaser against
and hold the Purchaser and each Company harmless from any loss,
damage, cost or expense (including reasonable attorneys' fees and
reasonable fees of environmental consultants) sustained by the
Purchaser or any Company arising out of or relating to such
Non-Remediation Properties and (ii) there will be a corresponding
reduction in the Purchase Price equal to the aggregate book value of
such withdrawn Non-Remediation Properties.
(c) If neither party makes the election to withdraw,
or to require the Sellers to withdraw, such Non-Remediation Properties
as provided in Section 5.3.4(b) above, then Purchaser shall acquire
all Non-Remediation Properties owned or occupied by a Company subject
to all Environmental Breaches and all conditions stated or identified
in any Phase I Report, Phase II Report, the Environmental Statement or
any other environmental report or assessment prepared
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prior to Closing for the Purchaser or any Purchaser Affiliate or
representative ("Conditions") and the Sellers shall have no further
liability with respect to any such Environmental Breaches and
Conditions.
5.3.5 (a) If the Purchaser delivers an Environmental
Statement prior to the end of the Environmental Due Diligence Period
and either of the following conditions set forth in clauses (i) or
(ii) below is satisfied:
(i) the aggregate book value of all Identified
Properties exceeds $3 million, or
(ii) the estimated cost of resolving an Environmental
Breach at the Identified Properties, as determined by an
Environmental Consultant, exceeds $3 million,
then Industries or the LLC, as the case may be, and the Purchaser
agree to negotiate in good faith in an attempt to reach a Remediation
Agreement with respect to any Identified Property.
(b) With respect to those Identified Properties for
which a Remediation Agreement has not been executed ("Excess Non-
Remediation Properties") pursuant to Section 5.3.5(a) above, the
Sellers may elect to withdraw such Excess Non-Remediation Properties
from the Companies, in which case (i) the Sellers shall jointly and
severally indemnify the Purchaser against and hold the Purchaser and
each Company harmless from any loss, damage, cost or expense
(including reasonable attorneys' fees and reasonable fees of
environmental consultants) sustained by the Purchaser or any Company
arising out of or relating to such Excess Non-Remediation Properties
and (ii) there will be a corresponding reduction in the Purchase Price
equal to the aggregate book value of such withdrawn Excess
Non-Remediation Properties.
(c) If the Sellers do not make the election to
withdraw such Excess Non-Remediation Properties as provided in Section
5.3.5(b) above, then the Purchaser shall have the right either to:
(i) terminate this Agreement, in which event
neither the Sellers nor the Purchaser shall have any further
obligations under this Agreement other than their respective
obligations to pay their own costs and expenses under this
section 5.3, the
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Purchaser's indemnification obligations under this Section
5.3, and their respective obligations identified in Section
9.2.4 below, or
(ii) acquire all Excess Non-Remediation
Properties owned or occupied by a Company subject to all
Environmental Breaches and all Conditions and Sellers shall
have no further liability with respect to any such
Environmental Breaches and Conditions.
5.3.6 With respect to the terms of Sections 5.3.3, 5.3.4
and 5.3.5:
(a) "Identified Properties" shall mean
properties with respect to which an Environmental Breach has
been identified and shall be limited to those lots within any
subdivision, or the portion of any property that is not part
of a subdivision, that are reasonably expected to be affected
by an environmental matter, and
(b) "Environmental Consultant" shall
mean an environmental engineering firm selected by the
Purchaser and reasonably acceptable to the Sellers with
experience in performing environmental assessments of
properties similar to the properties owned or operated by the
Companies.
5.4. Land Contracts. The Purchaser and the LLC agree as
follows with respect to Rayco contracts for the acquisition of
undeveloped tracts of land ("Land Contracts"):
5.4.1 Rayco may close all Land Contracts which on the
date of this Agreement may not be terminated by Rayco by their terms
and without penalty in excess of $1,000 individually.
5.4.2 Land Contracts which (i) on the date of this
Agreement may be terminated by Rayco without penalty in excess of
$1,000 individually and (ii) provide for a closing date between the
date of this Agreement and the Closing Date will be reviewed by the
Purchaser during the Due Diligence Period. Rayco may close any such
Land Contract which is not disapproved of in writing by the Purchaser
during the Due Diligence Period.
5.4.3 Between the date of this Agreement and the Closing
Date, Rayco will not enter into or close new Land Contracts which
would or could obligate Rayco to pay an aggregate purchase price in
excess of $200,000 except for (i) Land Contracts approved in writing
by the Purchaser and
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(ii) Land Contracts which may be terminated by Rayco after the Closing
Date without penalty in excess of $1,000 individually.
ARTICLE 6.
Conditions to Closing
6.1. Conditions to the Obligations of the Purchaser. The
obligations of the Purchaser to proceed with the Closing are subject to the
satisfaction on or prior to the Closing Date of all of the following
conditions, any one or more of which may be waived, in whole or in part, by the
Purchaser:
6.1.1 Compliance. Each of the Sellers shall have
complied in all material respects with each of its covenants and
agreements contained herein and each of its representations and
warranties contained in Sections 4.1, 4.2 or 4.3 hereof shall have
been true in all material respects when made and shall be true in all
material respects on and as of the Closing Date as if made on and as
of such date.
6.1.2 Officers' Certificate. The Purchaser shall have
received (i) a certificate, dated the Closing Date, of an executive
officer of Industries certifying as to the matters specified in
Section 6.1.1 hereof with respect to Industries, (ii) a certificate,
dated the Closing Date, of an executive officer of the LLC certifying
as to the matters specified in Section 6.1.1 hereof with respect to
the LLC, and (iii) a certificate dated the Closing Date, of REGT
certifying as to the matters specified in Section 6.1.1 hereof with
respect to REGT.
6.1.3 Legal Opinions. The Purchaser shall have received
from Matthews & Branscomb, a Professional Corporation, counsel for the
Companies, an opinion dated the Closing Date in substantially the form
set forth as Exhibit C.
6.1.4 HSR Act. The waiting period (and any extension
thereof) under the HSR Act applicable to the transactions contemplated
hereby shall have expired or been terminated.
6.1.5 Statutes; Consents. Except as contemplated by
Section 6.1.4, any other statutory requirements for the valid
consummation of the transactions contemplated hereby shall have been
fulfilled and any other third-party and governmental consents,
approvals or authorizations
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necessary for the valid consummation of the transactions contemplated
hereby shall have been obtained.
6.1.6 No Orders. The Closing shall not violate any order
or decree of any court or governmental body having competent
jurisdiction over the transactions contemplated by this Agreement.
6.1.7 Resignations of Directors. Industries shall have
delivered the resignation of each director of each Corporation.
6.1.8 Employment Agreements. Each of the Executive
Officers shall have executed and delivered an Employment Agreement as
provided for in Section 2.4.
6.1.9 Material Adverse Changes. Since the Balance Sheet
Date no change shall have occurred in the business, assets, properties
or prospects of the Companies which has had or might reasonably be
expected to have a Material Adverse Effect other than (i) changes
reflected in the Financial Statements and (ii) changes listed on
Schedule 4.1.7.
6.1.10 Certificates Required by Code. Each of the Sellers
shall have provided to the Purchaser the appropriate certificate,
dated the Closing Date, that is required pursuant to Section 897 and
1445 of the Code.
6.2. Conditions to the Obligations of the Sellers. The
obligations of the Sellers to proceed with the Closing are subject to the
satisfaction on or prior to the Closing Date of all of the following
conditions, any one or more of which may be waived, in whole or in part, by the
Sellers:
6.2.1 Compliance. The Purchaser shall have complied in all
material respects with each of its covenants and agreements contained
herein, including, without limitation, the payment of the cash sums
provided for in Section 2.3 above, and each of its representations and
warranties contained in Section 4.4 hereof shall have been true in all
material respects when made and shall be true in all material respects
on and as of the Closing Date as if made on and as of such date.
6.2.2 Officer's Certificate. The Sellers shall have
received a certificate, dated the Closing Date, of an executive
officer of the Purchaser certifying as to the matters specified in
Section 6.2.1
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hereof.
6.2.3 Legal Opinion. The Sellers shall have received from
(i) Barton P. Pachino, the Purchaser's Senior Vice President and
General Counsel, an opinion dated the Closing Date in substantially
the form set forth as Exhibit D-1, and (ii) Davis Polk & Wardwell,
counsel to the Purchaser, an opinion dated the Closing Date in
substantially the form set forth as Exhibit D-2.
6.2.4 HSR Act. The waiting period (and any extension
thereof) under the HSR Act applicable to the transactions contemplated
hereby shall have expired or been terminated.
6.2.5 Statutes; Consents. Except as contemplated by
Section 6.2.4, any other statutory requirements for the valid
consummation of the transactions contemplated hereby shall have been
fulfilled and any governmental consents, approvals or authorizations
necessary for the valid consummation of the transactions contemplated
hereby shall have been obtained.
6.2.6 No Orders. The Closing shall not violate any order
or decree of any court or governmental body having competent
jurisdiction over the transactions contemplated by this Agreement.
6.2.7 Guaranty Federal Release. The Purchaser shall have
paid, satisfied and discharged all obligations of Rayco to Guaranty
Federal which are secured by a security interest in the GP Interest
and the LP Interest (which payments shall be made effective as of the
Closing and shall not affect in any way the Closing Date Balance
Sheet).
ARTICLE 7.
Taxes
7.1. Tax Returns.
7.1.1 The Sellers and the Purchaser agree that the tax
returns covering the activities of the Companies and their Affiliates
which must be filed after the Closing, and the respective obligations
of the Sellers, the Companies, the Companies' Affiliates and the
Purchaser with respect to the preparation and filing of such returns,
are as follows:
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(i) A consolidated federal income tax return for
Ellison, Inc., covering the period January 1, 1995, to
December 31, 1995, and including taxable income of the
Corporations for the period January 1, 1995 to January 31,
1995, will be due on or before March 15, 1996. The Sellers
will cause this return to be prepared and filed. The
Purchaser and its Affiliates, including the Corporations,
shall cooperate with the Sellers and make available all
necessary records and information concerning the activities of
the Corporations for the period January 1, 1995 to January 31,
1995, to allow the Sellers or their Affiliates to prepare and
file such return in a timely manner.
(ii) An initial 1995 consolidated federal income
tax return for Industries, including taxable income of the
Corporations for the period February 1, 1995, to December 31,
1995, will be due on or before March 15, 1996. In the event
that the Closing Date occurs on or after March 1, 1996,
Industries shall prepare and submit such return on or before
March 15, 1996 or, if a valid extension is granted, in a
timely manner thereafter. In all other events, the Purchaser
shall cause the Corporations to complete the preparation of
the portions of such return that relate to the Corporations.
The Purchaser shall use reasonable efforts to submit such
information to Industries in a manner that will enable
Industries to file on March 15, 1996, or if such filing date
is not practicable Industries shall seek an extension of time
for filing, in which case such information will be submitted
to Industries at least two weeks prior to the required filing
date. The Sellers will cause this return to be signed and
filed by Industries, and the Sellers and their Affiliates, and
the Purchaser and its Affiliates shall make available all
necessary records and information and shall otherwise
cooperate fully with each other.
(iii) A short-year federal income tax return for
Rayco covering the period February 1, 1995 to December 31,
1995, will be due on or before April 15, 1996. The Purchaser
will be responsible for the preparation and filing of this
return; provided, however, that not later than 15 days prior
to the date such return is to be filed, the
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Purchaser will provide the Sellers with a copy of such return
and give the Sellers an opportunity to provide the Purchaser
with comments with respect thereto. In the event that the
Closing Date occurs on or after April 1, 1996, the LLC shall
prepare and submit such return on or before April 15, 1996 or,
if a valid extension is granted, in a timely manner
thereafter; provided, however, that not later than 15 days
prior to the date such return is to be filed, the LLC shall
provide the Purchaser with a copy of such return and give the
Purchaser an opportunity to provide the LLC with comments with
respect thereto. In all other events, the Purchaser shall
cause Rayco to complete the return. The Purchaser shall use
reasonable efforts to submit such information to the LLC in a
manner that will enable the LLC to file on April 15, 1996, or
if such filing date is not practicable the LLC shall seek an
extension of time for filing, in which case such information
will be submitted to the LLC at least two weeks prior to the
required filing date. The Sellers and their Affiliates, and
the Purchaser and its Affiliates, shall make available all
necessary information and records and shall otherwise fully
cooperate with each other.
(iv) A short-year federal income tax return for
Rayco covering the period January 1, 1996, to the Closing
Date, will be due within three and one-half months after the
Closing Date. The Purchaser will be responsible for the
preparation and filing of this return; provided, however, that
not later than 15 days prior to the date such return is to be
filed, the Purchaser will provide the Sellers with a copy of
such return and give the Sellers an opportunity to provide the
Purchaser with comments with respect thereto.
(v) A consolidated federal income tax return for
Industries covering the period from January 1, 1996, to
December 31, 1996, will be due March 17, 1997. The Sellers
will cause this return to be prepared and filed. The
Purchaser and its Affiliates, including the Corporations,
shall cooperate with the Sellers and make available all
necessary records and information concerning the activities of
the Corporations for the period January 1, 1996, to the
Closing Date, to allow the Sellers or their Affiliates to
prepare and file such
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return in a timely manner.
7.1.2 The Purchaser and its Affiliates, including the
Companies, are responsible for preparing and filing with the
appropriate governmental authorities all returns or reports that
relate to the Taxes of the Companies other than those described in
Section 7.1.1 which are the responsibility of the Sellers. Such
returns or reports shall be prepared on a basis consistent with
returns prepared for prior taxable periods, and with the Closing Date
Balance Sheet so long as such basis is not materially adverse to the
Purchaser or its Affiliates.
7.2. Liability for Taxes.
7.2.1 The Sellers, jointly and severally, shall be liable
for any Taxes imposed on or incurred by any of the Companies for any
Pre-Closing Tax Period. The Sellers, jointly and severally, shall be
liable for any income Taxes imposed on the Companies pursuant to
Treasury Regulation Section 1.1502-6 or similar provisions with
respect to the taxable income of any member of the combined or
consolidated group covered by any combined or consolidated tax return
that include any of the Companies. "Pre-Closing Tax Period" means any
Tax period that (i) ends at or before the close of business on the
Closing Date and (ii) with respect to a Tax period that commences
before and ends after the close of business on the Closing Date, the
portion of such period up to the close of business on the Closing
Date. The Sellers, jointly and severally, shall also be liable for any
liabilities of any of the Companies that arise from any obligation of
any of the Companies to indemnify another Person with respect to
Taxes.
7.2.2 The Purchaser shall be liable for any Taxes imposed
on or incurred by the Companies for which Industries or the LLC are
not liable under Section 7.2.1; provided, however, that the Sellers
shall be liable, jointly and severally, for any sales, use, transfer,
recording, conveyance or similar Taxes imposed by the State of Texas
or any political subdivision thereof arising from the transactions
contemplated in this Agreement.
7.2.3 The Sellers, jointly and severally, shall indemnify
and hold the Purchaser harmless from any liability for Taxes for which
any Company is liable pursuant to Sections 7.2.1 and 7.2.2.
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The Purchaser shall indemnify and hold the Sellers harmless from any
liability for Taxes for which the Purchaser is liable pursuant to
Section 7.2.2.
7.2.4 The Sellers shall be entitled to any refunds (whether
by payment, credit, offset or otherwise) in respect of any Taxes for
which the Sellers are liable under Section 7.2.1. The Purchaser and
its Affiliates shall cooperate with the Sellers in order to permit the
Sellers to take all necessary steps to claim any such refund. Any
such refund received after the Closing by the Purchaser or its
Affiliates, including the Companies, shall be paid to the Sellers
within 10 days after its receipt.
7.2.5 The Sellers and the Purchaser agree that, for
purposes of all required returns or reports with respect to Taxes, the
amount of the unused minimum tax credit under Section 53 of the Code
attributable to each of the Companies that may be carried forward to
taxable periods ending after the Closing Date shall, unless otherwise
required by law or regulations, be determined in accordance with the
principles of Treasury Regulation Section 1.1502-79.
7.3. Section 754 Election. The LLC shall, upon the request of
the Purchaser delivered to the LLC contemporaneously with the delivery by the
Purchaser to the LLC of the Form 1065 of Rayco for the period ending on the
Closing Date, cause Rayco to elect under Section 754 of the Code to adjust the
basis of its property in the manner provided in Sections 734 and 743 of the
Code.
7.4. Tax Proceedings. In the event the Purchaser or any of
its Affiliates, including the Companies, receives any oral or written
communication regarding any pending or threatened examination, claim,
adjustment or other proceeding with respect to the liability of a Company for
Taxes for any period for which the Sellers are or may be liable under Section
7.2.1, the Purchaser shall within 10 days notify the Sellers in writing
thereof. As to any such Taxes for which a Seller is or may be liable under
Section 7.2.1, such Seller shall at its expense control, or settle the contest
of, such examination, claim, adjustment or other proceeding, unless it notifies
the Purchaser in writing within 10 days after receipt of the notice described
in the immediately preceding sentence that such Seller desires not to do so.
The Purchaser and its Affiliates shall cooperate with the Sellers and their
Affiliates in the negotiation and settlement of any
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proceedings described in this Section 7.5 and shall have the right to
participate fully (but not control), at its own expense. The Purchaser shall
provide, or cause to be provided, to the Sellers or their designee necessary
authorizations, including powers of attorney, to control any proceedings which
a Seller is entitled to control pursuant to this Section 7.5; provided,
however, if a Seller assumes the control or settles any such examination,
claim, adjustment or other proceeding, such Seller (or any other Seller) shall
not assert that the Tax, or any portion thereof, with respect to which
Purchaser seeks indemnification is not within the ambit of Section 7.2.3. If a
Seller elects not to assume such control as provided under this Section 7.5,
Purchaser may pay, compromise or contest the Tax at issue and the Seller shall
continue to be liable for its indemnifications obligations hereunder and for
reasonable fees and expenses of Purchaser's counsel.
7.5. Cooperation and Exchange of Information. Except as
otherwise provided in this Article 7, any amount to which a party is entitled
under this Article 7 shall be promptly paid to such party by the party
obligated to make such payment following written notice to the party so
obligated that the Taxes to which such amount relates have been paid or
incurred and that provides details supporting the calculation of such amount.
The Purchaser shall provide, or cause to be provided, to the Sellers copies of
all correspondence received from any taxing authority by the Purchaser or any
of its Affiliates, including the Companies, in connection with the liability of
a Company for Taxes for any period for which a Seller is or may be liable under
Section 7.2.1. The parties shall provide each other with such cooperation and
information as they may reasonably request of each other in preparing or filing
any return, amended return or claim for refund, in determining a liability or a
right to refund or in conducting any audit or other proceeding in respect of
Taxes imposed on the parties or their respective Affiliates. The Purchaser and
its Affiliates shall preserve and retain all returns, schedules, work papers
and other documents relating to any such returns, claims, audits or other
proceedings until the expiration of the statutory period of limitations (with
regard to waivers and extensions) of the taxable periods to which such
documents relate and until the final determination of any payments which may be
required with respect to such periods under this Agreement and shall make such
documents available to representatives of the Sellers upon reasonable notice
and at reasonable times, it being understood that such representatives shall be
entitled to make
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copies of any such books and records as they shall deem necessary. The
Purchaser further agrees to permit representatives of the Sellers to meet with
employees of the Purchaser or the Companies on a mutually convenient basis in
order to enable such representatives to obtain additional information and
explanations of any documents provided pursuant to this Section 7.5. The
Purchaser shall make available, or cause the Companies to make available, to
the representatives of the Sellers sufficient work space and facilities to
perform the activities described in the two preceding sentences. Any
information obtained pursuant to this Section 7.5 shall be kept confidential,
except as may be otherwise necessary in connection with the filing of returns
or claims for refund or in conducting any audit or other proceeding. Each of
the parties shall provide the cooperation and information required by this
Section 7.5 at its own expense.
7.6. Threshold Amount; Limit on Liability. The Purchaser shall
not be entitled to assert rights of indemnification under Section 7.2.3 unless
and until the aggregate of all Taxes for which such indemnification is required
exceeds $50,000. The aggregate amount of liability of any Seller under this
Article 7, Article 10, and for any other breach of this Agreement shall not
exceed the consideration specified in Section 2.1 of this Agreement with
respect to the Securities of the Company which are being sold by such Seller,
as such amount may be adjusted as provided for in Section 2.5. The Sellers
shall not be entitled to assert rights of indemnification under Section 7.2.3
unless and until the aggregate of all Taxes for which such indemnification is
required exceeds $50,000; provided, however, that such limitation shall not
apply to the Purchaser's obligation to pay to the Sellers any refund as
described in Section 7.2.4.
7.7. Conflict. In the event of a conflict between the
provisions of this Article 7 and any other provisions of this Agreement, the
provisions of this Article 7 shall control.
7.8. Section 338 Election. At the election of the Purchaser,
Industries agrees to join in the making of an election under Section
338(h)(10) of the Code (and any similar state provision) with respect to the
sale of each of the Corporations. If Purchaser makes such election, Industries
shall (i) timely complete, execute and file the appropriate forms, (ii)
cooperate in the making of the required allocation of the purchase price among
each of the Corporation's assets, (iii) not take any position inconsistent with
the Section 338(h)(10) elections or the allocations thereunder, and (iv) timely
provide (and in all events at least
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seven days prior to the applicable filing deadline) Purchaser with executed
originals of all documents to be filed with any taxing authorities.
ARTICLE 8.
Employee Benefits
8.1. Employees. There are an aggregate of approximately 440
individuals who are employed by the Companies as of the date hereof ("Company
Employees"). Industries and the LLC shall promptly furnish to the Purchaser a
list of the Company Employees, which list shall contain the salary level and
date of hire of each Company Employee. Industries and the LLC shall endeavor
to continue the employment of Company Employees to the Closing Date, subject to
turnover and replacement in the ordinary course of business. From the date
hereof and during the one-year period following the Closing Date, neither the
Sellers nor any Seller Affiliate shall offer employment to any Company Employee
unless the Purchaser terminates the employment of such Company Employee or the
Purchaser consents in writing to the employment of such Company Employee by a
Seller or any Seller Affiliate. From the date hereof and through the Closing
Date, without the written consent of the Purchaser, the total number of
individuals employed by the Companies may not be increased by more than 3% from
the number of Company Employees.
8.2. Service Credit to Company Employees. Upon the Closing,
employees of each Company shall receive credit for their service prior to the
Closing Date with such Company or any of its Affiliates (including service with
any predecessor company) for the purpose of determining eligibility for
participation (but not for benefit accrual purposes) under the employee welfare
benefit plans (as defined in Section 3(1) of ERISA) and similar benefit
policies (i.e., vacations, sick days, holidays and short-term disability
programs) of the Purchaser and its Affiliates in which such employees are or
become eligible to participate, but not for purposes of eligibility for
participation, vesting or benefit accrual under employee pension benefit plans.
8.3. Termination of Company Employee Benefit Plans. Subject
to effecting the Closing, and except as provided in Section 8.4.4, Industries
and the LLC shall take or cause to be taken whatever
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action is necessary or appropriate to terminate as of the Closing the
participation of each Company as a participating employer in all the Plans and
Rayco Plans.
8.4. Benefits Plans.
8.4.1 Upon the discontinuation and termination of the
participation of each Company in the Plans and the Rayco Plans as
provided in Section 8.3, the interests and the liabilities of (i) each
Corporation in the Plans shall be assumed by Industries or an
Industries Affiliate as of the Closing Date and (ii) Rayco in the
Rayco Plans shall be assumed by the LLC or an Affiliate of the LLC.
From and after the Closing Date, no Company shall have any interest
in, responsibility for or liability with respect to the Plans or the
Rayco Plans. Without limiting the foregoing and except as provided in
Section 8.4.4, Industries or the LLC shall remain liable for any
claims incurred (whether or not reported) on or prior to the Closing
Date under, respectively, any Plan or Rayco Plan.
8.4.2 After the Closing Date, employees of each Company
continuing active employment shall become eligible to participate,
taking into account Section 8.2 hereof, in the employee benefit plans,
programs and policies sponsored by the Purchaser for the benefit of
its employees generally, excluding plans sponsored or maintained by
the Purchaser for select groups of employees who are officers or
highly compensated employees, for which plans the Purchaser shall
retain the discretion as to which employees are eligible for coverage
or participation.
8.4.3 The Purchaser shall cause the Company Employees and
their eligible dependents to be eligible for coverage under an
employer-sponsored health insurance benefit plan or health maintenance
organization as of the Closing Date (or as of any later date of
terminated coverage under Section 8.4.4) without interruption of
coverage and shall waive all pre-existing conditions, restrictions and
limitations for any medical condition thereof at or prior to the
Closing, except to the extent coverage of any such medical condition
would be limited under the group health insurance plan applicable to
the affected employee at or prior to the Closing Date or later date of
terminated coverage under Section 8.4.4. In the event that any group
health plan providing COBRA coverage
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to existing Company "qualified beneficiaries" (as that term is defined
in Section 4980B of the Code) as of the Closing Date is not treated as
a Continued Plan (as that term is defined below in Section 8.4.4),
until the expiration of all continued coverage rights of such
qualified beneficiaries the Purchaser agrees to cause another of its
group health plans to assume and cover such qualified beneficiaries,
at the beneficiaries' expense, until such expiration.
8.4.4 Prior to the Closing Date, the Purchaser may
designate any of the Plans or Rayco Plans as a "Continued Plan."
Notwithstanding Section 8.3 and the first two sentences of Section
8.4.1, the participation of each Company in any Continued Plan shall
continue, after the Closing Date, until further notice by the
Purchaser. The Purchaser shall reimburse Industries or the LLC, as
appropriate, for any and all liability resulting from and the
reasonable costs (including administrative costs) of covering
employees of any Company after the Closing Date under a Continued
Plan. Coverage of employees of any Company under a Continued Plan
shall be treated as satisfying any requirement under Section 8.4.2 or
8.4.3 with respect to benefits of the same type as those provided
under such Continued Plan for so long as such Continued Plan exists.
8.4.5 Any other provision of this Agreement
notwithstanding, to the extent employees of the Companies participate
as of the date hereof in any "flexible spending account" under a
"cafeteria plan," within the meaning of Section 125 of the Code and
regulations thereunder (a "Company FSA"), sponsorship of such Company
FSA shall be assumed by such Company or Companies as of the Closing.
The Purchaser shall cause each Company FSA to remain in effect until
such time as all Company Employees have had adequate opportunity to
claim reimbursement of claims in connection with contributions to such
Company FSA for the plan year of the Company FSA within which the
Closing Date occurs (the "Company FSA Year"). The Purchaser shall
assume all plan liabilities associated with claims of Company
Employees under each Company FSA for the applicable Company FSA Year
and, if maintained by the Purchaser or the Companies for subsequent
periods, for such subsequent periods. To the extent any amounts
deferred or contributed prior to the Closing by any Company Employee
under a Company FSA during the
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applicable Company FSA Year have not, prior to the Closing Date, been
paid out under such Company FSA in the form of premiums or benefits to
beneficiaries or third party service providers, such deferred amounts
or contributions shall be reflected as a liability of the Company
employing such Company Employee on the Closing Date Balance Sheet.
The Sellers represent, as a condition to the effectiveness of the
obligations set forth in this Section 8.4.5, that each Company FSA is,
as of the date hereof, administered by employees of the Companies, and
that no hiring of additional employees or other actions outside the
ordinary course of business would be required for a Company to assume
sponsorship and administration of such Company FSA as of the Closing
Date.
8.5. Subsequent Dispositions. The Purchaser agrees to
cause any of its successors or assignees or any transferees of the businesses or
lines of business of any Company to assume the obligations of the Purchaser set
forth in this Article 8.
ARTICLE 9.
Termination
9.1. Grounds for Termination. In addition to a
termination as provided for in Section 5.3, this Agreement may be terminated
at any time prior to the Closing Date:
9.1.1 By the mutual written agreement of the Sellers and
the Purchaser;
9.1.2 By any of the Sellers or the Purchaser by written
notice thereof to the other if the purchase and sale of the Securities
contemplated hereby shall not have been consummated on or before April
30, 1996, or such other date, if any, as the Seller and the Purchaser
shall agree upon in writing;
9.1.3 By any of the Sellers or the Purchaser by written
notice thereof to the other if the consummation of such transactions
would violate any nonappealable final order, decree or judgment of any
court or governmental body having competent jurisdiction enjoining,
restraining or otherwise preventing, or awarding substantial damages
in connection with, or imposing any material adverse condition upon,
the consummation of this Agreement or the transactions
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contemplated hereby;
9.1.4 By any of the Sellers following the end of the Due
Diligence Period or the Purchaser during or after the Due Diligence
Period by written notice thereof to the other if the Boards of
Directors of the Purchaser and the Purchaser Entities, during the Due
Diligence Period, have not duly authorized and approved (i) the
execution and delivery by the Purchaser and the Purchaser Entities of
this Agreement and the various other agreements contemplated herein to
which each of the Purchaser and the Purchaser Entities is a party,
(ii) the performance by the Purchaser and the Purchaser Entities of
all the terms and conditions hereof and thereof to be performed by
each of them, and (iii) the consummation of the transactions
contemplated hereby and thereby;
9.1.5 By any of the Sellers by written notice thereof to
the Purchaser if each of the Sellers have not received, from the date
of this Agreement to a date no later than two days after the Due
Diligence Period, the Purchaser's Due Authorization Notice stating
that the Boards of Directors of the Purchaser and the Purchaser
Entities, during the Due Diligence Period, have duly authorized and
approved (i) the execution and delivery by the Purchaser and the
Purchaser Entities of this Agreement and the various other agreements
contemplated herein to which each of the Purchaser and the Purchaser
Entities is a party, (ii) the performance by the Purchaser and the
Purchaser Entities of all the terms and conditions hereof and thereof
to be performed by each of them, and (iii) the consummation of the
transactions contemplated hereby and thereby;
9.1.6 By any of the Sellers or the Purchaser by written
notice thereof to the other if termination is permitted and exercised
pursuant to and in accordance with Section 5.3 above;
9.1.7 By the Purchaser by written notice thereof to the
Sellers if the Purchaser, for any reason whatsoever, elects to
terminate this Agreement and such written notice of such termination
is provided to the Sellers during the Due Diligence Period;
9.1.8 By the Purchaser by written notice thereof to the
Sellers if (i) the results of operations or financial condition of the
Companies taken as a whole as reflected in the Year-End
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Unaudited Financial Statements differ materially from the results of
operations or financial condition of the Companies taken as a whole as
reflected in the Year-End Audited Financial Statements and (ii) the
Purchaser provides such written notice of its election to terminate
this Agreement no later than five business days after, but not
including, the date on which it received a copy of the Year-End
Audited Financials.
9.1.9 By any of the Sellers by written notice thereof to
the Purchaser if (i) the Trustees of the REGT shall not have received
a written opinion on or before January 31, 1996 from Dillon, Read &
Co., Inc. that the consideration to be received by the Sellers in the
transaction contemplated by this Agreement is within a range of
fairness from a financial point of view and (ii) such written notice
is provided to the Purchaser on February 1, 1996.
9.1.10 By any of the Sellers by written notice thereof to
the Purchaser if (i) the Purchaser provides the Purchaser's Notice of
Breach to any of the Sellers or the Companies at any time on or prior
to the Closing Date and (ii) the amount of all losses, damages and
expenses (including attorney's fees) claimed by the Purchaser or that
would reasonably be expected to be claimed by the Purchaser as a
result of the breach or breaches set forth in the Purchaser's Notice
of Breach exceeds, individually or in the aggregate, $2 million;
provided, however, that a party shall not be allowed to exercise any right of
termination pursuant to this Section 9.1 (other than Sections 9.1.4, 9.1.5,
9.1.6 and 9.1.7) if the event giving rise to such termination right shall be
due to the willful failure of the party seeking to terminate this Agreement to
perform or observe in any material respect any of the covenants or agreements
set forth herein to be performed or observed by such party.
9.2. Effect of Termination. The following provisions shall
apply in the event of a termination of this Agreement:
9.2.1 [Intentionally left blank]
9.2.2 If this Agreement is terminated as a result of the
willful failure of the Purchaser to perform its obligations hereunder,
the Purchaser shall be fully liable for any and all damages
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sustained or incurred by the Sellers.
9.2.3 If this Agreement is terminated as a result of the
willful failure of any Seller to perform its obligations hereunder,
each such Seller shall be fully liable for any and all damages
sustained or incurred by the Purchaser.
9.2.4 The Sellers and the Purchaser hereby agree that the
provisions of Sections 5.1.7, 5.2.5, 5.2.6 and 5.3 and Articles 11 and
12 hereof shall survive any termination of this Agreement.
9.2.5 If this Agreement is terminated by the Sellers
pursuant to Section 9.1.9, the Sellers shall pay the Purchaser in cash
within two business days of the date of such termination (a) a fee
(the "Termination Fee") of $2,000,000 and (b) an expense reimbursement
fee of $500,000; provided that if the Purchaser subsequently purchases
any partnership interests in or assets of Rayco pursuant to Section
5.1.15, then upon the consummation of such purchase the Purchaser
shall repay to the Sellers any Termination Fee or expense
reimbursement fee previously paid by the Sellers to the Purchaser
pursuant to this Section.
In addition, if this Agreement is terminated by the
Sellers pursuant to Section 9.1.9 and if, on or prior to the first
anniversary of the date of such termination, a majority of the
partnership interests in or assets of Rayco is acquired directly or
indirectly, in one or a series of related transactions, or one or
more Sellers enter into an agreement on or prior to such first
anniversary pursuant to which such partnership interests or assets
are subsequently acquired directly or indirectly, by one or more
Persons other than the Purchaser, the Sellers shall pay the Purchaser
a fee (in addition to any Termination Fee) in cash on the date of the
closing of such acquisition in an amount equal to (a) plus (b), where
(a) is equal to $2,000,000 less any Termination Fee paid prior to
such date and (b) is equal to half of the amount, if any, by which
the aggregate consideration received or to be received by the Sellers
and any of their Affiliates as a result of such acquisition exceeds
$84,000,000 (or, if less than all of the Partnership interests in or
assets of Rayco is being acquired, an amount equal to the percentage
of the partnership interests or assets being acquired times
$84,000,000).
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9.2.6 If this Agreement is terminated pursuant to Section
9.1.4 or Section 9.1.5 the Purchaser shall pay the Sellers an expense
reimbursement fee (the "Reimbursement Fee") in cash within two
business days of the date of such termination of $500,000. For the
avoidance of doubt, no Reimbursement Fee shall be payable if this
Agreement is terminated pursuant to any other provision of this
Agreement prior to any termination pursuant to Section 9.1.4 or
Section 9.1.5.
9.2.7 THE SELLERS AND THE PURCHASER AGREE THAT, EXCEPT AS
PROVIDED FOR IN SECTIONS 9.2.5 AND 9.2.6 AND EXCEPT WITH RESPECT TO
PROVISIONS OF THIS AGREEMENT WHICH EXPRESSLY SURVIVE TERMINATION OF
THIS AGREEMENT, IF THIS AGREEMENT IS TERMINATED PURSUANT TO THE
PROVISIONS OF THIS AGREEMENT, NO PARTY SHALL HAVE ANY LIABILITY TO ANY
OTHER PARTY ABSENT A WILLFUL BREACH OF THIS AGREEMENT OCCURRING PRIOR
TO TERMINATION. IN THE EVENT OF SUCH WILLFUL BREACH BY ANY PARTY,
THAT PARTY SHALL REMAIN LIABLE TO THE OTHER PARTIES FOR ALL DAMAGES
RESULTING THEREFROM, INCLUDING LOST PROFITS, BUT SHALL NOT BE LIABLE
FOR INDIRECT, UNFORESEEN, SPECULATIVE OR PUNITIVE DAMAGES. Without
limitation other than as set forth in Sections 9.1.1, 9.1.4, 9.1.5 and
9.1.9, if all of the conditions to a party's obligations set forth in
Section 6.1 or 6.2 have been satisfied or waived by the date scheduled
for the Closing pursuant to Article 3, the failure of such party to
perform its obligations on such date shall be deemed to be a willful
breach of this Agreement by such party.
ARTICLE 10.
Extent and Survival of Representations,
Warranties, Covenants and Agreements; Indemnification
10.1. Scope of Representations. EXCEPT AS SET FORTH IN THIS
AGREEMENT, THE VARIOUS OTHER AGREEMENTS CONTEMPLATED HEREIN AND THE SCHEDULES
HERETO, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER ARE MADE BY ANY PARTY TO
THIS AGREEMENT, AND ALL PARTIES TO THIS AGREEMENT DISCLAIM ALL LIABILITY AND
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RESPONSIBILITY, WITH RESPECT TO ANY REPRESENTATION, WARRANTY, STATEMENT OR
INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO ANY OTHER PARTY TO
THIS AGREEMENT (INCLUDING, BUT NOT LIMITED TO, ANY OPINION, INFORMATION OR
ADVICE WHICH MAY HAVE BEEN PROVIDED TO ANY PARTY TO THIS AGREEMENT BY ANY
OFFICER, STOCKHOLDER, PARTNER, DIRECTOR, EMPLOYEE, AGENT, AFFILIATE,
CONSULTANT, TRUSTEE OR REPRESENTATIVE OF SUCH PARTY, OR BY DILLON, READ & CO.,
INC., OR MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, OR BY SUCH PARTY'S
COUNSEL OR ANY OTHER AGENT, CONSULTANT OR REPRESENTATIVE).
10.2. Indemnification of the Purchaser. The Sellers jointly and
severally agree to indemnify the Purchaser against, and hold the Purchaser and,
after the Closing, each Company harmless from, any loss, damage or expense
(including reasonable attorneys' fees) sustained by the Purchaser or any
Company arising out of or resulting from any inaccuracy in or breach of any of
the representations, warranties or covenants of or by any Seller set forth
herein (any such loss, damage or expense being referred to herein as "Purchaser
Indemnified Loss"); provided, however, that (i) the Purchaser shall not be
entitled to assert rights of indemnification under this Article 10 or claims
for any breach of this Agreement unless and until the aggregate of all
Purchaser Indemnified Losses exceeds $100,000 (the "Threshold Amount") (it
being understood that all such Purchaser Indemnified Losses shall accumulate
until such time or times as the aggregate of all Purchaser Indemnified Losses
exceeds such Threshold Amount, whereupon the Purchaser shall be entitled to
indemnification hereunder or assert claims for breach of this Agreement for any
Purchaser Indemnified Losses in excess of, but excluding, such Threshold
Amount); (ii) the Threshold Amount shall not apply to the Sellers' obligations
to the Purchaser pursuant to Articles 2 and 7 and Section 9.2 of this
Agreement; and (iii) the aggregate of all Purchaser Indemnified Losses for
which the Purchaser is entitled to reimbursement hereunder and all amounts for
which the Sellers are liable for breach of this Agreement (including, without
limitation, any liability of a Seller under Article 7) shall not exceed the
Adjusted Purchase Price, and in no event shall the aggregate of all Purchaser
Indemnified Losses for which the Purchaser is entitled to reimbursement
hereunder and all amounts for which a Seller
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is liable for breach of this Agreement (including, without limitation, any
liability of a Seller under Article 7) exceed the Adjusted Purchase Price. For
the avoidance of doubt, it is understood that each of the Sellers will be
jointly and severally responsible for any loss, damage or expense sustained by
the Purchaser or any Company arising out of or resulting from any inaccuracy in
or breach of any of the representations, warranties or covenants of or by any
Seller whether or not such representation, warranty or covenant was made by
such Seller. The Sellers have advised the Purchasers that the Executive
Officers may receive compensation from the Sellers for certain non-compete
agreements contained in the Employment and Non-Competition Agreements and that
any such compensation shall be the sole responsibility of the Sellers. The
Sellers hereby indemnify the Purchasers for any and all obligations and claims
relating to or arising out of the payment of such compensation for such
non-compete agreements contained in the Employment and Non-Competition
Agreements and any agreements between the Sellers and the Executive Officers
with respect to the payment of such compensation for such non-compete
agreements contained in the Employment and Non-Competition Agreements; however,
notwithstanding the foregoing, the Sellers do not agree to and shall not
indemnify the Purchaser for any claim relating to or arising out of (i) an
Executive Officer's failure to perform his obligations under his respective
Employment and Non-Competition Agreement or (ii) the Purchaser's failure to pay
the compensation due an Executive Officer under his respective Employment and
Non-Competition Agreement for services rendered by such Executive Officer under
such Employment and Non-Competition Agreement.
10.3. Indemnification of the Sellers. In addition to the
indemnification provided for in Section 5.3, the Purchaser agrees to indemnify
the Sellers against, and hold the Sellers harmless from, any loss, damage or
expense (including reasonable attorneys' fees) sustained by any Sellers arising
out of or resulting from any inaccuracy in or breach of any of the
representations, warranties or covenants made by the Purchaser herein (any such
loss, damage or expense being referred to herein as a "Seller Indemnified
Loss"); provided, however, that (i) the Sellers shall not be entitled to assert
rights of indemnification hereunder or assert claims for any breach of this
Agreement unless and until the aggregate of all Seller Indemnified Losses
exceeds the Threshold Amount (it being understood that all such Seller
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Indemnified Losses shall accumulate until such time or times as the aggregate
of all Seller Indemnified Losses exceeds the Threshold Amount, whereupon the
Seller Indemnified Parties shall be entitled to indemnification hereunder for
any Seller Indemnified Losses in excess of, but excluding, the Threshold
Amount); (ii) the Threshold Amount shall not apply to the Purchaser's
obligations to Seller pursuant to Articles 2 and 7 and Section 9.2 of this
Agreement; and (iii) the aggregate of all Seller Indemnified Losses for which
the Sellers are entitled to reimbursement hereunder and all amounts for which
the Purchaser is liable for breach of this Agreement (including, without
limitation, any liability of Purchaser under Article 7) shall not exceed $10
million.
10.4. Survival. The representations, warranties, covenants
and agreements set forth in this Agreement and in any certificate or instrument
delivered in connection herewith, and the Sellers' and the Purchaser's
indemnification obligations with respect thereto under this Article 10, shall
(except as provided for in Section 5.3) be continuing and shall survive the
Closing for the eighteen-month period immediately following the Closing Date,
notwithstanding any investigation at any time made by or on behalf of the
Purchaser, but shall thereafter terminate and be of no further force or effect
except to the extent they relate to claims made in writing to the Sellers or
the Purchaser, as the case may be, prior to or on such date; provided, however,
that (i) the representations and warranties set forth in Sections 4.1.3, 4.1.8,
4.1.13, 4.2.3, 4.2.8, 4.2.13 and 4.3.3 and the covenants and agreements set
forth in Sections 5.1.15, 5.2.4, 5.2.7 and 5.3 and in Articles 7 (including all
applicable extensions), 8 (other than Section 8.4.3), 11, 12 and 13 and the
accompanying indemnification obligations shall survive in accordance with their
terms until the expiration of the applicable statute of limitations, and (ii)
the representations and warranties set forth in Sections 4.1.16 and 4.2.16 and
the accompanying indemnification obligations shall survive in accordance with
their terms for the five (5) year period immediately following the Closing
Date.
10.5. Indemnification Procedures. All claims for
indemnification under this Agreement (other than the provisions of Article 7)
shall be asserted and resolved as follows:
10.5.1 A party claiming indemnification under this Agreement
(an "Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party")
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of any third-party claim or claims asserted against the Indemnified
Party ("Third Party Claim") which could give rise to a right of
indemnification under this Agreement and (ii) transmit to the
Indemnifying Party a written notice ("Claim Notice") describing in
reasonable detail the nature of the Third Party Claim, a copy of all
papers served with respect to such claim (if any), and the basis of
the Indemnified Party's request for indemnification under this
Agreement. Within 30 days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the
Indemnified Party (i) whether the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Article 10
with respect to such Third Party Claim and (ii) whether the
Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such Third
Party Claim.
10.5.2 If the Indemnifying Party notifies the Indemnified
Party within the Election Period that the Indemnifying Party elects to
assume the defense of the Third Party Claim, then the Indemnifying
Party shall have the right to defend, at its sole cost and expense,
such Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party
to a final conclusion or settled at the discretion of the Indemnifying
Party in accordance with this Section 10.5.2. The Indemnifying Party
shall have full control of such defense and proceedings, including any
compromise or settlement thereof, but shall consult in good faith with
the Indemnified Party before entering into any compromise or
settlement. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section 10.5, and shall
bear its own costs and expenses with respect to such participation.
10.5.3 If the Indemnifying Party fails to notify the
Indemnified Party within the Election Period that the Indemnifying
Party elects to defend the Indemnified Party pursuant to Section
10.5.2, or if the Indemnifying Party elects to defend the Indemnified
Party pursuant to Section 10.5.2 but fails to prosecute or settle the
Third Party Claim diligently and promptly, then the Indemnified Party
shall notify the Indemnifying Party that the Indemnified Party elects
to assume
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the defense of the Third Party Claim. The Indemnified Party shall
then have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously
prosecuted by the Indemnified Party to a final conclusion or settled.
The Indemnified Party shall have full control of such defense and
proceedings; provided, however, that the Indemnified Party may not
enter into, without the Indemnifying Party's consent, which shall not
be unreasonably withheld, any compromise or settlement of such Third
Party Claim. Notwithstanding the foregoing, if the Indemnifying Party
has delivered a written notice to the Indemnified Party to the effect
that the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article 10 and if such dispute is
resolved in favor of the Indemnifying Party by final, nonappealable
order of a court of competent jurisdiction or by settlement,
arbitration or other binding non- judicialprocedure, the Indemnifying
Party shall not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this Section or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this
Section, and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.
10.5.4 In the event any Indemnified Party should have a
claim against any Indemnifying Party hereunder which does not involve
a Third Party Claim, the Indemnified Party shall transmit to the
Indemnifying Party a written notice (the "Indemnity Notice")
describing in reasonable detail the nature of the claim, an estimate
of the amount of damages attributable to such claim and the basis of
the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified
Party within 60 days from the Indemnifying Party's receipt of the
Indemnity Notice that the Indemnifying Party disputes such claim, the
claim specified by the Indemnified Party in the Indemnity Notice shall
be deemed a liability of the Indemnifying Party hereunder. If the
Indemnifying Party has timely disputed such claim, as
82
<PAGE> 88
provided above, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction.
10.5.5 Payments of all amounts owing by an Indemnifying
Party pursuant to this Article 10 relating to a Third Party Claim
shall be made within 30 days after the latest of (i) the settlement of
such Third Party Claim, (ii) the expiration of the period for appeal
of a final adjudication of such Third Party Claim or (iii) the
expiration of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under this
Agreement. Payments of all amounts owing by an Indemnifying Party
pursuant to Section 10.5.4 shall be made within 30 days after the
later of (i) the expiration of the 60-day Indemnity Notice period or
(ii) the expiration of the period for appeal of a final adjudication
of the Indemnifying Party's liability to the Indemnified Party under
this Agreement.
10.6. Insurance Proceeds. In determining the amount of any
loss, liability or expense for which the Purchaser is entitled to
indemnification under this Agreement, (i) the gross amount thereof shall be
reduced by any insurance proceeds realized after the Closing by any Company
under any insurance policy or policies maintained by any Company prior to the
Closing and which provided insurance coverage to any Company with respect to a
period prior to Closing and (ii) if the Purchaser has been indemnified by the
Sellers regarding a loss that is covered by an insurance policy of any Company
in effect prior to the Closing, the Sellers shall have the right to receive
(and the Purchaser shall assign the right to receive) any amounts received
after Closing or to be received under such insurance policy by the Purchaser or
the Companies for such loss but only to the extent of any indemnity payments
received by the Purchaser from the Sellers for such loss.
ARTICLE 11.
Brokers
The Sellers represent to the Purchaser that, except for
Dillon, Read & Co. Inc., which the Sellers represent has been retained by them
to assist and advise them in connection with the transactions contemplated by
this Agreement, the Sellers have not, directly or indirectly, employed any
broker, finder
83
<PAGE> 89
or intermediary in connection with such transactions who might be entitled
to a fee or commission from the Purchaser upon the execution of this Agreement
or consummation of the transactions contemplated hereby. The Purchaser
represents to the Sellers that, except for Merrill Lynch, Pierce, Fenner &
Smith Incorporated, which has been retained by the Purchaser to advise it in
connection with the transaction contemplated by this Agreement, the Purchaser
has not, directly or indirectly, employed any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement who might be
entitled to a fee or commission from any of the Sellers upon the execution of
this Agreement or the consummation of the transactions contemplated hereby.
ARTICLE 12.
Expenses
The parties agree that (i) the Sellers shall pay the costs and
expenses of the engagement of Dillon, Read & Co. Inc., to advise it in
connection with the transactions contemplated by this Agreement, (ii) the
Purchaser and the Sellers will each pay 50% of all filing fees which must be
paid to any governmental entity, subdivision or agency in connection with any
HSR Act filing which must be made in connection with the transactions
contemplated by this Agreement and (iii) the Purchaser shall pay all other
filing fees which must be paid to any governmental entity, subdivision or
agency in connection with any other filing which must be made in connection
with the transactions contemplated by this Agreement. Except as specifically
provided herein, all legal and other costs and expenses in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Sellers
(and not any Company) or the Purchaser, as the case may be, depending upon
which party incurred such costs and expenses.
ARTICLE 13.
Notices; Miscellaneous
13.1. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally or when
received if sent by registered or certified mail, return receipt requested, or
by facsimile transmission, to the parties at the following addresses (or at
such other address as a party may specify by like notice):
84
<PAGE> 90
13.1.1 If to the Purchaser, to:
Kaufman and Broad Home Corporation
10990 Wilshire Blvd.
Los Angeles, California 90024
Attention: Albert Z. Praw
Facsimile: (310) 231-4222
with copies to:
Kaufman and Broad Home Corporation
10990 Wilshire Blvd.
Los Angeles, California 90024
Attention: Barton P. Pachino, Esq.
Facsimile: (310) 231-4280
David W. Ferguson, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile: (212) 450-4800
13.1.2 If to the Sellers, to:
Rayco Management, L.L.C.
4800 Fredericksburg Road
San Antonio, Texas 78229
Attention: Jack Biegler
Facsimile: (210) 344-9486
with copies to:
Matthews & Branscomb, P.C.
One Alamo Center
106 S. St. Mary's Street, Suite 800
San Antonio, Texas 78205
Attention: James M. Doyle, Jr., Esq.
Facsimile: (210) 226-0521; and
Cauthorn, Hale, Hornberger, Fuller,
Sheehan & Becker
One Riverwalk Place, Suite 620
San Antonio, Texas 78205
Attention: T. Drew Cauthorn, Esq.
Facsimile: (210) 271-1740
13.2. Books and Records. The Sellers agree to deliver, or
cause to be delivered, promptly after the Closing all corporate minute books,
stock transfer records and other records of each Company to the Purchaser, to
the extent not then in the possession of any Company.
85
<PAGE> 91
13.3. Miscellaneous.
13.3.1 Exclusive Agreement. This Agreement supersedes all
prior agreements between the parties (written or oral) other than the
Confidentiality Agreement, and, except as aforesaid, is intended as a
complete and exclusive statement of the terms of the agreement between
the parties.
13.3.2 Choice of Law: Amendments; Headings. This Agreement
shall be governed by the internal laws of the State of Texas (without
regard to the choice of law provisions thereof). This Agreement may
not be changed or terminated orally. No waiver by any party of any
default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence. The headings
and table of contents contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.3.3 Assignments and Third Parties. Except as
specifically contemplated by this Agreement (including, without
limitation, Section 2.1 above), no party hereto shall assign this
Agreement or any part hereof without the prior written consent of the
other parties. No such assignment shall release a party of any of its
obligations under this Agreement. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
Nothing in this Agreement shall entitle any person other than the
Sellers or the Purchaser, or their respective successors and assigns
permitted hereby, to any claim, cause of action, remedy or right of
any kind.
13.3.4 Incorporation of Schedules and Exhibits. The
Schedules and Exhibits identified in this Agreement are incorporated
herein by reference and made a part hereof. The Sellers may revise or
supplement the Schedules attached to this Agreement at any time during
the period from the date hereof to the date two days prior to the end
of the Due Diligence Period.
86
<PAGE> 92
13.3.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse
to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
13.3.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute but one and the
same agreement. For convenience, this Agreement and any counterpart
hereof may be executed by a party or parties on separate signature
pages, and all such separate signature pages shall together constitute
the signature page or pages of this Agreement.
13.3.7 Further Assurances. The Sellers and the Purchaser
agree to take such further action and to deliver or cause to be
delivered to each other on the Closing Date and at such other times
thereafter as shall be reasonably agreed any such additional
instrument as any of them may reasonably request for the purpose of
carrying out this Agreement.
13.3.8 Time of the Essence. In the performance of this
Agreement, time is of the essence.
13.3.9 Mediation. The Sellers and the Purchaser agree that
prior to the institution of any legal proceedings concerning a
controversy or claim arising out of or relating to this Agreement, or
the breach thereof, the party seeking resolution of such claim or
controversy (the "Movant") will submit such claim to non-binding
mediation. The Movant shall notify in writing the other party against
whom such mediation is sought (the "Respondent"), describe the nature
of such claim, the provision of this Agreement which has been violated
by the Respondent, and the material facts surrounding such claim. If
the parties are unable to agree on the acting mediator, the Movant
shall
87
<PAGE> 93
appoint one mediator and the Respondent shall appoint one mediator to
appoint the acting mediator within fifteen (15) days of the date of
the foregoing described notice. Within fifteen (15) days of
appointment, such mediators shall appoint an acting mediator, who
shall act as the sole mediator of the claim or controversy. Each
party appointing a mediator shall bear all costs and expenses
associated with such mediator, except that the costs and expenses
associated with the acting mediator shall be borne equally by the
parties. Within thirty (30) days of the appointment of the foregoing
described acting mediator, the Movant and the Respondent shall hold a
mediation hearing before such mediator at such time and place as the
Movant and Respondent may agree. All mediation shall be entered into
in a spirit of cooperation and willingness to reach a mutual
resolution of the dispute. The acting mediator will conduct a full
and fair review of the claim or controversy, and shall meet with
representatives of the Sellers or the Purchaser if either party so
requests. If (i) within 90 days after the Movant has submitted the
claim or controversy to mediation there has been no resolution of the
claim or controversy or (ii) if the parties are unable to reach a
resolution through mediation, the acting mediator shall issue a
written notification to the Sellers and the Purchaser that the
mediation has not been successful. If, after the completion of such
mediation, settlement has not been achieved, all parties to this
Agreement may pursue any legal or other remedies which may be
available to it.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
SELLERS
Ray Ellison Industries, Inc.
By: /s/ JOHN H. WILLOME
----------------------------
John H. Willome, President
Rayco Management, L.L.C.
By: /s/ JOHN H. WILLOME
----------------------------
John H. Willome, President
88
<PAGE> 94
Ray Ellison Grandchildren Trust
By: /s/ RONALD K. CALGAARD
----------------------------
Ronald K. Calgaard, Trustee
By: /s/ A. BAKER DUNCAN
----------------------------
A. Baker Duncan, Trustee
By: /s/ BONNIE ELLISON
----------------------------
Bonnie Ellison, Trustee
EXECUTIVE OFFICERS
/s/ JOHN H. WILLOME
-------------------------------
John H. Willome
/s/ JACK E. BIEGLER
-------------------------------
Jack E. Biegler
/s/ JACK ROBINSON
-------------------------------
Jack Robinson
PURCHASER
Kaufman and Broad Home Corporation
By: /s/ BRUCE KARATZ
----------------------------
Name: Bruce Karatz
---------------------
Title: Chairman and Executive Officer
-------------------------------
89
<PAGE> 95
4.1.4 Violations and Consents (Industries)
Better Homes and Gardens Real Estate Service Contract dated
10/1/93 requires notification upon change of ownership (World
Wide Realty)
The Department of Housing and Urban Development (HUD) requires
notification upon change of ownership (Texas Homestead
Mortgage Company)
<PAGE> 96
4.1.5 Defaults (Industries)
NONE
<PAGE> 97
4.1.7 Changes (Industries)
First Quarter 1996 Incentive Compensation Program
1996 Annual Incentive Compensation Program
<PAGE> 98
1ST QUARTER STRATEGIC FOCUS
ON KEY ELEMENTS NECESSARY TO MAKE 1996 PLAN
I. SALES
1. Key Players
Area Sales Managers
World Wide Managers
2. Incentive
Pat Turner and WW Managers
<TABLE>
<CAPTION>
# Rayco Gross Sales Bonus
------------------- --------
<S> <C>
Over 300 $ 15,000
275-300 $ 5,000
</TABLE>
Cancellation rate cannot exceed 45%
Area Sales Managers
<TABLE>
<CAPTION>
$25,000 Bonus $10,000 Bonus
------------- -------------
<S> <C> <C>
Jose over 475 sales* 425-475 sales*
Kent over 675 sales 625-675 sales
LuAnn over 650 sales 600-650 sales
Becki M. over 35 sales 30-35 sales
</TABLE>
* Does not include Kenton Place
Based on Area Gross Sales-not including inner city.
Area cancellation rate cannot exceed 45%
II. AUTHORIZED STARTS
1. Key Player - Valerie Byrd
2. Incentive
<TABLE>
<CAPTION>
Authorized Starts Bonus
----------------- -------
<S> <C>
675 - 700 $ 5,000
700 - 725 $10,000
725 - 750 $15,000
Over 750 $25,000
</TABLE>
<PAGE> 99
III. DIRECT COST
1st Quarter Strategic targets - slab price and AD Cost
1. Key Players
Slab Price - Larry Oglesby and Tony Pena
AD Cost - Four Regional Construction Managers
2. Incentive
Slab Price -
A. Gary will establish an average cost/neighborhood based
on the last six months of 1995. This will be
approved by Amy and Barbara.
B. Gary will establish a benchmark for the 1st quarter
1996 using the last six months of 1995 history and
any known differences like topo, etc. This will be
approved by Amy and Barbara.
<TABLE>
<CAPTION>
1st Quarter Composite
Reduction Benchmark Bonus
--------------------- -----
<S> <C>
10%-15% $ 5,000
15%-20% $10,000
20%-25% $25,000
Over 25% $35,000
</TABLE>
AD Cost-
A. Barbara will establish a cost measurement for AD costs
based upon 1995 performance. Gary and Amy will
approve.
B. Barbara will measure performance by area for 1st
quarter. Gary and Amy will approve.
<TABLE>
<CAPTION>
1st Quarter Total ADs Bonus
--------------------- -----
<S> <C>
$825,000-900,000 $15,000
$750,000-824,999 $30,000
Under $750,000 $50,000
</TABLE>
Bonus payment may have some subjectivity by Barbara with Gary
and Amy's approval. Transferring dollars spent from
ADs to POs is not the intent of this program.
<PAGE> 100
IV. MORTGAGE ANALYSIS
Objective 1,000+ Mortgage, Analyses in 1996 and 250 Mortgage
Analyses in 1st Quarter
1. Key Players - Deborah Chandler
Becky Thieleman
2. Incentive - Based on number during 1st quarter
<TABLE>
<CAPTION>
Mortgage Analysis Bonus
----------------- -----
<S> <C>
200-225 $ 5,000
225-250 $10,000
250-275 $15,000
Over 275 $25,000
</TABLE>
<PAGE> 101
RAYCO COMPENSATION PROGRAM
The Rayco compensation program is designed to identify those
employees who have a direct affect on the Company's Financial
performance and give those employees a stake in the Company's
profitability.
The program includes the combined earnings of Rayco, Texas
Homestead Mortgage Company, World Wide Realty, and San Antonio Title
Company. For 1996, approximately 100 employees will participate
according to the following schedule:
<TABLE>
<CAPTION>
Combined Total
Earnings Distribution
-------- ------------
<S> <C>
Over $35,000,000 $ 4,867,500
$32,500,000-$35,000,000 $ 3,412,500
$30,000,000-$32,500,000 $ 2,650,000
$27,500,000-$30,000,000 $ 1,977,500
$25,000,000-$27,500,000 $ 1,492,500
Less than $25,000,000 None
</TABLE>
The expense is accrued on the financial statements of Rayco,
and is included in general and administrative expense.
The employees participating in this program consist of four
broad categories. The amounts shown assume Combined Earnings in
excess of $35,000,000:
A. Five Vice-Presidents will receive $250,000 each.
Base salaries range from $51,000 to $65,000. One participant also
receives a production bonus based upon closings.
B. Six department managers and three regional sales
managers are in the category receiving $100,000-$150,000. Base
salaries in this group range from $50,000 to $67,000.
C. Fourteen employees will receive $50,000-$75,000.
This group includes smaller department managers and regional
construction project managers. Base salaries in this category average
the low to mid $30s.
D. Approximately 46 employees will receive between
$20,000 and $40,000. This category consists of key production
employees involved in estimating, architecture, engineering and
various other departments. Base salaries in this category average the
mid to high $20s.
<PAGE> 102
4.1.8 - Taxes (Industries)
NONE
<PAGE> 103
4.1.9 Contracts, Agreements, Plans and Commitments (Industries)
Lease dated May 1, 1993 for the San Antonio Title Company office at
4242 Medical Drive, for a 3 year period and annual rents approximating
$60,000.
Purchase Agreement for GNMA, FNMA, and FHLMC Mortgage Loan Servicing
between Texas Homestead Mortgage Company and First State Bank of
Bandera and Norwest Bank, San Antonio, FKA Valley-Hi National Bank
Lease dated October 1, 1995 between Landata Inc. of San Antonio and
San Antonio Title Company for the operation and maintenance of a title
plant. The lease is month to month with annual rents approximating
$60,000.
First Quarter 1996 Incentive Compensation Program (See 4.1.7)
1996 Annual Incentive Compensation Program (See 4.1.7)
Better Homes and Gardens Real Estate Services Contract
Texas Homestead Mortgage Company "Rate Cap" Agreement
<PAGE> 104
4.1.10 Litigation (industries)
See Schedule of Pending Litigation (4.2.10)
<PAGE> 105
RAYCO, LTD. & AFFILIATES
INSURANCE COVERAGE RECAP
<TABLE>
<CAPTION>
LIMITS DEDUCTIBLE PREMIUM
----------- ---------- -------
<S> <C> <C> <C>
BUILDERS RISK $ 750,000 $ 50,000 $ 32,500
PERSONAL PROPERTY
VEHICLE $ 1,000,000 VARIOUS $ 47,170
EDP 1,028,985 2,500 1,000
CONTRACTORS EQUIP 183,000 2,500 915
MODEL HOMES 5,000,000 50,000 7,500
SHOWROOM 765,000 1,000 2,111
GENERAL BUILDINGS & CONTENTS 7,117,000 5,000 18,504
GENERAL LIABILITY $ 1,000,000 $ 10,000 $257,000
(PUNITIVE DAMAGES NOT COVERED)
UMBRELLA $10,000,000 $ 10,000 $ 79,000
(PUNITIVE DAMAGES NOT COVERED)
(SUBSIDENCE NOT COVERED)
EXCESS INDEMNITY
EACH EMPLOYEE $ 5,000,000 $500,000 $ 37,500
EACH OCCURRENCE 5,000,000
ANNUAL AGGREGATE 10,000,000
CUMULATIVE TRAUMA 1,000,000
--------
TOTAL $483,200
========
</TABLE>
<PAGE> 106
4.1.12 Patents, Trademarks, Etc. (Industries)
NONE
<PAGE> 107
4.1.13 Plans (Industries)
A. See Attached Employee Benefit Plan Summary
B. Employee Injury Benefit Program
C. First Quarter 1996 Incentive Compensation Program
D. 1996 Annual Incentive Compensation Program
E. Severence Policy
F. Vacation Policy
G. Personnel Manual
<PAGE> 108
EMPLOYMENT BENEFITS
NOVEMBER 1, 1995
I. GROUP MEDICAL/LIFE INSURANCE
A. HUMANA HEALTH CARE PLANS PPO (or preferred provider
organization) is currently the group medical insurance available to all
full-time employees.
The Company provides group medical insurance for full-time employees
at the Company's expense. Dependent coverage is available for a monthly
premium of $110.00 to the employee while the company pays balance. Deductions
are calculated by dividing the yearly cost by the number of the employee's pay
periods. See attached for brief description of benefits.
B. PRESCRIPTION DRUG COVERAGE is included in the Humana Health
Care Plan. A $15.00 copayment per prescription is required at participating
pharmacies. The participating pharmacies are all Eckerd's of San Antonio and
some surrounding areas. A membership card must be present with prescription at
participating pharmacy. Coverage includes a 100-unit or 34-day supply,
whichever is less, per prescription or refill. Generic medications will be
used when available.
If member elects a nonparticipating provider then the plan pays 70% of
covered expenses after a $15.00 copayment per prescription or refill. The
member must file a claim form to receive reimbursement.
C. The DENTAL PLAN 981 is also part of the Humana Health Care
Plan. Again, the member must choose a participating dentist from the provider
list in order to receive discounted fees for numerous dental treatments.
D. CIGNA LIFE INSURANCE as a group life insurance is a core
benefit to all fulltime employees. There, it is provided at no charge to the
employee. The policy amount is calculated at one times the employee's annual
salary.
THE FOLLOWING PROGRAMS ARE OFFERED THROUGH PAYROLL DEDUCTIONS AT NO
COST TO RAYCO. THE EMPLOYEE MAY PAY THE PREMIUMS USING THE PRETAX DOLLARS
THROUGH THE 125 PLAN.
EYE CARE PLAN OF AMERICA
- Discount Plan on usual retail eyewear purchases is available
to full-time employees with monthly premiums of:
$1.00 for employee only
$2.00 for employee and one member
$3.00 for family coverage
<PAGE> 109
2
o AMERICAN DENTAL
- Referral Plan through a network of participating providers is
available in the following categories based on monthly premiums:
$ 8.90 employee only
$15.90 employee and one
$19.90 family
Includes a schedule of benefits listing prices per procedures. 140
procedures in all.
- Dental Indemnity Plan based on monthly premiums on coverage as
follows:
$17.36 employee only
$34.70 employee and one
$43.40 family
Some preexisting conditions covered. Employee may choose any licensed
dentist. Full coordination of benefits with other plans. Increased benefits
each year for three years. Low deductible. Orthodontia benefits for eligible
members.
o COLONIAL LIFE & ACCIDENT INSURANCE
- Short term disability benefits available at a monthly premium which
depends on coverage. Includes accidental death and dismemberment benefits.
CIGNA LIFE INSURANCE
- Employee must purchase through the cafeteria plan elections.
Supplemental life insurance in which premium is based on coverage amount.
II. SECTION 125 - CAFETERIA PLAN
A. Child Care Reimbursement plan available.
Administered by company Payroll department.
B. Medical Reimbursement plan included. Administered by
LifeRe.
ELIGIBILITY
An employee becomes eligible for participation in the above plans following
completion of the 90-day continuous employment period. In addition, the
employee must be classified full-time status.
Upon separation of employment, employees and their dependents may apply for
continuation of group health coverage as provided by law.
<PAGE> 110
ELLISON INC.
HUMANA HEALTH CARE PLANS
<TABLE>
<CAPTION>
BENEFITS PARTICIPATING NON-PARTICIPATING
-------- ------------- -----------------
<S> <C> <C>
INPATIENT CARE 90% AFTER $300 DEDUCTIBLE 80% AFTER $600 DEDUCTIBLE
OUTPATIENT SURGERY 90% - NO DEDUCTIBLE 80% AFTER $600 DEDUCTIBLE
OUTPATIENT NON-SURGICAL 90% - NO DEDUCTIBLE 80% AFTER $600 DEDUCTIBLE
HOSPITAL EMERGENCY ROOM
FACILITY - 90% AFTER $25 DEDUCTIBLE 80% AFTER $600 DEDUCTIBLE
PER VISIT AND $25 CO-PAYMENT PER VISIT
PHYSICIAN - 100% AFTER $20 COPAYMENT 80% AFTER $600 DEDUCTIBLE
AND $25 CO-PAYMENT PER VISIT
ROUTINE OFFICE VISITS 100% AFTER $20 COPAYMENT 80% AFTER $600 DEDUCTIBLE
PREVENTIVE CARE:
WELL BABY CARE THROUGH THE 100% WELL BABY CARE AFTER 80% WELL BABY CARE AFTER
FIRST 24 MONTHS $20 COPAYMENT PER INSURED $600 DEDUCTIBLE
PHYSICALS UP TO $250 EVERY 80% AFTER $20 COPAYMENT 50% NOT SUBJECT TO DEDUCTIBLE
24 MONTHS PER INSURED
PHYSICIAN
INPATIENT 90% 80% OF REASONABLE CHGS. AFTER DED.
OUTPATIENT 90% 80% OF REASONABLE CHGS. AFTER DED.
PRESCRIPTIONS SEE RIDER SEE RIDER
</TABLE>
IN THE EVENT OF A PREGNANCY THE $20 CO-PAYMENT WILL BE REQUIRED AT THE INITIAL
VISIT ONLY.
This is a brief plan description. It is not the plan document and does not
include all of the covered services, limitations and inclusions of the plan.
Complete terms of the plan are contained in the group plan documents.
<PAGE> 111
4.1.14 Encumbrances on Assets (Industries)
NONE
<PAGE> 112
4.1.16 Environmental Matters (Industries)
NONE
<PAGE> 113
4.1.17 Liabilities (Industries)
NONE
<PAGE> 114
4.1.19 Intercompany Balances (industries)
<TABLE>
<S> <C> <C>
Balances at 9/30/95 Amount Receivable
From/To (Payable)
San Antonio Title Company Texas Homestead Mortgage Co. $ 62,679
World Wide Realty Texas Homestead Mortgage Co. ($28,044)
Texas Homestead Mortgage Co. World Wide Realty $ 28,044
San Antonio Title Co ($ 62,679)
Rayco $ 4,968,950
Ellison Investments 84-1, Inc. ($6,706,392)
</TABLE>
<PAGE> 115
4.1.28 Terminating Employees
NONE
<PAGE> 116
4.2.3 Encumbrances on GP Interest and LP Interest
The Limited Partnership and General Partnership Interests are
pledged as collateral to Guaranty F.S.B.
<PAGE> 117
4.2.4 Violations and Consent (Management)
The indebtedness to Guaranty F.S.B. prohibits the transfer of
ownership.
<PAGE> 118
4.2.5 Defaults (LLC)
NONE
<PAGE> 119
4.2.7 Changes (LLC)
First Quarter 1996 Incentive Compensation Program (See 4.1.7)
1996 Annual Incentive Compensation Program (See 4.1.7)
<PAGE> 120
4.2.8 Taxes (Rayco)
Rayco is currently undergoing a sales tax audit of the period
1/1/92 - 7/1/95. No material tax liability has been revealed.
<PAGE> 121
4.2.9 Contracts, Agreements, Plans and Commitments (LLC)
Lease dated September 16, 1991 for the Rayco Showroom at 12235
San Pedro. Lease is for the period of six years with two
three-year renewal options. Monthly payments approximate
$150,000 annually and include property taxes insurance, and
letter of credit fees.
Main office lease to an affiliate, Rayco Management LLC., dated
January 1, 1996 for approximately 6,132 sq. ft. for five years
at $4,300 per month.
Guaranty F.S.B. Debt
Advertising Agreements for the Trade-Out of Billboards
See Schedule of Pending Land Purchases
1996 Purchase commitments with Hart Lumber Company and Ince
Distributing
First Quarter 1996 Incentive Compensation Program
1996 Annual Incentive Compensation Program
Overhead income received from Ray Ellison Mortgage Acceptance
Corp. paid monthly at $8,000 per month.
See attached list of outstanding commitments for
contributions, dues, and public relations expenditures.
Letters of credit in the amount of $1,564,387 secured by GNMA
securities and unsecured letters of credit in the amount of
$399,065. All letters of credit are for subdivision
development.
See Attached Schedule of Lot Development Projects under
Construction
<PAGE> 122
PROJECTED PURCHASES (LAND AND LOTS)
REVISED 1/23/96
<TABLE>
<CAPTION>
NUMBER PRICE PURCHASE CASH/ EARNEST
OF PER PRICE OPTION MONEY/
LOTS/ACRES LOT/ACRE CONTRACT TERM DOWN PAYMENT
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. NEW TERRITORIES 26 LOTS $6,800 $183,600 CASH N/A $9,000
2. MODCO 25 LOTS $3,566 $89,150 CASH N/A N/A
3. WESTCREEK 70 AC $17,653 $1,235,696 CASH N/A $25,000
4. CINNAMON HILLS 13+ AC $40,000 $525,000 CASH N/A $100,000
(KENTON PLACE)
5. LONGS CREEK 24 AC $10,000 $240,000 CASH N/A $10,000
6. SALADO BLUFF 42 LOTS $35,500 $1,491,000 TERMS 2 YEARS $25,000
7. BENKE 27+ AC $12,000 $332,000 CASH N/A $25,000
(FIELDSTONE)
8. HELOTES (NANCE) 73+ AC $12,500 $1,005,000 CASH N/A $25,000
---------- --------
TOTAL $5,101,446 $219,000
========== ========
</TABLE>
<TABLE>
<CAPTION>
CONTRACT DEVELOPMENT FEASIBILITY CLOSING CASH PAYMENT PROBABILITY
STATUS STATUS PERIOD DATE TO SCHEDULE OF
CLOSE CLOSING
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. NEW TERRITORIES TITLE COMPLETE 20 DAYS 01/22/96 $173,600 N/A 100%
COMPANY
2. MODCO TITLE COMPLETE N/A 01/24/96 $89,150 N/A 90%
COMPANY
3. WESTCREEK TITLE RAW LAND 17 DAYS 01/31/96 $1,210,694 N/A 90%
COMPANY
4. CINNAMON HILLS TITLE RAW LAND 60 DAYS 02/01/96 $425,000 N/A 90%
(KENTON PLACE) COMPANY
5. LONGS CREEK TITLE RAW LAND 26 DAYS 02/12/96 $230,000 N/A 90%
COMPANY
6. SALADO BLUFF TITLE COMPLETE N/A 03/01/96 $263,200 QTLY P&I 100%
COMPANY
7. BENKE TITLE RAW LAND 60 DAYS 03/01/96 $307,000 N/A 90%
COMPANY
8. HELOTES (NANCE) TITLE RAW LAND 60 DAYS 06/10/96 $980,000 N/A 75%
COMPANY
----------
TOTAL $3,678,646
==========
</TABLE>
NOTE: The feasibility periods for all contracts except Longs Creek have
expired. The Longs Creek feasibility period expires on 2/5/96.
Cinnamon Hills, Benke, and Nance contracts are contingent upon final
plot approval on the property.
DISTRIBUTION:
JACK WILLOME AMY O'NEIL
JACK BIEGLER LOCKSLEY SIMMONS
JACK ROBINSON
<PAGE> 123
PROJECTS UNDER CONSTRUCTION
<TABLE>
<CAPTION>
UNIT CONTRACTOR CONTRACT CONTRACT UNPAID
AMOUNT DATE BALANCE
<S> <C> <C> <C> <C>
CREEKSIDE #1 V.K. KNOWLTON $1,409,959.84 8/31/95 $231,742.65
CREEKSIDE #2 V.K. KNOWLTON $655,203.37 9/28/95 $428,919.46
GUILBEAU #5/NEW TERRITORIES 12-B V.K. KNOWLTON $497,771.20 9/11/95 $101,934.98
ASHLEY PLACE #2 V.K. KNOWLTON $1,044,466.25 9/25/95 $623,135.78
KENTON PLACE V.K. KNOWLTON $397,162.90 1/26/96 $397,162.90
REDLAND WOODS #5 V.K. KNOWLTON $683,192.68 11/17/95 $571,137.78
NORTHWEST CROSSING #40 PIPELAYERS, INC. $690,514.60 9/15/95 $237,745.17
LONGS CREEK #9 PIPELAYERS, INC. $579,492.29 7/15/96 $269,030.35
LONGS CREEK #10 PIPELAYERS, INC. $627,702.80 1/22/96 $627,702.80
CRESTRIDGE #1 ELLA CONTRACTING $674,804.55 6/30/95 $207,885.41
CRESTRIDGE #2 ELLA CONTRACTING $382,286.82 1/15/96 $382,286.82
CREEKSIDE OUTFALL L&J CONSTRUCTION $186,994.50 12/19/95 $186,984.50
LINCOLN PARK #2 YANTIS $597,874.40 11/28/95 $206,167.30
LONGS CREEK #9 & #l0 OUTFALL YANTIS $288,702.70 $288,702.70
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
Vendor Contribution Dues P.R. Amount
- ------ ------------ ---- ---- ------
<S> <C> <C> <C> <C>
Aging Research and Education Center x S10,000 in 1996
Alamo Area Council - Boy Scouts of x $3,000
America (Hispanic Program)
Cancer Therapy and Research Center x S2,000 per year - last
payment in 1996
Child Care Collaborative x S5,000 per year
through 1999
Incarnate Word College x $5,000
Our Lade of the Lake University x $2,000
Salvation Army x $ 1,000 per year
through 1998
San Antonio Education Partnership x $15,000 per year
through 1998
San Antonio Medical Foundation x $1,000 per year
Trinity University - Business Affifliates x $2,500
Trinity University - Ray Ellison Luncheon x $5,000 for the luncheon
and Symposium and $3,750 to teachers
United Way x $42,500
University of Texas Health Science x $1,000
Center at San Antonio
Greater Austin-San Antonio Corridor x $1,000 per year
Council, Inc.
Greater San Antonio Chamber of x $4,000
Commerce
Responsible Development for San Antonio x $10,000 in 1996
San Antonio Economic Development Fdtn x $10,000
San Antonio Hispanic Chamber of x $1,000
Commerce
Urban Land Institute x $2,250
Greater SA Chamber of Commerce x $6,000 per year for a
Forward San Antonio total of $30,000 to be
paid in full on or before
December 31, 1998
</TABLE>
<PAGE> 125
4.2.10 Litigation
See Schedule of Pending Litigation Attached
<PAGE> 126
Pending Litigation, Claims and Potential Claims
Rayco, Ltd.
Texas Homestead Mortgage Company
San Antonio Title Company
World Wide Realty/Better Homes & Gardens
January 22, 1996
UPDATED TO JANUARY 31, 1996
GLORIA SILVESTRO VS RAYCO, LTD. (RICHMOND LUMBER DIVISION)
Sexual harassment, discrimination and assault claim. This is one of the most
bogus claims that has been made. The claimant alleges that she was passed over
for promotion to manager even though she was better qualified. Prior to her
employment with Rayco (first as a clerk, then as an office manager with small
staff) she operated a home cleaning business out of her residence. The person
receiving the position, as General Manager of Richmond, had a college degree in
appropriate studies, had been a home builder, and worked in the Estimating
Department of Rayco for several years, in a supervisory position with much
greater authority. The assault was nothing more than being bumped into in a
crowded hallway. The sexual harassment claim is equally as weak. At the
request of the claimant, the EEOC issued a right-to-sue letter.
The damages sought have not been determined. It is expected that the greatest
exposure will be for the cost of defense. Defense cost are estimated at
$15,000 to $30,000.
JIM HAMILTON VS RAYCO
This is an age discrimination claim. Again, the claimant requested a
right-to-sue letter. Claimant alleges that he was discharged in order to
control medical benefit costs. Claimant had been terminated once for failing
to follow the dress code and attendance rules; he was rehired about one year
later. Again, the claimant began to ignore the customers and company policies
and was discharged. It is expected that the greatest exposure will be for the
cost of defense. Future defense costs are estimated at $15,000 to $25,000.
The settlement demands are so ridiculous that this case is not likely to
settle. The matter has been removed to the federal court. Removal has been
contested by Claimant fees. The case has been remanded back to the state
district court. Claimant's counsel appears to be attempting to build
attorney's fees.
1
<PAGE> 127
SERGIO GARCIA VS RAYCO
Claimant alleges faulty wiring. Investigation reveals power surges from the
utility transfer. Rayco will be fully indemnified by the electrical
contractor. Only nominal attorney's fees have been incurred. An offer to
repurchase the residence has been made. If the repurchase is accepted, Rayco
will be in a near break even position. Future attorney's fees may run
$1,000.00 if the settlement is approved and $10,000.00 if the settlement is
not approved.
CHRIS WEBER VS RAYCO AND JESSE MURPHY
Claimant is an attorney who had provided services to three community
associations. The association directors voted to terminate his services.
Claimant sued Rayco (and General Counsel who was also on the association
boards) for civil conspiracy and defamation. These claims are being defended
by insurance carriers. The primary defense is provided by the carriers for the
three associations; motions for summary judgment will be filed shortly.
Although the claim is for $2,500,000 in lost income, it is believed that there
is no evidence to support the claims. It is believed that this is a frivolous
claim. Motion for Summary Judgement has been granted as to Jesse Murphy, named
individually as codefendant. Rayco did not join in the Motion, but will file
its own motion later. Because the only allegation against Rayco was conspiracy
and it takes two to conspire, it is strongly expected that Rayco will be
dismissed on summary judgment. Both Rayco and Jesse Murphy are represented by
insurance carrier appointed attorneys. Rayco has a $5,000.00 deductible. I do
not believe any additional reserve should be set up in excess of the insurance
deductible. Rayco's insurance appointed attorney will be substituted for
Rayco's retained counsel. The case will be subject to appeal.
ROLANDO GOMEZ CLAIM AGAINST RAYCO, LTD.
Claimant alleges faulty construction. A review of the plans reveals an error;
the PI of the soil was shown as 49 but the actual PI is 65. Therefore the slab
was in fact under designed. An offer to repurchase the home has been made.
This matter is being submitted to JAMS for binding arbitration. If the
residence were repurchased, repaired and resold, the expected financial
exposure is estimated at $20,000.00 to $35,000.00, depending on the attorney's
fee award by the arbitrator.
2
<PAGE> 128
ARTURO VILLAREAL CLAIM AGAINST RAYCO, LTD.
Home buyer is concerned with foundation movement but does not want to rescind
the purchase. There has been excessive movement, but proper drainage has now
been restored. Rayco has offered a price guarantee, good for ten years. The
maximum risk is not expected to exceed $10,000. This matter is now near its
end, resulting in a repurchase.
CLARK BOEKEN VS RAYCO
Claimant alleges defective construction on a "build on your lot" residence.
The foundation is well designed, but a leaky swimming pool on one side and a
water consuming tree on the other have caused a slight flex. There is a
hairline crack, but it does not endanger the residence. Arbitration has been
ordered by the district court. Maximum risk is estimated at $20,000 including
attorney's fees. We are presently awaiting the arbitration hearing date.
Rayco filed suit to compel arbitration. Hearing date scheduled for March 7 and
8, 1996.
CARLOS MORAN COMPLAINT AGAINST TEXAS HOMESTEAD MORTGAGE COMPANY
Self-employed Hispanic borrower went to apply for loan, but before application
was complete was told that it would be futile because income tax forms showed
too little income. Borrower got angry and left. He was immediately asked to
return and have his loan application completed. Because the issue did not
involve any racial discrimination, and the employees involved were promptly
reprimanded, the total estimated risk (defense and settlement) is estimated at
less than $10,000. Claimant has offered to settle for $4,000.00. THMC has
offered $1,000.00.
EUGENE AND CARRIE HILL AGAINST RAYCO AND TEXAS HOMESTEAD MORTGAGE COMPANY
Black buyers were informed that Texas Homestead Mortgage Company would not
approve their loan but Texas Homestead Mortgage Company also asked if they
would like the loan package submitted directly to VA. It was and VA rejected
the loan. The sale was cancelled and the residence resold. Several months
later, the buyers contracted for a more expensive residence in another Rayco
community. Because no significant changes in income, debt or credit history
had been made, the second loan was rejected by Texas Homestead Mortgage
Company. The first home was resold to a black family; the second home was sold
to a white family. No outside expenses or settlement costs are expected. No
settlement demand has been made and no offer has been made.
3
<PAGE> 129
AMY AIRD POTENTIAL CLAIM AGAINST RAYCO, LTD.
Amy Aird resigned from Rayco and appears to be attempting to make a claim
against Rayco for unspecified reasons. She began having personal problems
which began to interfere with her work. She was reassigned to a less
responsible position, but quit when her sick time was used up. She has counsel
but no claim has been made by counsel. Ms. Aird demanded one year salary in
settlement at the time of her resignation. She resigned on September 22, 1995;
the limitations for bringing a discrimination claim are rapidly running. She
retained counsel, but no demand has been made and no suit or complaint has been
filed.
LIZCANO VS RAYCO, LTD.
Claimant is an employee of a contractor. He fell from a ladder which was
struck by a small tractor. Liability is nil and the defense if provided by the
insurance carrier. A Motion For Summary Judgment is pending in this case. I
expect Rayco to be dismissed from the case shortly. I would only allocate the
$5,000.00 deductible.
KRISTIN SQUYRES
Suit filed January 22 and served January 25, 1996, alleging construction
defects. Suit will be abated for non-compliance with statutes and to compel
arbitration. In August, 1995, Rayco offered a replacement home; this was
listed by Customer Service Manager for possible repurchase in 1996.
VERNON MOTES VS RAYCO
This claim was not earlier reported because it was Rayco's belief that
accounting provided claimant resolved all issues. The file was dormant for
months. It was learned January 30 that suit had been filed. Later a notice of
judgment was received by mail. A review of the court records shows that
citation was served on December 26, 1995, a date when the registered agent was
on vacation. Motion for new trial is being prepared; if motion is rejected, an
appeal will be filed. There are meritorious defenses. The suit alleges
commissions due in the amount of $65,000.00 and lost future commissions of
$280,000.00.
MARISSA KNUFFKE VS LISA BRANDT AND WORLD WIDE REALTY/BETTER HOMES & GARDENS
Suit for failure to disclose a malfunctioning septic system. The septic had
failed a prior inspection but repairs were made. The septic system failed
several months after closing. This is being defended under the E & 0 policy
through Better Homes & Gardens. Clemens & Spencer is representing World Wide
Realty/Better Homes & Gardens.
4
<PAGE> 130
TONI GREEN VS RAYCO
Personal injury; claims raped in model home during business hours; police
investigation does not believe claim in legitimate. This is an insured claim;
our attorney is Ron Hood, from Houston.
OTHER MATTERS: There is a small number of homes that are experiencing
unexpected foundation movement. When Rayco cannot readily
solve the problem, an offer is made to repurchase the
residence. The home is then placed in the rental market until
the foundation is stabilized and the home is ready for resale.
Foundation movement is disclosed on the resale. It is
believed that this process costs approximately ten percent
(10%) of the price of the residence. Very few homes fall into
this category.
5
<PAGE> 131
4.2.10 Litigation (Continued)
Rayco has contracted to purchase two tracts of land adjoining the
Villages of Westcreek Subdivision from VWC, Ltd. The Earnest Money Contract
between VWC, Ltd. and Rayco provides that, at the written request of Rayco,
VWC, Ltd. shall annex the property being acquired by Rayco into the Villages of
Westcreek as contemplated by the Villages of Westcreek Declaration of
Covenants, Conditions and Restrictions. Centex Real Estate Corporation has
notified VWC, Ltd. that, in the opinion of Centex, VWC, Ltd. does not have the
Declarant status necessary to annex the property to be acquired by Rayco into
the Villages of Westcreek, that VWC, Ltd. does not have the right to assign
Declarant status to Rayco, and that Centex will oppose any attempts to effect
such annexation and will join the Villages of Westcreek Homeowners Association
in legal action to prevent such annexation from occurring.
<PAGE> 132
4.2.11 Insurance
See Insurance Summary 4.1.11
<PAGE> 133
4.2.12 Patents, Trademarks, etc. (LLC)
NONE
<PAGE> 134
4.2.13 Rayco Plans
A. See Plans and Policies Decribed in 4.1.13
B. Employee Home Purchase Discount Programs
C. Deferred Compensation Death Plan Benefit for the following:
John H. Willome
Jack Robinson
Jack Biegler
Amy O'Neil
Gary Gentz
Ken Gancarczyk
Herb Quiroga
<PAGE> 135
4.2.14 Encumbrances (Rayco)
Guaranty Federal Savings Debt
Kansas City Life Insurance note payable collateralized by the
Main Office Building.
The adjoining parking lot to the north of the main office
building is leased on a month to month basis for $200/month.
Cash Surrender Value of Principal Mutual Life Insurance
Policies
<PAGE> 136
4.2.16 Environmental Matters (Rayco)
NONE
<PAGE> 137
4.2.17 Liabilities (Rayco)
NONE
<PAGE> 138
4.2.19 Intercompany Balances (Rayco)
<TABLE>
<CAPTION>
Balances at 9/30/95 Amount Receivable
From/To (Payable)
<S> <C>
Texas Homestead Mortgage Co ($4,968,950)
</TABLE>
<PAGE> 139
4.2.23 Flood Plains
See Attached Schedule
<PAGE> 140
TOTAL LAND LOCATED WITHIN THE 100 YR. FLOOD PLAIN.
1. Eckert Crossing Subdivsion, 9.241 Acres of land, located on the
Northwesterly portion of the City of San Antonio, off Eckert Road and
Border Mist Dr.
2. Redland Woods Subdivision, 64.896 Acres of land, located on the
Northerly portion of the City of San Antonio, off Redland Road and
Gold Canyon Road.
3. Canyon Oaks Subdivision, 68.056 Acres of land, located on the
Northerly portion of the City of San Antonio, off Gold Canyon Road and
F. M. 1604.
4. Northampton Subdivision, 19.38 Acres of land, located on the
Northeasterly portion of the City of San Antonio, off Sequin Road and
Manderly Place.
5. Ventura Subdivision Unit 25 and 26, 28.50 Acres of land, located on
the Northeasterly portion of the City of San Antonio, off Sequin Road
and Proposed Walzem Road Extension.
<PAGE> 141
4.2.25 Warranty Claims
See Attached List
HOME/RWC of Texas Limited Warranty Program
<PAGE> 142
RAYCO 1995 REPURCHASES, RESCISSIONS OR SUBSTITUTIONS OF COLLATERAL
7453 Myrtle Trail - (Matthews)
Original move-in date 10/89. Rayco offered to place the buyer into
another similar home and substitute the collateral for the loan.
The house was experiencing significant foundation movement.
No litigation was involved.
A new home was built and the collateral was substituted.
11094 Cedar Park - (Kehoe)
Original move-in date 6/90.
Litigation occurred alleging a faulty foundation. A settlement and
repurchase agreement was reached between Rayco and the plaintiff which included
repurchase of the home, moving expenses, $5,000 damages, and $2,500 plaintiff's
attorney fees.
7710 Autumn Park (Garza)
Original move-in date 4-91. Ex-model home. Litigation
occurred alleging a faulty foundation. Settlement of the case included
rescission of the contract and $5,000 plaintiff's attorney fees.
7714 Autumn Park - (Geary)
Same as above (7710 Autumn Park). Original move-in 4-91. Ex-model,
same plaintiff attorney handled case. Alleged faulty foundation. Settlement
of the case included rescission of the contract and $5,000 in plaintiff's
attorney fees.
11335 Candle Park - (Higginbotham)
Original move-in 9/90. Litigation occurred alleging a faulty
foundation. The transaction was rescinded to settle the case. Rayco paid
$2,500 in plaintiffs attorney fees.
1
<PAGE> 143
8146 Bent Meadow - (Colunga)
Original move-in 8-93 Litigation occurred alleging faulty sheetrock
and/or framing of the residence. The transaction was rescinded and $750
plaintiff attorney fees were paid to settle the case.
6607 Meadow Fawn - (Grelle)
Original move-in date 12-92. Litigation occurred alleging a faulty
foundation. The case was settled for repurchase of the home and $2500 in
plaintiff's attorney fees.
8323 Pine Meadow - (Martin)
Original move-in date 12-92. Rayco offered to place the buyer into
another similar home and substitute the collateral for the loan.
The house was experiencing significant foundation movement. No
litigation involved. A new home was built and the collateral was substituted.
2
<PAGE> 144
POSSIBLE REPURCHASES, RESCISSIONS, OR SUBSTITUTION OF COLLATERAL IN 1996
AND/OR COST OF REPAIRS THAT MAY EXCEED $5,000
7450 Myrtle Trail - (Tougas)
Original move-in 11-88.
Excessive foundation movement. Rayco has agreed to pay existing note
balance.
7603 Stone Crop - (Garcia)
Original move-in 12-92.
Plaintiff attorney is involved, alleging defective wiring and framing
of the residence. At this time, Rayco does not believe these defects exist,
however expert and attorney fees coupled with the exposure from a jury trial
outweigh the benefits of proof of no defect.
Rayco outside attorney has made an offer to repurchase or rescind.
16511 Eagle Cross - (Villarreal)
Original move-in 5-92.
The homeowner (Mr. Villarreal) is an Engineer II of the City of San
Antonio Dept. of Aviation. He is alleging a structural problem with the home
due to a faulty foundation. Significant foundation movement is occurring.
Rayco has made alternative offers to repair and guarantee market value, provide
a new home and substitute the collateral on the existing loan, or repurchase
the home and pay for moving expenses.
There is no plaintiff attorney involved that we are aware of as of
1/20/96.
Repairs may range $6,000-9,000.
3
<PAGE> 145
300 Hill Country Lane - (Boeken)
The Rayco Custom Home Dept. built a home on Mr. Boeken's "acreage" size
lot. Differential foundation movement occurred in the new home after final
inspection but prior to closing. Mr. Boeken has refused to close.
Attorneys are involved and Binding Arbitration will occur soon.
Mr. Boeken has previously demanded that piers be installed around the
residence and Rayco pay Mr. Boeken $130,000 for diminution in value of the
residence.
Repairs may range from a few thousand dollars (no piers) to $20,000
(piers) or more, depending upon the outcome of the Arbitration.
8135 Chestnut Barr - (Gomez)
Original move-in 3-94.
Attorneys are involved, and Binding Arbitration will occur soon.
A minimal amount of differential foundation movement occurred. An
investigation revealed that an incorrect plasticity index was used in the
design criteria for the foundation, and the foundation was under-designed.
When this was discovered, Rayco offered to repurchase the home.
Mr. Gomez has asked for an exorbitant amount.
4819 Fern Lake - (Squyres)
Original move-in 1-94.
Differential foundation movement occurring. Plaintiff attorney
involved. Rayco offered to repair or place Squyres into a new home and
substitute the loan collateral.
Plaintiff attorney to respond.
4
<PAGE> 146
7959 D Real Road - (Lazarr)
Original move-in 4-94. Custom home. Plaintiff attorney involved.
Two-story brick home with brick mortar that may not meet hardness criteria.
Also wind bracing issue.
Original bricker no longer available.
Repairs could range $4,000 - $15,000.
16614 Calico Creek - (Reilly)
Original move-in 12-92. Old model. No plaintiff attorneys involved
at this time.
Significant foundation movement. Rayco has offered to install piers.
Repairs expected in the $7,000-8,000 range.
11222 Cedar Park - (Quintanilla)
Original move-in 6-29-91.
Significant foundation movement. Rayco has offered piers. Repairs
expected in the $8,000-10,000 range. No plaintiff attorneys involved at this
time.
9214 Roquefort - (Blanchard)
Original move-in 6-93.
Rayco has just been made aware of this situation and will investigate
and respond. A Regional Customer Service Manager reports significant
foundation movement.
THE ABOVE SITUATIONS ARE ONES THAT WE ARE AWARE OF THAT ARE LIKELY TO
RESULT IN REPURCHASE, RESCISSION, SUBSTITUTION OF COLLATERAL OR REPAIR
EXPENSES EXCEEDING $5,000 IN 1996. THERE MAY BE OTHER SIMILAR
SITUATIONS, WHICH WE ARE PRESENTLY UNAWARE OF, THAT MAY OCCUR IN 1996.
5
<PAGE> 147
REPAIR EXPENSES IN 1995 THAT EXCEEDED $5,000 ON A HOME
Presently, Rayco does not track these expenses summarily. Copies of
all repairs and invoices are kept in each individual house file. Expenses in
excess of $5,000 in 1995 for repairs on a home could include homes that were
built in 1995, or earlier. This includes thousands of homes.
Subcontractors are held accountable for construction defects when
possible. There are very few homes that the cost of repair exceeds $5,000.
To the best of the Director of Customer Service's knowledge, $5,000 or
more in repair costs was spent on only one home at the following address in
1995:
8207 Talkenhorn - (Patternson)
Water seepage into the garage foundation occurred. Approximately
$7,500 has been spent in evaluation and grading work to resolve this situation.
There is a plaintiff attorney involved here. The customers want Rayco to buy
their house.
Binding Arbitration or a guarantee of market value may occur here.
6
<PAGE> 148
RAYCO
CONSTRUCTION LITIGATION
Most of the soils in Bexar County are expansive. They experience
volume changes that correlate in chances with the moisture content of the
soils. These changes in volume may result in movement of the foundations which
are supported by the soils. Some degree of movement of the foundation is
expected and will occur.
When the volume changes of the soils are uneven underneath the
foundation, differential foundation movement may occur, which can place stress
on the structure.
Design engineers take into account the soil conditions when designing
a foundation. Proper foundation maintenance, also, can minimize foundation
movement. However, at times, a properly designed and maintained foundation may
experience an unacceptable amount of differential movement.
Rayco takes a proactive approach in educating its customers about
foundation movement and the importance of maintenance. Relative to the number
of homes constructed, the problems with foundation movement are minimal.
Differential foundation movement is the most likely construction
related issue to result in attorney involvement with the customer.
Approximately two years ago, an agreement of Binding Arbitration to
solve disputes was installed into the Rayco Purchase Agreement. It is expected
this will expedite the resolution of disputes, and limit damages when Rayco is
unable to reasonably satisfy the customer.
Rayco makes a concerted effort to set customer expectations, respond
fairly and avoid disputes.
<PAGE> 149
[SAMPLE]
HOME/RWC OF TEXAS
5300 Derry Street, Harrisburg, PA 17111-3598
717-561-4480
LIMITED WARRANTY PROGRAM
INSURER: WARRANTY UNDERWRITERS INSURANCE COMPANY
PLACE VALIDATION STICKER HERE
SUBJECT TO
CHANGE. NO
WARRANTY INVALID WARRANTY
WITHOUT STICKER AND WILL BE ISSUED
APPLICATION FOR WARRANTY UNLESS THE
FORM (#8316) BUILDER
COMPLIES
[HOME/RWC OF TEXAS LOGO] WITH ALL
WARRANTY
PROGRAM
STANDARDS.
Within six weeks after receiving this Warranty book, you should receive a
validation sticker from the Administrator. If you do not, contact your BUILDER
to verify the forms were properly processed and sent to the Adminstrator. You
do NOT have a warranty without the validation sticker.
THIS LIMITED WARRANTY DOES NOT COVER CONSEQUENTIAL OR INCIDENTAL DAMAGES.
LIABILITY UNDER THIS LIMITED WARRANTY IS LIMITED TO THE FINAL SALES PRICE
LISTED ON THE APPLICATION FOR WARRANTY FORM.
THE BUILDER MAKES NO HOUSING MERCHANT IMPLIED WARRANTY OR ANY OTHER WARRANTIES,
EXPRESS OR IMPLIED, IN CONNECTION WITH THE ATTACHED SALES CONTRACT OR THE
WARRANTED HOME, AND ALL SUCH WARRANTIES ARE EXCLUDED, EXCEPT AS EXPRESSLY
PROVIDED IN THIS LIMITED WARRANTY. THERE ARE NO WARRANTIES WHICH EXTEND BEYOND
THE FACE OF THIS LIMITED WARRANTY.
Some states do not allow the exclusion or limitation of incidental or
consequential damages by the Builder so all of the above limitations or
exclusions may not apply to you.
HR #8320
(c) 1994 Harrisburg, PA
Rev. 9/24/94
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[HOME/RWC OF TEXAS LETTERHEAD]
DEAR HOMEBUYER:
Congratulations on the purchase of your new home. This is probably the
largest, most important single investment you've ever made and we wish you many
years of enjoyment.
This limited warranty affords you protection for ten full years of home
ownership. During the first two years, your Builder provides the warranty
coverage described in this booklet. The warranty program stands behind your
Builder and protects you in the event your Builder fails to perform. During
the next eight years, your warranty protects your home against major structural
defects as defined in the warranty.
Your warranty does contain certain exclusions and limitations. It is just as
important for you to understand these exclusions/limitations as it is for you
to understand your coverages.
Take a minute now to read this booklet in its entirety. This booklet defines
the warranty's responsibilities to you and your responsibility to your home.
It is vital that homeowners and condominium associations perform required
maintenance. Without such maintenance this warranty will be voided. Your
Builder or the Administrator's staff will be able to answer any questions you
may have about the warranty or specific construction standards and how they
apply to your home.
Again, congratulations and enjoy your new home!
Very truly yours,
HOME/RWC OF TEXAS
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[SAMPLE]
CONTENTS
- -------------------------------------------------------------------------------
INTRODUCTION
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HOME OWNER MAINTENANCE FOR HOMES CONSTRUCTED ON ACTIVE SOILS
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SECTION A. THE LIMITED WARRANTY PROGRAM
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Protection Provided.................................................. 2
Condominium Coverage - Common Elements .............................. 2
Builder's Responsibility and Purchaser's Rights: Years One and Two .. 2
Conditions Affecting Builder's and/or Insurer's Responsibilities
for Warranty program and Purchaser's Rights ......................... 2
How to Make a Warranty Claim; Dispute Settlement .................... 3
Timing of Arbitration Actions ....................................... 5
Role of Home/RWC of Texas ........................................... 5
General Terms and Conditions Affecting This Agreement ............... 5
SECTION B. DEFINITIONS AND EXCLUSIONS
-----------------------------------------------------------------------
Definitions ......................................................... 5
Exclusions .......................................................... 6
SECTION C. WARRANTY STANDARDS
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Purpose of the Standards ............................................ 7
Conditions Applicable ............................................... 7
Additional Conditions: Purchaser's Responsibility ................... 8
Standards Applicable During Year One Only ........................... 8
Standards Applicable During Year One and Two ....................... 16
Standards Applicable During Year Three Through Ten ................. 16
SECTION D. ADDENDUMS AND APPENDIX
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HUD/VA Addendum .................................................... 17
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LIMITED WARRANTY PROGRAM
INTRODUCTION
HOME/RWC of Texas ("Administrator",) administers the limited warranty program
as described in this Agreement. During the first two (2) years of this
program, the Builder, as identified on the Application For Warranty Form, is
the warrantor. The Builder has purchased warranty coverage from Warranty
Underwriters Insurance Company ("Insurer") to benefit the Purchaser both by
acting if the Builder fails to perform its obligations set forth herein and by
providing Major Structural Defects warranty coverage, all as described in this
Agreement. Section A describes the protection which this program affords to
the Purchaser; Section B defines the terms used in this Agreement and sets
forth the exclusions of the warranty; Section C sets forth warranty standards
which will govern the interpretation and operation of this warranty.
THIS AGREEMENT INCLUDES PROCEDURES FOR INFORMAL SETTLEMENT OF DISPUTES,
INCLUDING BINDING ARBITRATION, IN ACCORDANCE WITH THE PROCEDURES OF THE FEDERAL
ARBITRATION ACT; SEE SECTIONS A.5.F.-G. ADDITIONAL INFORMATION MAY BE RECEIVED
BY CALLING THE ADMINISTRATOR AT 717-561-4480. YOU SHOULD READ THIS AGREEMENT
IN ITS ENTIRETY IN ORDER TO UNDERSTAND THE PROTECTION IT AFFORDS, THE
EXCLUSIONS APPLICABLE TO IT, THE WARRANTY STANDARDS WHICH WILL GOVERN ITS
INTERPRETATION AND OPERATION, AND THE PURCHASER'S RESPONSIBILITIES.
It should be understood by the Purchaser that every newly constructed home
needs maintenance to prolong the life of your home. It is the Purchaser's
responsibility, not the Builder's, to maintain the home. Regular maintenance
includes such items as preserving soil drainage conditions, caulking, cleaning,
resealing or repainting of finished surfaces as necessary, routine maintenance
of mechanical systems, etc. Section C.4 describes many of these items in the
comments section. In a condominium, the association has the same maintenance
responsibilities for common elements. ANY DAMAGE OR DEFECT CAUSED OR WORSENED
BY NEGLECT, ABNORMAL USE, OR IMPROPER MAINTENANCE AND OPERATION OF THE HOME,
THE SURROUNDING LOT, OR THE COMMON ELEMENTS OF A CONDOMINIUM WILL NOT BE
COVERED BY THIS AGREEMENT.
HOME OWNER MAINTENANCE FOR HOMES CONSTRUCTED ON ACTIVE SOILS
Soils having a high clay content can expand and contract when variations occur
in the moisture content of the soils. Where seasonal moisture changes in the
sub-surface soils are common, it is the responsibility of the homeowner to
provide proper ongoing maintenance. Although foundations are specifically
designed for soil conditions in each area, conditions may be encountered that
were not revealed by sub-surface exploration and testing.
Additionally, improper homeowner maintenance can adversely affect the
performance and structural integrity of any foundation constructed on active
soils and void the warranty coverage. These post-construction practices are
beyond the control of the design engineer and the Builder.
To minimize the probability of movement and displacement in the foundation
caused by moisture content variations, the following post-construction
maintenance and requirements must be executed. Failure to do so by the
homeowner will void the warranty coverage provided by this Agreement.
1. A final grade certificate has been issued for the lot on which your home is
located. This confirms that the final grade, as established by the Builder,
meets the warranty requirements. The homeowner is responsible for maintaining
such grades in accordance with the final grade certificate. The grade around
the foundation shall be maintained by the homeowner in such a manner that
surface drainage is away from the foundation, and shall not permit water to
pond or become trapped in localized areas against the foundation as this can
cause variations in moisture content that can damage the foundation.
2. Watering shall be done in a uniform systematic manner as equally as possible
on all sides of the foundation to keep the soil moist, NOT SATURATED. Areas
of soil that do not have ground cover may require more moisture as they are
more susceptible to evaporation, causing a moisture content imbalance.
3. During extreme hot and dry periods, close observations should be made around
the foundation to insure adequate watering is being provided, preventing soil
from separating or pulling back from the foundation.
4. Gutters and downspouts shall be maintained to prevent injection of moisture
into the soil from roof run-off in localized areas. Downspout extensions
shall be maintained to discharge a minimum of five feet away from the
foundation wall.
5. Studies show that trees planted within twenty (20) feet of the foundation
can damage the structural integrity of the foundation. Trees planted in close
proximity to the foundation can develop a root system which can penetrate
beneath the foundation and draw moisture from the soil. Areas around trees
will require more water in periods of extreme drought. If the homeowner plants
a tree closer than twenty (20) feet to the foundation, warranty coverage may be
affected. Precautionary measures such as the installation of a root shield or
root injection system should be taken to maintain moisture equilibrium.
6. Placing flower gardens and beds or shrubs next to the foundation and
watering these areas heavily will generally result in a net increase of the
soil moisture content in that localized area. This may result in a soil
expansion in that localized area of the foundation. The homeowner must
maintain a balanced soil moisture content around the perimeter of the
foundation.
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SECTION A. THE LIMITED WARRANTY PROGRAM
The Builder is the warrantor during the first two years of this Agreement. The
Insurer will perform the Builder's obligations hereunder during the first two
years of this Warranty if the Builder fails to do so, and is the warrantor
providing a major Structural Defect warranty as defined in Section B, during
the third through tenth years of this Warranty. The Administrator will
administer the limited warranty program for participating Builders and the
Insurer. The Administrator is neither a warrantor nor the Insurer. The
protection provided under the limited warranty program is automatically
transferable to subsequent Purchasers during the ten year term of this
Agreement.
1. PROTECTION PROVIDED
Subject to the exclusions set forth in Section B.2, the Limited Warranty
program provides you with the following protection:
a. YEAR ONE COVERAGE
Commencing on the effective date of warranty as specified on the Application
For Warranty Form, and subject to the terms and conditions listed herein,
the Builder warrants that for a period of one year your home will be free
from defects due to nonconformity with the warranty standards set forth in
Section C of this Agreement. With respect to fixtures, appliances and items
of equipment, the warranty is for one year or the manufacturer's written
warranty, whichever is less.
b. YEARS ONE AND TWO COVERAGE
Commencing on the effective date of warranty as specified on the Application
For Warranty Form, and subject to the terms and conditions listed herein, the
Builder warrants that for a period of two years, your home will have no
Major Structural Defects (as defined in Section B of this Agrement) and that
certain portions of the cooling, heating, ventilating, electrical, and
plumbing systems will be free from defects due to nonconformity with the
warranty standards set forth in Section C.5 of this Agreement.
c. YEARS THREE THROUGH TEN COVERAGE
Commencing at the beginning of the third year following the effective date
of warranty as specified on the Application For Warranty From, and subject
to the terms and conditions listed herein, the Insurer will protect your
home for a period of eight years against loss resulting from Major
Structural Defects (as defined in Section B of this Agreement).
2. CONDOMINIUM COVERAGE - COMMON ELEMENTS
This Agreement shall only be applicable to warranted common elements.
Warranted common elements are those portions of a condominium structure which
serve two or more residential units, and are contained wholly within a
residential structure. Warranty coverage for common elements shall be for the
same periods and to the same extent as similar or comparable items in
individual residential units. Examples of common elements which are covered
by the warranty are hallways, meeting rooms and other spaces wholly within the
residential structure and designated for the use of two or more units; and
those portions of the electrical, heating, ventilating, cooling, and plumbing
systems which serve two or more units. Examples of common elements which are
not covered under this warranty agreement are club houses, recreational
buildings and facilities, exterior structures, exterior walkways or any other
non-residential structure which is a part of the condominium.
3. BUILDER'S RESPONSIBILITY AND PURCHASER'S RIGHTS: YEARS ONE AND TWO
If a defect in your home arises due to nonconformity with the warranty
standards during the first year of this Agreement, or if a covered defect in
your home's cooling, ventilating, electrical, or plumbing systems arises due to
nonconformity with the warranty standards during the first two years of this
Agreement, the Builder will repair, replace, or pay you the reasonable cost of
repairing or replacing the defective item; if a Major Structural Defect arises
in your home during the first two years of this Agreement, the Builder will
repair, replace, or pay you the reasonable cost of repairing or replacing the
defective item, limited to such actions as are necessary to restore
load-bearing capability to the load-bearing components of the home and to
repair those elements of the home damaged by the Major Structural Defect which
make the home physically unsafe.
4. CONDITIONS AFFECTING BUILDER'S AND/OR THE INSURER'S RESPONSIBILITIES FOR
WARRANTY PROGRAM AND PURCHASER'S RIGHTS
In each instance, the Builder's and/or the Insurer's responsibilities for
warranty coverage under this program are subject to the following.
a. In the event of a warranty claim, the decision of whether to repair or
replace a defective item, or to pay you the reasonable cost of repair or
replacement, is solely the Builder's or the Insurer's, as applicable.
b. The Builder's and the Insurer's aggregate total liability for all claims
made during the term of this Limited Warranty Agreement is limited to and
shall not exceed the sale price listed on the Application For Warranty Form.
c. In the first two years, if the Builder does not fulfill its obligations
under this Agreement, the Insurer will be responsible for the Builder's
obligations, subject to a one-time deductible of $250. In years 3 to 10,
the Insurer's liability is subject to a deductible of $500.00 per claim. In
the case of the common elements of a condominium, at all times, the
deductible shall be $250 per unit affected by the common elements defect, up
to a maximum aggregate total of $5,000.00 per free standing residential
structure.
In each instance, the deductible must be paid by you prior to repair or
replacement by the Insurer. In the event of a cash payment in lieu of
repairs, the deductible will be subtracted from the cash payment.
d. Actions taken to cure defects will not extend the period of coverage
specified in this Agreement.
e. When the Builder or the Insurer finishes repairing or
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replacing a defective item, or prior to paying you the reasonable cost of
doing so, you must sign and deliver to the Builder or the Insurer, as the
case may be, a full and unconditional release, in recordable form, of all
legal obligations with respect to the defect, any conditions arising from
the defect or any repair of the defect. Provided that if the Builder or the
Insurer repairs or replaces a defective item, the repairs or replacement
item will continue to be covered by this warranty.
f. In the event the Builder or the Insurer repairs or replaces, or pays you
the reasonable cost of the repair or replacement of any defective item
covered by this Agreement, the Builder and the Insurer shall be subrogated
to all of your rights of recovery therefore against any person or entity
(including the Builder if its obligations hereunder have been performed by
the Insurer), and you agree to execute and deliver any and all instruments
and papers and to take any and all other actions necessary to secure such
rights, including, but not limited to, assignment of the proceeds of any
other insurance or warranties to the Builder or the Insurer, as appropriate.
You shall do nothing to prejudice such rights of subrogation.
g. This Agreement provides coverage only in excess of coverage provided by
other warranties or insurance, whether collectible or not.
h. If a claim under this Agreement involves a common element in a
condominium, the claim may be made only by an authorized representative of
the condominium association. However, if the Builder retains a voting
interest in the association of more than 50%, the claim may be made by unit
owners representing 10% of the voting interests in the association.
If a claim under this Agreement involves a common element affecting multiple
units, and all affected units are not warranted by the Limited Warranty
Program, the Insurer's liability shall be limited to only those units
warranted by the Insurer. The Insurer's limit of liability shall be
prorated based upon the number of units warranted by the Insurer.
i. Notwithstanding anything to the contrary contained in this Agreement, if
a claim is resolved by the payment of cash, in lieu of repair or
replacement, the payment shall be made to or on behalf of you and any
mortgagees (or their successors), as your interests may appear, provided
neither the Builder nor the Insurer shall have any obligation to make
payment jointly to the Purchaser and mortgagee, where the mortgagee has not
notified the Insurer in writing of its security interest in the home prior
to the payment of the claim. A mortgagee shall be completely bound by any
agreement or conciliation accepted by the Purchaser or arbitration relating
to a claim hereunder.
j. If a Major Structural Defect (as defined in Section B of this Agreement)
arises in your home during years three through ten of this Agreement, the
Insurer, at its sole option, will repair or replace, or pay you the
reasonable cost of repairing or replacing, the defective item. The
responsibilities of the Insurer as set forth herein, will be limited to such
actions as are necessary to restore load-bearing capability to the
load-bearing component of the home and to repair those elements of the home
damaged by the Major Structural Defect which make the home physically
unsafe.
5. HOW TO MAKE A WARRANTY CLAIM; DISPUTE SETTLEMENT
a. Carefully read and review this Agreement and the standards contained
herein to determine whether the defect is covered.
b. NOTICE TO YOUR BUILDER AND THE INSURER FOR DEFECTS ARISING IN YEARS 1 AND
2
If you have a complaint which you believe is covered by this Agreement and
it arises during the first two years of this Agreement, you must send a
notice to the Builder which is clear and describes the defect in reasonable
detail.
Written notice of a defect covered during years one and two must be
received by the Builder no later than seven (7) calendar days following the
expiration of the applicable warranty period. If notice to the Builder does
not result in satisfaction within a reasonable time, written notice must be
given to HOME/RWC of Texas, as the Administrator, at 5300 Derry Street,
Harrisburg, Pennsylvania 17111-3598 ATTN - Construction Claims. The notice
must describe each defect in reasonable detail and must be forwarded by
Certified Mail, Return Receipt Requested. The Administrator shall have the
responsibility to notify Warranty Underwriters Insurance Company, "Insurer",
of the claim.
c. NOTICE OF MAJOR STRUCTURAL DEFECT CLAIM ARISING IN YEARS 3 THROUGH 10
If you have a claim as a result of a major structural defect occuring during
the third through tenth year of this Agreement, you must notify the
Administrator of this Agreement, who will investigate the claim. All such
claims must be presented in writing to HOME/RWC of Texas, at 5300 Derry
Street, Harrisburg, Pennsylvania 17111-3598 ATTN - Construction Claims, by
Certified Mail, Return Receipt Requested within a reasonable time after the
major structural defect arises but in no event later than thirty (30) days
after the expiration of the term of this Agreement. Claims received after
that period will not be honored. Any such notice must describe the defect
in reasonable detail.
d. CONTENT OF TIMING OF NOTICE TO HOME/RWC OF TEXAS
PLEASE NOTE THAT HOME/RWC OF TEXAS MUST RECEIVE A WRITTEN NOTICE OF CLAIM
WITHIN THIRTY DAYS AFTER THE EXPIRATION OF THE APPLICABLE WARRANTY PERIOD.
FOR EXAMPLE, IF THE DEFECT IS ONE WHICH IS COVERED UNDER THE THE BUILDER'S
ONE-YEAR WARRANTY PERIOD, NOTICE MUST BE RECEIVED BY HOME/RWC OF TEXAS
WITHIN THIRTY DAYS OF THE END OF THE FIRST YEAR, OR THE NOTICE WILL NOT BE
HONORED. NOTICE TO THE BUILDER DOES NOT CONSTITUTE NOTICE TO HOME/RWC OF
TEXAS, NOR WILL IT BE DEEMED TO EXTEND APPLICABLE COVERAGE PERIODS. THIS
NOTICE MUST CONTAIN THE FOLLOWING INFORMATION:
(1) THE ENROLLMENT NUMBER AND EFFECTIVE DATE OF WARRANTY. IF UNKNOWN,
THE HOMEOWNER WILL BE ASSESSED A $25.00 SEARCH FEE WHICH SHOULD BE
INCLUDED WITH YOUR NOTICE;
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(2) THE BUILDER'S NAME AND ADDRESS;
(3) YOUR NAME, ADDRESS, AND PHONE NUMBER (BOTH HOME AND WORK);
(4) A REASONABLY SPECIFIC DESCRIPTION OF THE DEFECT(S);
(5) THE PAGE AND SECTION NUMBER OF THIS AGREEMENT CONTAINING THE
APPLICABLE WARRANTY STANDARD(S); AND
(6) A COPY OF YOUR WRITTEN NOTICE TO THE BUILDER (IF THE CLAIM AROSE
DURING YEARS 1 AND 2).
e. 30 DAYS RESPONSE
You have an obligation to cooperate with the Administrator's inspection and
investigation of your claim. From time to time, the Administrator may
request information from you regarding your claim. Failure by you or your
appointed representative to respond with the requested information within 30
days of the date of request will result in the closing of your claim file.
f. INSPECTION AND MEDIATION
During the first thirty days following HOME/RWC OF TEXAS' receipt of proper
notice of a defect, HOME/RWC OF TEXAS will review and mediate the claim by
communicating with the Builder, you and any other individuals or entities
who HOME/RWC OF TEXAS believes possesses relevant information. If, after
thirty days, HOME/RWC OF TEXAS has not been able to successfully mediate the
claim, or at any earlier time when HOME/RWC OF TEXAS believes that the
Builder and you are at an impasse, then HOME/RWC OF TEXAS will notify you
that your claim is an "unresolved dispute".
HOME/RWC OF TEXAS, at any time following the receipt of proper notice of
your claim, may schedule an inspection of the defect. You must provide
HOME/RWC OF TEXAS reasonable access for any such inspection as discussed in
sub-paragraph (h.) below.
Where a claimed defect is filed that cannot be observed or determined under
normal conditions, it is the homeowner's responsibility to substantiate that
the condition does exist. Any cost involved shall be paid by the owner, and
if properly substantiated, reimbursement shall be made by your Builder or
WPIC, whichever is liable for the claim.
g. BINDING ARBITRATION PURSUANT TO THE FEDERAL ARBITRATION ACT
Any "unresolved dispute" (defined below) that you may have with the Builder,
the Administrator or the Insurer shall be submitted to binding arbitration
governed by the procedures of the Federal Arbitration Act, 9 U.S.C. 1 et.
seq. Copies of this Act are available from the Administrator. You commence
the arbitration process by giving the Administrator written notice of your
demand for Arbitration of an unresolved dispute. The dispute will be
submitted to the American Arbitration Association, or such other independent
arbitration service as is agreeable to the Administrator and you (herein
referred to as Arbitrator) within 20 days after the Administrator's receipt
of your notice of demand for Arbitration. If you submit a demand for
Arbitration, you must pay the Arbitrator's filing fee prior to the matter
being referred to the Arbitrator. The Arbitrator shall have the power to
award the cost of this fee to you or to split it among the parties to the
Arbitration. The Arbitration shall be conducted in accordance with the
Arbitrator's rules and regulations to the extent that they are not in
conflict with the Federal Arbitration Act. As used herein, the term
"unresolved dispute" shall mean all claims, demands, disputes,
controversies, and differences that may arise between the parties to this
Agreement of whatever kind or nature, including without limitation,
disputes: (1) as to events, representations, or omissions which pre-date
this Agreement; (2) arising out of this Agreement or other action performed
or to be performed by the Builder, the Administrator or the Insurer pursuant
to this Agreement; (3) as to repairs or warranty claims arising during the
term of this Agreement; and/or (4) as to the cost to repair or replace any
defect covered by this Agreement.
Either party may, within one year after an arbitration award, apply to the
U.S. District Court in which the home is situated, to confirm the award.
The forwarding of a written demand for arbitration shall toll the running of
any applicable statute of limitations for the matter to be arbitrated. THE
DECISION OF THE ARBITRATOR SHALL BE FINAL AND BINDING UPON ALL PARTIES.
Inasmuch as this Agreement provides for mandatory arbitration of disputes,
if any party commences litigation in violation of this Agreement, such party
shall reimburse the other parties to the litigation for their costs and
expenses including attorneys' fees incurred in seeking dismissal of such
litigation.
The Builder or the Insurer shall have 60 days after receipt of the
arbitration award in which to comply with the arbitrator's decision. Repairs
will be commenced as soon as possible and will be completed within 60 days
with the exception of any seasonal repairs or items that would reasonably
take more than 60 days to complete. The Builder will complete such repairs
or replacement with diligence but without the necessity of incurring
overtime or weekend expenses.
h. RIGHT OF ACCESS
You must provide the Builder, or if applicable, the Insurer, with reasonable
weekday access during normal business hours in order to perform its
obligations. Failure by you to provide such access to the Builder or the
Insurer may relieve the Builder or the Insurer of its obligations under this
Agreement.
i. ADDITIONAL PROTECTION: THE INSURER
If the Builder does not fulfill its obligations under this Agreement, the
Insurer will be responsible for the Builder's obligations, subject to a
one-time deductible as described in Section A.4.c.
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6. TIMING OF ARBITRATION ACTIONS
This Agreement provides a procedure for you to give notice to both the Builder
and the Insurer of potential claims, to have an inspection at no cost to you,
and to give the Builder or the Insurer, as appropriate, an opportunity to
fulfill their obligations hereunder. If you institute arbitration proceedings
against the Builder or the Insurer for any obligation arising or claimed to
have arisen under this Agreement prior to giving the Builder or the Insurer the
proper notices and opportunities to cure provided under this Agreement, you
agree to indemnify the Builder and the Insurer, as appropriate, for all costs
and expense of such arbitration, including reasonable attorneys' fees,
regardless of whether you have an otherwise legitimate claim under this
Agreement. In the event you strictly follow the procedures provided in this
Agreement and you commence arbitration proceedings, alleging that the Builder
or the Insurer failed to honor their obligations hereunder, the arbitrator or
court shall have the authority to award costs, including reasonable attorney's
fees and expert fees, to the substantially prevailing party in such
arbitration. In no event shall the Administrator or the Insurer have any
obligation to reimburse you if the Builder fails to pay to you arbitration
costs which may be awarded to you hereunder.
7. ROLE OF HOME/RWC OF TEXAS
The Administrator of this Warranty Agreement is neither a warrantor nor an
insurer. In the event you commence any legal action against the Administrator,
in its individual capacity, you agree to reimburse the Administrator for all
costs and expenses of arbitration, including reasonable attorney's fees, unless
such arbitration arises out of an independent wrongful action of the
Administrator.
8. GENERAL TERMS AND CONDITIONS AFFECTING THIS AGREEMENT
The following terms and conditions of general applicablity will govern the
interpretation and operation of this Agreement:
a. The Builder must assign to you all manufacturers' warranties on products
included in the sale price of your home.
b. This Agreement is separate and apart from and cannot be affected by your
contract with the Builder. It cannot be altered or amended in any way by
any other agreement which you may have.
c. If the Builder fails to complete items of work, in order to maintain the
Insurer's coverage, it is Purchaser's responsibility to take reasonable steps
to complete such items where the failure to do so may lead to structural
damage. The warranty period for any item completed after the Effective Date
shall be deemed to have commenced on the Effective Date.
d. All notices required under this Agreement must be in writing and sent by
certified mail, postage prepaid, to the recipient's address shown on the
Application For Warranty Form, or to whatever other address the recipient
may designate in writing.
e. Should any provision of this Agreement be determined by a court of
competent jurisdiction to be unenforceable, that determination will not
affect the validity of the remaining provisions.
f. This Agreement is binding on the Builder and the Purchaser, his heirs,
executors, administrators, successors and assigns.
g. This Agreement shall be interpreted and enforced in accordance with the
laws of the state in which the home is located.
h. This Agreement cannot be modified, altered or amended in any way except by
a formal written instrument signed by all of the parties hereto.
i. If performance by the Builder or the Insurer of any of their respective
obligations under this Agreement is delayed by an event not resulting from
their own conduct, such performance will be excused until the delaying
effects of the event are remedied. Such events include acts of God or the
common enemy, war, riot, civil commotion or sovereign conduct, or acts or
omissions by the Purchasers or any other person, not a party to this
Agreement.
j. Whenever appropriate, it is intended that the use of one gender in this
Agreement includes all genders and use of the singular includes the plural.
SECTION B. DEFINITIONS AND EXCLUSIONS
1. DEFINITIONS
For the purpose of this Agreement, the following terms shall have the meanings
set forth herein:
a. Purchaser: The Purchaser shall include the first Purchaser of the home
under this Agreement and any and all successors in title, lessees having a
leasehold interest in the home of at least fifty years, and a mortgagee in
possession of the home. With respect to condominium common elements, the
Homeowner's Association is the purchaser.
b. Builder: The person, corporation, partnership, or other entity which is a
participating member of this Warranty Program and which obtained this
Agreement for the Purchaser.
c. Effective Date of Warranty: The date specified on the Application For
Warranty Form.
d. Home: A single family dwelling, a two-or-more unit structure which may be
conveyed as a single unit, and the common elements which comprise the
building in which a condominium unit is situated and which it shares in
common with other units in the building.
e. Major Structural Defects (MSD): All of the following conditions must be
met to constitute a Major Structural Defect:
(1.) Actual physical damage to one or more of the following specified
load bearing segments of the home;
(2.) Causing the failure of the specific major structural components; and
(3.) Which affects its load-bearing function to the degree
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that it materially affects the physical safety of the occupants of the
home:
Load-bearing components of the home deemed to have MSD potential:
(i) roof framing members (rafters and trusses);
(ii) floor framing members (joists and trusses);
(iii) bearing walls;
(iv) columns;
(v) lintels (other than lintels supporting veneers);
(vi) girders;
(vii) load-bearing beams; and
(viii) foundation systems and footings.
Examples of non-load-bearing elements which will be deemed not to have Major
Structural Defect potential are:
(i) non-load-bearing partitions and walls;
(ii) wall tile or paper, etc.;
(iii) plaster, laths, or dry wall;
(iv) flooring and subflooring material;
(v) brick, stucco, stone, or veneer;
(vi) any type of exterior siding;
(vii) roof shingles, sheathing, and tar paper;
(viii) heating, cooling, ventilating, plumbing, electrical, and
mechanical systems;
(ix) appliances, fixtures, or items of equipment; and
(x) doors, trim, cabinets, hardware, insulation, paint, and stains.
f. Cooling, Ventilating, and Heating Systems: All ductwork, refrigerant
lines, steam and water pipes, registers, convectors, and dampers.
g. Plumbing Systems: All pipes (supply and waste) and their fittings, as
well as gas supply lines and vent pipes located within the home.
h. Electrical Systems: All wiring, electrical boxes, and connections, up to
the public utility connection.
i. Fixtures, Appliances and Items of Equipment, including Attachments and
Appurtenances: Water heaters, pumps, stoves, refrigerators, compactors,
garbage disposals, stoves and ranges, dishwashers, washers and dryers,
bathtubs, sinks, commodes, faucets and valves, lights and fixtures,
switches, outlets, circuit breakers, thermostats, furnaces and oil tanks,
humidifiers, oil purifiers, ventilating fans, air conditioning material,
in-house sprinkler systems, and similar items.
j. Administrator: HOME/RWC of Texas
k. Warrantor: The Builder in years one and two and Warranty Underwriters
Insurance Company "Insurer" in years three through ten.
2. EXCLUSIONS
The following are not covered under this Agreement (by the Builder or the
Insurer):
a. Failure of the Builder to complete construction of the home or any part
of the home on or before the Effective Date or damages arising from such
failure. An incompleted item is not considered a defect hereunder, although
the Builder is otherwise obligated to complete such items.
b. Any defect which does not result in actual physical damage or loss.
c. All consequential damages including, but not limited to, damage to the
home that is caused by a covered defect but is not itself a covered defect
and costs of shelter, transportation, food, moving, storage, or other
incidental expenses related to relocation during repairs.
d. Personal property damage or bodily injury.
e. Any claim reported to the Insurer after an unreasonable delay or later
than thirty days after the expiration of the applicable warranty period.
f. Loss or damage caused to the home, persons or property directly or
indirectly by insects, birds, vermin, rodents, or wild or domestic animals.
g. Any loss or defect which arises while the home is used primarily for
nonresidential purposes.
h. Loss or damage caused by soil movement, including subsidence, expansion
or lateral movement of the soil (excluding flood and earthquake) which is
covered by any other insurance or for which compensation is granted by
legislation.
i. Normal deterioration or normal wear and tear.
j. Any deficiencies in or damage caused by material or work supplied by
anyone other than the Builder or its employees, agents, or subcontractors,
including but not limited to the items listed as additional exclusions on
the Application For Warranty Form.
k. Damages or losses not caused by a defect in construction of the home by
the Builder or its employees, agents, or subcontractors, but resulting
instead from acts or omissions of the Purchaser, his agents, employees,
licensees, invitees, accidents, riots, civil commotion, nuclear hazards,
acts of God or nature, fire, explosion, blasting, smoke, water escape,
windstorms, hail, lightning, falling trees, aircraft, vehicles, flood, mud
slides, sinkholes, faults, crevices, earthquake, including land shock waves
or tremors before, during or after a volcanic eruption.
l. Loss or damage resulting from Purchaser's or condominimum association's
failure to perform routine maintenance.
m. Loss or damage resulting from the Purchaser's failure to minimize or
prevent such loss or damage in a timely manner provided that Purchaser knew
or reasonably should have known, that such damage or loss might occur or
worsen.
n. Loss or damages to or resulting from defects in outbuildings.
6
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including, but not limited to detached carports, except outbuildings
which contain plumbing, electrical heating, cooling or ventilation systems
serving the home (a fence, utility line or similar union shall not cause an
outbuilding to be considered attached), site located swimming pools and
other recreational facilities; driveways; walkways; patios not structurally
attached; boundary and retaining walls, bulkheads; fences; landscaping
(including sodding, seeding, shrubs, trees and plantings) french drains;
septic systems; off-site improvements; or any other improvements not a part
of the home itself.
o. Following the first year of this Agreement, loss or damage resulting
from concrete floors of basements and attached garages and chimneys which
are constructed separate from foundation walls or other structural elements
of the home.
p. Loss or damage to real property which is not part of the home (land
is not considered part of the home) covered by this Agreement and which may
or may not be included in the final Sales Price listed on the Application
For Warranty Form.
q. Loss or damage resulting from, or made worse by, changes in the
grading of the property surrounding the home by anyone except the Builder or
its employees, agents or subcontractors, or changes in the grading or
drainage resulting from erosion or subsidence.
r. Loss or damage resulting from, or made worse by, modifications or
additions to the home, or property under or around the home, made after
commencement of the term of this Agreement (other than changes made in order
to meet the obligations of this Agreement).
s. Loss or damage resulting from, or made worse by dampness,
condensation or heat build-up caused by the failure of the Purchaser to
maintain proper ventilation.
t. Any defect, damage or loss which is caused or made worse by failure
of the Purchaser to notify the Builder or the Administrator, as applicable,
of any defect within a reasonable period of time.
u. Any defect, damage, or loss which is caused or made worse by failure
by anyone other than the Builder or its agents, employees, or subcontractors
to comply with the manufacturers' warranty requirements concerning
appliances, fixtures or items of equipment.
v. Loss or damage resulting from, or made worse by, negligent
maintenance or operation of the home and its systems by anyone other than
the Builder or its employees, agents, or subcontractors.
w. Following the first year of this Agreement, any deficiencies in
fixtures, appliances, and items of equipment whether or not components of
the cooling, ventilating, heating, electrical, plumbing or in-house
sprinkler systems. During the first year of this agreement, coverage on
fixtures, appliances, and items of equipment (including attachments and
appurtenances) is for one year or the manufacturer's written warranty
period, whichever is less. Damage caused by improper maintenance or
operation, negligence, or improper service of such systems by the Purchaser
or its agents will not be covered by this Agreement.
x. Loss or damage resulting from a condition not resulting in actual
physical damage to the home, including uninhabitability or health risk due
to the presence or consequences of insects, unacceptable levels of radon,
formaldehyde, carcinogenic substances, or other pollutants and contaminants;
or the presence of hazardous or toxic materials.
y. Loss or damage caused directly or indirectly by flood, surface water,
waves, tidal water, overflow of a body of water, or spray from any of
these (whether or not driven by wind), water which backs up from sewers or
drains, changes in the water table which were not reasonably foreseeable, or
water below the surface of the ground (including water which exerts pressure
on or seeps or leaks through a building, sidewalk, driveway, foundation,
swimming pool, or other structure) wetlands, springs or aquifers.
z. Violations of applicable building codes or ordinances unless such
violation results in a defect which is otherwise covered under this
agreement. Under such circumstances, the obligation of the Insurer under
this agreement shall only be to repair the defect, but not to restore or
bring the home to conform to code.
aa. Any loss or damage resulting from the weight and/or performance of
any type of waterbed or any other furnishings excessive in weight for which
the home was not designed.
- -------------------------------------------------------------------------------
SECTION C. WARRANTY STANDARDS
1. PURPOSE OF THE STANDARDS
This section establishes the standards by which it will be determined whether
your home has a problem which is covered by this Agreement and the obligation
of the Builder or the Insurer to correct those defects. Where specific
standards and obligations are not set forth, the standard shall be the accepted
industry practice for workmanship and materials.
2. CONDITIONS APPLICABLE
Your Builder warrants that it has constructed your home in compliance with
local building codes as well as one of the following model codes accepted by
the Administrator. In the event that your home is not constructed in accordance
with one of the following accepted model codes then the Builder shall have full
responsibility for warranty claims arising from such noncompliance for the full
ten-year
7
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period. If the Builder fails to perform, the Insurer will repair or pay the
cost of repair of defects otherwise covered by this agreement, but will be
under no obligation to cause the home to conform to code. The codes acceptable
to the Administrator include the following:
<TABLE>
<CAPTION>
Building Code Mechanical Code Plumbing Code Electrical Code
<S> <C> <C> <C>
o CABO 1 & 2 Family Dwelling Code o BOCA National Mechanical Code o BOCA National Plumbing Code o National Electrical Code
o BOCA National Building Code o Uniform Mechanical Code o Uniform Plumbing Code
o Standard Building Code o Standard Mechanical Code o Standard Plumbing Code
o Uniform Building Code
</TABLE>
3. ADDITIONAL CONDITIONS: PURCHASER'S RESPONSIBILITY
The applicability of warranty coverage is conditioned upon the purchaser's
proper maintenance of the home, common elements, and surrounding property to
prevent damage due to neglect, abnormal use or improper maintenance.
4. STANDARDS APPLICABLE DURING YEAR ONE ONLY
<TABLE>
<CAPTION>
Potential Problems Comments Builder's Obligation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
a. MASONRY AND CONCRETE
- -----------------------------------------------------------------------------------------------------------------------------------
1. Concrete Foundation Wall Cracks Shrinkage or settlement cracks are common Any cracks greater than 1/8 inch in width
and should be expected within certain will be repaired by surface patching or
tolerances. pointing; Builder is not responsible for
color variations. Any cracks greater than
2. Cracks in block or veneer walls Settlement cracks are common and should 3/8 inch in width will be repaired by
(blocks, bricks and mortar joints) be expected within certain tolerances. surface patching or pointing; Builder will
not be responsible for color variations
Any cracks greater than 1/4 inch in width
or 1/8 inch in vertical displacement will
3. Cracks in concrete basement floors Shrinkage (hairline) cracks are common be repaired by surface patching or other
and should be expected within certain remedies.
tolerances.
4. Vertical or horizontal movement of Concrete floor slabs are engineered to None.
concrete floor slabs at joints move at expansion and contraction joints.
5. Cracks in attached garage slab Shrinkage cracks are common and should be Cracks exceeding 1/4 inch in width or 1/4
expected within certain tolerances. inch in vertical displacement will be
repaired by patching or other remedies.
6. Concrete floors in rooms designed for Slopes purposefully created for drainage If the uneveness exceeds 1/4 inch in a
living having pits, depressions or are not covered. 32 inch measurment, it will be corrected.
uneveness
7. Concrete slab cracks which cause * * * The problem will be corrected so that the
finished floor coverings to rupture defect is not readily noticeable.
8. Powdering, scaling or pitting of If the problem is caused by erosion due to If the deterioration occurs under normal
concrete (aggregate showing or loose) salt, chemicals or unusual weather, the use and conditions, the Builder will
Builder is not responsible. repair it.
9. Vertical or horizontal separation of Minor separation is normal as is minor Separation of more than 1 inch will be
stoops away from the house puddling of rain water. repaired as will excessive water puddling.
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b. LOT GRADING AND DRAINAGE
- -----------------------------------------------------------------------------------------------------------------------------------
1. Ground settlement around foundation, Ground settlement should not disrupt water If the final grading was performed by the
utility trenches, or other filled areas. drainage away from the house, although Builder, he will replace fill in
settlement around the foundation, at excessively settled areas only once.
utility tranches and other filled areas of
up to 6 inches should be expected. In all
cases, the purchaser is responsible for the
removal and replacement of shrubs, grass, etc.
</TABLE>
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<TABLE>
<CAPTION>
Potential Problems Comments Builder's Obligation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2. Improper grades and swales which After normal rainfall, water should not The Builder is responsible for
cause standing water and affects the stand in the yard for more than 24 hours establishing the proper grades and swales;
drainage in the immediate area nor 48 hours in swales. No decision after that, the purchaser is responsible
surrounding the home which may affect regarding coverage will be made while for maintaining them.
the foundation. frost or snow or saturation exist on the
ground.
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c. FOUNDATION WATERPROOFING
- -----------------------------------------------------------------------------------------------------------------------------------
1. Water leading into basement Dampness of floors and walls is common Actual leakage of water (actual
and not covered by this warranty. The flow and accumulation) into the
Builder will not be responsible if the basement will be corrected.
cause is improper landscaping,
maintenance or negligence by the
purchaser.
2. Inadequate ventilation of crawl Adequate ventilation of the space The Builder shall correct to meet
spaces. between the bottom of the floor joists warranty standard.
and the earth under the building is
important to minimize vapor build-up
in the crawl space area. This
ventilation may be provided by a
sufficient number of ventilation
openings, or other approved method
of ventilation. The minimum net
area of ventilation openings shall not
be less than one square foot for each
150 square feet of crawl space area
where the ground surface does not have
an approved vapor barrier has been
installed, or one square foot for each
1500 square feet of crawl space area
where an approved vapor barrier has been
installed. There shall be one such
opening within three feet of each corner
of the crawl space wall.
3. Condensation on walls, joists, support The movement of water vapor from the None.
columns and other components of the crawl ground below a foundation (including
space, basement or cellar. crawl spaces, basements and cellars
may cause the introduction of large
amounts of water by evaporation from the
ground. These conditions are beyond the
Builder's control. Excessive vapor
build-up may cause condensation on the
structural components of the foundation.
Maintaining adequate ventilation and
moisture control is considered as
routine maintenance and is the
responsibility of the purchaser.
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d. CARPENTRY (ROUGH-IN)
- -----------------------------------------------------------------------------------------------------------------------------------
1. Walls which bulge, bow or are All interior and exterior framed walls The Builder will correct to meet
out-of-plumb have minor differences. Walls which warranty standard.
bulge or bow in excess of 1/4 inch
within a 32 inch measurement (floor to
ceiling or wall to wall) is a defect.
Walls which are out of plumb in
excess of 3/4 inch within a vertical
measurement of eight feet is a defect.
</TABLE>
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<TABLE>
<CAPTION>
Potential Problems Comments Builder's Obligation
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<S> <C> <C>
2. Floor squeaks or subfloor appears A squeak proof floor cannot be assured. For large areas of floor squeaks or floor
loose. Floor squeaks and loose sub-flooring are squeaks caused by a defective floor joist,
often temporary and passing conditions, the Builder will correct within reasonable
caused by lumber shrinkage or temperature repair capability. Where a finished ceiling
changes. An isolated floor squeak is not exists under the floor, the corrective work
a defect, unless caused by a defective may be attempted from the floorside. Where
floor joist in the system. A large area of Where necessary, remove the finish floor
floor squeak which is noticeable, loud material to make the repair and reinstall.
and objectionable is a defect.
3. Uneven wood framed floors. Uneven floor joists causing high or low The Builder will correct to meet the war-
areas exceeding 1/4 inch within a 32 inch ranty standard.
distance, measuring perpendicular to the
high or low area, is a defect. Floor slope
which exceeds 1/240 of the width or length
within a room, measured in the direction of
the slope, is a defect. Example, the slope
in a room ten feet wide may not exceed 1/2
inch.
- ------------------------------------------------------------------------------------------------------------------------------------
e. INSULATION
- ------------------------------------------------------------------------------------------------------------------------------------
1. In adequate insulation This warranty assures that your insulation Builder will install sufficient insulation
will meet the applicable energy code re- to meet the applicable code requirements.
quirements. If your contract with your
Builder provided for additional insulation,
that is a matter between you and him and is
not covered by this agreement.
2. Air infiltration from electrical Electrical connection boxes are backed by None.
outlets the exterior wall, which may cause air
infiltration. This is common in new con-
struction.
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f. ROOFING
- ------------------------------------------------------------------------------------------------------------------------------------
1. Roof Leaking The roof should not leak and no leaks All roof and flashing leaks not caused by
should arise from flashings, except where snow and ice buildup or other neglect by
snow and ice are allowed to build up. Pre- the purchaser will be required. The
vention of snow and ice buildup is the Builder is not responsible for color
purchaser's responsibility. variations.
2. Leaks in gutters and downspout Gutters and leaders should not leak. How- Leaks not caused by purchaser's neglect
leaders ever, during heavy rains, overflow should will be repaired.
be expected. The purchaser is responsible
for keeping the gutters and leaders open
and free from debris.
3. Water stays in gutters Purchaser is responsible for keeping gut- Builder will repair so that if free from
ters and leaders open and free from debris, the standing water depth will not
debris. exceed 1 inch.
4. Insufficient attic or roof Attic spaces shall have adequate ventila- Builder will correct to meet the warranty
ventilation lation. This may be accomplished by pro- standard.
viding a natural ventilation area equal to
1/150 of the attic area. When an accepted
vapor barrier is installed on the warm side
of the ceiling, net free cross-ventilation
area may not be less than 1/300 of the
attic area to be ventilated. The net free
cross-ventilation area may not be less than
1/300 of the attic area required to be
ventilated when at least 50% of the required
ventilating area is
</TABLE>
<PAGE> 162
<TABLE>
<CAPTION>
Potential Problems Comments Builder's Obligation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
provided by ventilators located in the
upper portion of the space to be
ventilated and at least 3 feet above eave
or cornice vents, with the balance or the
required ventilation to be provided by
eave or cornice vents.
5. Leakage of elements through attic Even when properly installed, wind- If leakage is due to poor workmanship or
louvers, vents, including ridge and driven snow and rain may enter through materials, the Builder will correct.
soffit vents. vents. This is not a defect.
- ------------------------------------------------------------------------------------------------------------------------------------
g. SIDING AND CAULKING
- ------------------------------------------------------------------------------------------------------------------------------------
1. Exterior trim poor workmanship. Separation at joints in the exterior trim, The Builder will correct by caulking
and between the trim and the surfaces of or other methods.
exterior siding or masonry should not
exceed 3/8 inch. Siding, trim and masonry
must be capable of excluding the elements.
2. Wall leaks due to caulking shrinkage All caulking shrinks and replacement is All junctions and separations of wall
a purchaser's maintenance item. surfaces will be recaulked once to
prevent water leakage.
3. Exterior joint separation of siding, Loose siding due to improper installation, The Builder will correct to meet
delamination of veneer siding or loose or separation or delamination due to warranty standards. Exact match cannot
siding. improper workmanship and materials is a be assured. The Builder is not
defect. Separated, loose or delaminated responsible for discontinued colors,
siding due to improper maintenance is styles or textures. The Builder will
not a defect. match as closely as possible.
4. Paint or stain peels or fades Exterior paints and stains should not The Builder will correct to meet
peel or deteriorate during the first year warranty standards. If peeling or
of warranty coverage. However, some fading deterioration affects 75% of a wall,
is normal and is caused by weathering. the entire wall will be refinished.
Varnish or lacquer on the exterior will The exact color and texture cannot be
deteriorate quickly and is not covered by assured. The Builder will match color
this warranty. Mildew and fungus on siding and texture as closely as possible.
are caused by climactic conditions or
nearby bodies of water, and are not
covered by this warranty.
5. Cracks in stucco wall finish Cracks in stucco wall finishes are common Cracks in excess of 1/8 inch in width
and should be expected within certain will be repaired once.
tolerances.
- ------------------------------------------------------------------------------------------------------------------------------------
h. CHIMNEYS AND FIREPLACES
- ------------------------------------------------------------------------------------------------------------------------------------
1. Not enough draw or down draft Trees too close to the chimney or high If the problem is caused by improper
winds can cause down drafts. Some homes construction or design, it will be
are extremely air-tight and a window may corrected.
have to be opened in order to maintain
an effective draft.
2. Chimney separated from home Some minor separation is normal and Separation in excess of 1/2 inch in any
should be expected within certain 10 foot measurement will be corrected by
tolerances. caulking or other measures.
3. Cracking of firebrick It is expected that heat will cause None.
cracking
4. Fireplace brick veneer cracking Some cracking is common and should be Cracks in brick veneer greater than 1/4
expected within certain tolerances. inch in width will be repaired by pointing
or patching. An exact color and texture
match cannot be assured. The Builder is
not responsible for color variations. The
Builder will match as closely as possible.
</TABLE>
<PAGE> 163
<TABLE>
<CAPTION>
Potential Problems Comments Builder's Obligation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
5. Creosote or resin build up or creosote Creosote seepage is caused by the build up Builder is responsible for constructing
seepage through chimney of creosote in the chimney flue which is the chimney to meet accepted industry
direct result of the materials and manner standards. Since the Builder does not
in which the fireplace or stove is have control over the purchaser's use and
utilized. Burning of non-seasoned wood or choice of combustible substances, the
improper operation will greatly enhance Builder is not responsible unless caused
this situation. Chimney flues should be by improper construction.
cleaned regularly.
6. Water infiltration into the firebox. A certain amount of water infiltration None.
can be expected under certain weather
conditions, such as during wind driven
rains and snow. This is beyond the
Builder's control and is not a defect.
- ------------------------------------------------------------------------------------------------------------------------------------
i. WINDOWS AND DOORS
- ------------------------------------------------------------------------------------------------------------------------------------
1. Warpage of doors Some warping, cupping, bowing or twisting, Defective doors will be repaired or
especially of exterior doors, is normal and replaced and the finish matched as closely
is caused by surface temperature changes. as possible.
Such warping, cupping, twisting or bowing,
however, should not cause the doors to
become unusable or allow entrance of the
elements. The amount of warp, bow, cup or
twist shall be measured by placing a
straight edge, taut wire or string on the
suspected concave face of the door at any
angle (horizontal, diagonal or vertical).
The measurement of the warp, bow, cup or
twist shall be made at the point of
maximum distance between the bottom of the
straight edge, taut wire or string and the
face of the door, allowing for recesses in
the door from glazing or panels. The warp,
bow, cup or twist shall not exceed 1/4
inch.
2. Shrinkage of door panels Expansion and contraction is normal and None.
may cause unfinished surfaces to appear.
3. Door panel splits Some splitting is normal and should be The Builder will correct to meet warranty
expected within certain tolerances. The standards. The Builder will match the
splitting should not allow the entrance finish as closely as possible; an exact
of light. match cannot be assured.
4. Glass breakage This is not covered by your warranty. You None.
should inspect your property and bring any
glass breakage to the Builder's attention
prior to occupancy.
5. Garage door malfunctions Following proper installation, maintenance The Builder will correct to meet warranty
is the purchaser's responsibility. standards.
6. Rain or snow enters through garage The Builder will install the door to meet The Builder will correct, if necessary, to
door the manufacturer's specifications. Some meet warranty standards.
entrance of the elements should be
expected under certain weather conditions.
7. Windows do not operate Reasonable pressure should open and close The Builder will correct to meet warranty
windows. standards.
</TABLE>
<PAGE> 164
<TABLE>
<CAPTION>
Potential Problems Comments Builder's Obligation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
8. Drafts around windows and doors Some draft is normal and can be corrected The Builder will correct to meet warranty
with storm windows. Minor alterations to standards.
adjustable thresholds, weather-stripping
and other elements are considered as
routine maintenance and are the respon-
bility of the purchaser. Defective weather-
stripping and improperly fitted windows and
doors are defect.
9. Condensation and frost on windows. Condensation or frost on windows is caused None.
by temperature difference between the inte-
rior and the exterior of the home, as well
as the personal living habits of the occu-
pants. These conditions are beyond the
control of the Builder and will not be
considered as a defect.
10. Water infiltration around doors Windows and doors should be installed in None.
and windows. accordance with the manufacturer's specifi-
cations, are other acceptable method. No
water should pass beyond the interior face
of the unit or flow into the wall area or
room. All caulking materials expand and
contract due to temperature variations and
dissimilar materials. Maintenance of weather-
stripping and caulking is considered as
routine maintenance and is the responsibility
of the purchaser.
11. Screen panels do not fit properly; If a pre-closing walk-through is performed, The Builder will correct improperly fitted
screen mesh is torn or damaged. defects, such as rips or gouges in the screen panels. Defects, such as rips and
screen mesh must be documented in writing gouges will be corrected if properly
to the Builder by the purchaser prior to documented.
occupancy. If the Builder does not perform
a pre-closing walk-through, the purchaser
must document in writing to the Builder
such defects within seven days of closing.
The screen panels shall fit properly.
- ------------------------------------------------------------------------------------------------------------------------------------
j. INTERIOR WALLS AND TRIM
- ------------------------------------------------------------------------------------------------------------------------------------
1. Faulty workmanship trim Some separations at joists in moldings and Separation in excess of 1/4 inch will be
between moldings and adjacent surfaces is corrected by caulking or other methods.
normal and should be expected within
certain tolerances.
2. Wall or ceiling cracks Hairline cracks and seam or tape cracks, Cracks, exceeding 1/8 inch in width will
along with other slight imperfections are be repaired once. The Builder is
normal and should be expected within responsible for repainting only the
certain tolerances. Nail pops are common affected are unless the majority of a
and are due to contraction and expansion wall is affected. Color will be
of lumber products. They are beyond the matched as closely as possible.
Builder's controls and are not covered by
this warranty.
3. Cracking of ceramic tile Cracking of grout joints is common and is Broken tiles will be replaced and
a home maintenance item. excessive cracking of grout joints will
be repaired once. Builder is not
responsible for discontinued patterns
or colors or for variations in colors.
</TABLE>
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<PAGE> 165
<TABLE>
<CAPTION>
Potential Problems Comments Builder's Obligation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
4. Wallpaper or covering begins to peel The purchaser should be careful not to The peelings will be corrected by repair
cause this problem by negligences, such or replacement. Builder is not
as consistent use of the shower without responsible for discontinued patterns or
the exhaust fan being on. Mis-matches of colors or for variations in color.
wall paper edging is not covered.
- -----------------------------------------------------------------------------------------------------------------------------------
k. FLOORING AND COVERING
- -----------------------------------------------------------------------------------------------------------------------------------
1. Separation between finished floor Separation not exceeding 1/4 inch is Builder will correct to meet warranty
boards normal and should be expected. standards.
2. Nails popping through resilient Only nails which have broken through the The nail pops will be repaired and the
flooring floor covering will be repaired. covering repaired or replaced in the area
damaged. Builder is not responsible for
discontinued patterns or colors or for
variations in color.
3. Sub-floor imperfections causing Minor ridges or indentations not exceeding The Builder will correct to meet warranty
ridges or depressions in resilient 1/8 inch are common and should be expected. standards. The affected area only will be
flooring. The ridge or indentations is measured by corrected, including the affected floor
placing a 6 inch straight edge covering. The Builder is not responsible
perpendicularly over the ridge or for discontinued patterns or colors, but
indentation, with three inches of the will match as closely as possible. An
straight edge extending over the exact match cannot be assured.
imperfection, while tightly holding the
other three inches to the floor.
4. Floor covering becomes loose or bubbles *** The affected area will be repaired or
replaced. Builder is not responsible for
discontinued patterns or colors or for
variations in color.
5. Gaps in seams of resilient coverings Minor gaps and separations not exceeding The Builder will correct the affected
1/8 inch are common and should be expected. area only to meet warranty standards.
When the purchaser installs the flooring The Builder is not responsible for
and covering, sub-flooring preparation is discontinued patterns or colors or for
the responsibility of the purchaser. If variations in color. An exact match
sub-floor repairs are to be made where the cannot be assured.
purchaser installed floor covering, the
removal and replacement of the floor
covering is the purchaser's responsibility.
6. Gaps in carpet seams Seams will be apparent. Spotting or fading The Builder will correct to meet
of carpet is not covered by this warranty. warranty standards.
Gaps at seams should not be apparent.
- ------------------------------------------------------------------------------------------------------------------------------------
l. CABINETS AND COUNTER TOPS
- ------------------------------------------------------------------------------------------------------------------------------------
1. Chips, cracks, scratches or Cracks, chips and scratches not reported The Builder will correct to meet
delamination to vanity or kitchen to the Builder prior to occupancy will warranty standards
countertops, including porcelain and not be covered by this warranty. Counter
fiberglass fixtures, or cabinets. top material should not deliminate.
2. Cabinet doors or drawers warp Minor warpage is common and should be Warpage in excess of 1/4 inch from the
expected with certain tolerances. face of the cabinet will be corrected.
3. Cabinet separates from wall or ceiling Some separation is common and should be Separation in excess of 1/4 inch will be
expected within certain tolerances. corrected.
</TABLE>
4
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[SAMPLE]
<TABLE>
<CAPTION>
Potential Problems Comments Builder's Obligation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
m. COOLING AND HEATING
- -----------------------------------------------------------------------------------------------------------------------------------
1. Insufficent cooling Where applicable, the cooling systems The Builder will correct the system to
should be able to maintain a temperature meet warranty standards.
of 78 degrees (measured 5 feet above the
center of the floor) under local outdoor
ASHRAE specifications. In the case of
excessive outdoor temperature, a 15
degree difference is acceptable.
Purchaser is responsible for minor
adjustment such as balancing dampersand
registers. All rooms will vary in
temperature by 3 or 4 degrees. This is
acceptable.
2. Insufficient heating The heating system should be able to The Builder will correct the system to
maintain a temperature of 70 degrees meet the warranty standards.
(measured 5 feet above the center of the
floor) under local outdoor ASHRAE
specifications. Purchaser is responsible
for minor adjustments such as balancing
dampers and registers. On extremely cold
days, a 5 to 6 degree difference between the
actual inside temperature and the thermostat
setting is acceptable. All rooms will vary
in temperature by 3 to 4 degrees. This is
acceptable.
3. Ductwork noisy When metal ducts heat and cool, some Builder will correct the oil canning noise
noise will result. Very loud noise known only.
as oil canning is not acceptable.
- -----------------------------------------------------------------------------------------------------------------------------------
n. PLUMBING
- -----------------------------------------------------------------------------------------------------------------------------------
1. Pipes freeze and burst Purchaser is responsible for maintaining Builder will correct if defect is caused by
suitable temperatures in the home to defective workmanship or materials.
prevent pipes from freezing. Proper
winterization including draining pipe
lines and supplying outside faucets, is a
homeowner's maintenance item.
2. Plumbing fixtures, appliances and *** Leaks or malfunctions in faucets, valves,
trim fittings leaks or malfunctions appliances and trim fittings caused by
defects in materials or workmandship will
be corrected.
3. Pipes noisy Expansion and contraction caused by Loud, hammering noises in pipes will be
water flow will cause some noise which corrected.
is to be expected.
4. Cracks or chips in porcelain or The purchaser should inspect these items The Builder will be responsible for these
fiberglass before taking occupany and report them items only if reported prior to occupancy.
to the Builder prior to occupancy.
- -----------------------------------------------------------------------------------------------------------------------------------
o. ELECTRICAL
- -----------------------------------------------------------------------------------------------------------------------------------
1. Outlets, switches or fixtures fail *** The Builder will correct defective outlets,
switches and fixtures.
2. Consistently blown fuses or circuit The Builder is not responsible if caused The Builder will correct defects caused by
breakers kicking off by the purchaser overloading in the improper workmandship and materials only.
system. Ground-fault Circuit-interrupters
(GFCI's) are designed to kick off as
necessary for safety reasons. This is not
considered as a defect.
</TABLE>
15
<PAGE> 167
[SAMPLE]
<TABLE>
<CAPTION>
Potential Problems Comments Builder's Obligation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
5. STANDARDS APPLICABLE DURING YEARS ONE AND TWO
1. Water supply stops Drought or causes other than defective The Builder will correct faulty
workmanship and materials will not be workmanship and materials only.
covered by this warranty.
2. Pipe leaks Condensation on pipes is normal and is The Builder will correct pipe leaks only.
not covered by this warranty. Leaks in Leaks in faucets, valves, joints and
faucets, valves, joints and fittings are fittings are the purchaser's
applicable to first year coverage only. responsibility.
3. Clogged drain and sewers This is a Purchaer's maintenance item. The Builder will correct only if caused
The Builder will be responsible only if by a defect in materials and workmanship.
the cause is a defect in construction. The purchaser will pay for Builder's
repair if not a defect in workmanship
and materials.
4. Ductwork separates Ductwork should not separate. The Builder will correct to meet warranty
standards.
5. Wiring fails to carry specified *** The Builder will correct tomeet acceptable
electrical load warranty standards if failure is caused
by a defect in workmanship or materials.
6. Major Structures Defects The criteria for establishing the existence Builder will correct the Maor Structural
of a Major Structural Defect is set forth Defect, limited to such actions as are
in Section B.1.(e) of this Limited Warranty necessary to restore the load-bearing
Agreement. capability of the component concluded to
meet the criteria of a Major Structural
Defect, and to correct those items of the
home damaged by the Major Structural
Defect.
6. STANDARDS APPLICABLE DURING YEARS THREE THROUGH TEN
Major Structural Defects The criteria for establishing the existence The Insurer will correct the defective
of a Major Structural Defect is set forth Major Structural Defect, limited to such
in Section B.1.(e) of this Limited Warranty actions as are necessary to restore the
Agreement. load-bearing capability of the component(s)
to meet the criteria of a Major Structural
Defect, and to correct those items of the
home damaged by the Major Structural
Defect.
</TABLE>
16
<PAGE> 168
[SAMPLE]
SECTION D: ADDENDUM
- -------------------------------------------------------------------------------
D.1 HUD/VA ADDENDUM (Applicable to FHA Financial Homes Only): February 1, 1992
- -------------------------------------------------------------------------------
1. SECTION A.1.a. YEAR ONE COVERAGE. The following language is added:
Notwithstanding anything to the contrary herein contained, during the first
year of coverage, the Builder will correct problems with, or restore the
reliable function of, appliances and equipment damaged during installation or
improperly installed by the Builder. In addition, the Builder will correct
Construction Deficiencies in workmanship and materials resulting from the
failure of the Home to comply with standards of quality as measured by
acceptable trade practices. "Construction Deficiencies" are defects (not of a
structural nature) in the Home that are attributable to poor workmanship or to
the use of inferior materials which result in the impaired functioning of the
Home or some part thereof. Defects resulting from Purchaser abuse or from
normal wear and tear are not functioning of the Home or some part thereof.
Defects resulting from Purchaser abuse or from normal wear and tear are not
considered Construction Deficiencies.
2. SECTION A.4.c. The following language is substituted: In the first two
years, if the Builder does not fulfill its obligations under this Agreement,
the Insurer will be responsible for the Builder's obligations, subject to a
one-time deductible of $250. The Insurer's liability in years 3 through 10
under this Agreement is subject to a deductible of $250 per claim. In each
instance, the deductible must be paid by you prior to the repair or replacement
by the Insurer. In the event of payment, the $250 will be subtracted from the
cash payment. In the case of the common elements of a condominium, the
deductible shall be $250 per home affected by each common element defect,
limited to a maximum of $5,000 per free standing structure.
3. The following is added to the agreement: SECTION A.4.i. Where a covered
defect is determined to exist and where either the Builder or the Insurer
elects to pay the reasonable cost of repair or replacement in lieu of
effectuating such repair or replacement, the cash offer must be in writing and
the Purchaser will be given two (2) weeks to respond. Cash offers over $5,000
are subject to an on-site review by a HUD approved fee inspector (inspection
costs to be paid by the Builder or the Insurer, as appropriate) unless:
(i) The cash offer is made pursuant to a binding bid by an
independent third party contractor, which will accept an award of a
contract from the Purchaser pursuant to such bid;
(ii) Payment is being made in settlement of legal action; or
(iii) The Purchaser is represented by legal counsel.
4. The following language is substituted: SECTION B.1.c. EFFECTIVE DATE. The
Effective Date will be the date on which closing or settlement occurs in
connection with the initial sale of the Home. In no event will the Effective
Date be later than the date of FHA endorsement or the Purchaser's Mortgage on
the Home.
5. The following language is added: SECTION B.1.e. MAJOR STRUCTURAL DEFECTS.
Failure of roof sheathing shall be deemed a major structural defect.
6. SECTION B.2.h. The following language is substituted: Loss or damage
caused by soil movement, including subsidence, expansion or lateral movement of
the soil (excluding flood and earthquake) which is covered by any other
insurance or for which compensation is granted by state legislation.
7. The following language is added: SECTION C.5.7.
<TABLE>
<CAPTION>
Potential Problems Comments Builder's Obligation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Septic System Fails Freezing, soil saturation, underground Builder will repair or replace faulty
springs, water run-off, excessive use and workmanship and materials and conform
increase in the water table are among the with the Sewage Enforcement Officer's
causes not covered by this warranty. instructions as per design and
installation only.
</TABLE>
17
<PAGE> 169
4.2.26 Condemnation Proceedings
NONE
<PAGE> 170
4.2.28 Termination Employees
NONE
<PAGE> 171
4.3.3 Encumbrances (REGT)
Guaranty F.S.B. Debt
<PAGE> 172
4.3.4 Violations and Consents (REGT)
Guaranty F.S.B. Debt
<PAGE> 173
SCHEDULE 4.4.3
VIOLATIONS AND CONSENTS OF PURCHASER
None.
<PAGE> 174
EXHIBIT A
TO
PURCHASE AGREEMENT
ASSIGNMENT OF GENERAL PARTNERSHIP INTEREST
This Assignment of General Partnership Interest (this "Assignment") is
between Rayco Management, L.L.C., a Texas limited liability company
("Assignor"), the sole general partner of Rayco, Ltd., a Texas limited
partnership (the "Partnership"), and ___________________________ ("Assignee").
The Partnership is organized and existing under the terms of an Amended and
Restated Agreement of Limited Partnership dated effective as of January 1,
1995, as amended (the "Partnership Agreement"). Capitalized terms which are
used but not defined in this Assignment shall have the meanings provided for in
the Partnership Agreement.
1. Assignment.
(a) Assignor hereby transfers and assigns to Assignee
Assignor's entire interest as a general partner in the Partnership, consisting
of a two percent (2.0%) general partnership interest in the Partnership
(collectively the "Transferred Interest"). The Transferred Interest includes
Assignor's capital account in the Partnership and Assignor's Percentage
Interest in the income, losses and distributions of the Partnership (which
interest is more particularly described in the Partnership Agreement), and the
Transferred Interest will consist of 100% of each such item. Assignor grants
to Assignee the right to be substituted as a limited partner of the Partnership
with respect to the Transferred Interest. This transfer and assignment shall
be effective as of __________, 1996 (the "Effective Date").
(b) Assignor represents and warrants to Assignee that the
Assignor is the sole owner of the Transferred Interest and that the Transferred
Interest is correctly described in paragraph 1(a) above, that the Transferred
Interest will be assigned free and clear of any and all liens and encumbrances
except for a security interest which secures obligations of Rayco, Ltd., to
Guaranty Federal Savings Bank, and that Assignor has full right, power and
authority to assign and transfer the Transferred Interest to Assignee. The
Transferred Interest is transferred and assigned subject to all the terms and
provisions of the Partnership Agreement.
2. Agreements of Assignee.
Assignee agrees to become a substituted General Partner of the
Partnership and to serve as a General Partner of the Partnership, accepts the
transfer and assignment of the Transferred Interest subject to the terms and
conditions of the Partnership Agreement, agrees to comply with and be bound by
all of the provisions of the Partnership Agreement, including, without
limitation, all of the obligations of the Assignor under the Partnership
Agreement, and assumes and agrees to perform all Assignor's obligations with
respect to the Transferred Interest and as a General Partner of the
Partnership. Assignee represents and warrants that it has full right, power
and authority to acquire the Transferred Interest and to own and hold an
interest as a General Partner of the Partnership.
<PAGE> 175
3. Miscellaneous.
This Assignment shall be governed by and construed in
accordance with the laws of the State of Texas. This Assignment and the
rights, powers and duties set forth herein shall bind and inure to the benefit
of the successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Assignment this
____ day of _______, 1996.
ASSIGNOR
--------
Rayco Management, L.L.C.
By:
-----------------------------------
Name:
-------------------------
Title:
------------------------
ASSIGNEE
--------
--------------------------------------
By:
-----------------------------------
Name:
-------------------------
Title:
------------------------
2
<PAGE> 176
EXHIBIT B
TO
PURCHASE AGREEMENT
ASSIGNMENT OF LIMITED PARTNERSHIP INTEREST
This Assignment of Limited Partnership Interest (this "Assignment") is
between the Ray Ellison Grandchildren Trust ("Assignor"), a limited partner of
Rayco, Ltd., a Texas limited partnership (the "Partnership"), and
_________________________________ ("Assignee"). The Partnership is organized
and existing under the terms of an Amended and Restated Agreement of Limited
Partnership dated effective as of January 1, 1995, as amended (the "Partnership
Agreement"). Capitalized terms which are used but not defined in this
Assignment shall have the meanings provided for in the Partnership Agreement.
1. Assignment.
(a) Assignor hereby transfers and assigns to Assignee
Assignor's entire interest as a limited partner in the Partnership, consisting
of a ninety-eight percent (98.0%) limited partnership interest in the
Partnership (collectively the "Transferred Interest"). The Transferred
Interest includes Assignor's capital account in the Partnership and Assignor's
Percentage Interest in the income, losses and distributions of the Partnership
(which interest is more particularly described in the Partnership Agreement),
and the Transferred Interest will consist of 100% of each such item. Assignor
grants to Assignee the right to be substituted as a limited partner of the
Partnership with respect to the Transferred Interest. This transfer and
assignment shall be effective as of __________, 1996 (the "Effective Date").
(b) Assignor represents and warrants to Assignee that the
Assignor is the sole owner of the Transferred Interest and that the Transferred
Interest is correctly described in paragraph 1(a) above, that the Transferred
Interest will be assigned free and clear of any and all liens and encumbrances
except for a security interest which secures obligations of Rayco, Ltd., to
Guaranty Federal Savings Bank, and that Assignor has full right, power and
authority to assign and transfer the Transferred Interest to Assignee. The
Transferred Interest is transferred and assigned subject to all the terms and
provisions of the Partnership Agreement.
2. Agreements of Assignee.
Assignee agrees to become a substituted Limited Partner of the
Partnership and to serve as a Limited Partner of the Partnership, accepts the
transfer and assignment of the Transferred Interest subject to the terms and
conditions of the Partnership Agreement, agrees to comply with and be bound by
all of the provisions of the Partnership Agreement, including, without
limitation, all of the obligations of the Assignor under the Partnership
Agreement, and assumes and agrees to perform all Assignor's obligations with
respect to the Transferred Interest and as a Limited Partner of the
Partnership. Assignee represents and warrants that it has full right, power
and authority to acquire the Transferred Interest and to own and hold an
interest as a Limited Partner of the Partnership.
<PAGE> 177
3. Miscellaneous.
This Assignment shall be governed by and construed in
accordance with the laws of the State of Texas. This Assignment and the
rights, powers and duties set forth herein shall bind and inure to the benefit
of the successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Assignment this ____ day
of _______, 1996.
ASSIGNOR
--------
The Ray Ellison Grandchildren Trust
By:
------------------------------------
Ronald K. Calgaard, Trustee
By:
------------------------------------
A. Baker Duncan, Trustee
By:
------------------------------------
Bonnie Ellison, Trustee
ASSIGNEE
--------
---------------------------------------
By:
------------------------------------
Name:
--------------------------
Title:
-------------------------
2
<PAGE> 178
EXHIBIT C
TO
PURCHASE AGREEMENT
FORM OF OPINION OF COUNSEL FOR THE SELLERS
Kaufman and Broad Home Corporation
10990 Wilshire Blvd.
Los Angeles, California 90024
Gentlemen:
We have acted as counsel to Ray Ellison Industries, Inc., a Delaware
corporation ("Industries"), Rayco Management, L.L.C., a Texas limited liability
company (the "LLC"), and the Ray Ellison Grandchildren Trust ("REGT") in
connection with the purchase and sale of all the outstanding common stock (the
"Shares") of Satex Properties, Inc., Texas Homestead Mortgage Company and San
Antonio Title Co., the general partnership interest (the "GP Interest") in
Rayco, Ltd., a Texas limited partnership (the "Partnership"), and the limited
partnership interest (the "LP Interest") in the Partnership, under a Purchase
Agreement dated January __, 1996 (the "Agreement") between the Sellers and you.
This opinion is given pursuant to Section 6.1.3 of the Agreement. Capitalized
terms not otherwise defined herein are defined as set forth in the Agreement.
In connection with the opinions expressed below, we have examined the
Agreement and the Conveyance Agreements. We have participated in the
preparation of the Agreement and the other documents referred to therein. As
to various questions of fact material to our opinion we have relied upon the
representations made in the Agreement and upon certificates of officers or
trustees of the Sellers. We have also examined such certificates of public
officials, corporate documents and records and other certificates, opinions and
instruments and have made such other investigations as we have deemed necessary
in connection with the opinions hereinafter set forth.
In rendering the opinions set forth below, we have assumed that (i)
all parties to the Agreement and the Conveyance Agreements other than the
Sellers (the "Other Parties") have all necessary power and authority to enter
into the Agreement and the Conveyance Agreements to which they are a party and
to exercise their respective rights thereunder and (ii) the Agreement and the
Conveyance Agreements have been duly and validly authorized, executed and
delivered by the Other Parties and that the Agreement and the Conveyance
Agreements constitute the legal, valid and binding obligations of the Other
Parties, enforceable in accordance with their respective terms. In addition,
we have assumed (i) the legal capacity of natural persons, (ii) the genuineness
of all signatures, (iii) the authenticity of all documents submitted to us as
originals, and (iv) the conformity to original documents of all documents
submitted to us as copies.
Based upon the foregoing and upon such investigation as we have deemed
necessary, we are of the opinion that:
1. Industries has been duly organized as a corporation and is
validly existing and in
<PAGE> 179
good standing under the laws of the State of Delaware. Each
of the Corporations has been duly organized as a corporation
and is validly existing and in good standing under the laws of
the State of Texas. The LLC has been duly organized as a
limited liability company and is validly existing and in good
standing under the laws of the State of Texas. REGT has been
organized and continues in existence under the terms of the
Trust Agreement. Rayco has been duly organized as a limited
partnership and is validly existing and in good standing under
the laws of the State of Texas.
2. The Shares constitute all the issued and outstanding capital
stock of the Corporations. Industries is the sole owner of
all the Shares. The Shares have been duly authorized and
validly issued and are fully paid and non-assessable. The GP
Interest and the LP Interest constitute all the partnership
interests in Rayco. The LLC is the sole owner of the GP
Interest and REGT is the sole owner of the LP Interest.
3. Each of the Sellers has the power and authority to enter into
and perform the Agreement and the Conveyance Agreements and to
transfer the Securities owned by it. The execution, delivery
and performance of the Agreement and the Conveyance Agreements
have been duly authorized by all requisite corporate actions
of Industries and all requisite actions of the LLC.
4. The Agreement is legal, valid and binding obligation of each
of the Sellers and is enforceable against each of the Sellers
in accordance with its terms. The Conveyance Agreements are
legal, valid and binding obligations of the LLC and REGT and
are enforceable against the LLC and REGT in accordance with
their terms.
5. The execution and delivery of the Agreement by Industries does
not and the performance by Industries of the terms of the
Agreement and the transfer of the Shares will not conflict
with or result in a violation of the Articles of Incorporation
or By-laws of Industries or any agreement, instrument, order,
writ, judgment or decree known to us to which Industries is a
party or is subject. The execution and delivery of the
Agreement and the Conveyance Agreements by the LLC do not and
the performance by the LLC of the terms of the Agreement and
the Conveyance Agreements and the transfer of the GP Interest
will not conflict with or result in a violation of the
Articles of Organization or Regulations of the LLC or any
agreement, instrument, order, writ, judgment or decree known
to us to which the LLC is a party or is subject. The
execution and delivery of the Agreement and the Conveyance
Agreements by REGT do not and the performance by REGT of the
terms of the Agreement and the Conveyance Agreements and the
transfer of the LP Interest will not conflict with or result
in a violation of the Trust Agreement or any other agreement,
instrument, order, writ, judgment or decree known to us to
which REGT is a party or is subject.
2
<PAGE> 180
6. We have no knowledge of any action, suit, proceeding or
investigation pending or threatened against any of the Sellers
seeking to enjoin or otherwise prevent consummation of the
transactions contemplated by the Agreement or Conveyance
Agreements.
7. Except for filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, no approval,
authorization or other action by, or filing with, any
governmental authority, is required in connection with the
execution and delivery of the Agreement and the Conveyance
Agreements by any of Sellers or the performance by any of
Sellers of its obligations under the Agreement or any of the
Conveyance Agreements.
The foregoing opinions are qualified by the following:
A. We are members of the Bar of the State of Texas. Accordingly,
as to matters of law set forth above, our opinions are limited to matters of
Texas law and the federal laws of the United States of America.
B. Our opinions are subject to the further qualifications that
the enforceability of the Agreement and the Conveyance Agreements may be
limited by and subject to (i) applicable bankruptcy, insolvency,
reorganization, fraudulent transfer or conveyance, moratorium or other similar
laws affecting creditors' rights and (ii) general principles of equity,
commercial reasonableness and conscionability.
C. In rendering the opinion expressed in numbered paragraphs 5
and 6 above, our inquiry has been limited to discussions with attorneys of this
firm who have performed legal services for the Sellers.
This opinion may be relied upon only by you and your counsel and only
in connection with the execution of the Agreement and the Conveyance Agreements
and the consummation of the transactions contemplated therein, and, without our
prior written consent, may not be quoted in whole or in part or otherwise
referred to in any report or document furnished to any person or entity.
Very truly yours,
3
<PAGE> 181
EXHIBIT D-1
TO
PURCHASE AGREEMENT
FORM OF OPINION OF INSIDE COUNSEL FOR THE PURCHASER
Ray Ellison Industries, Inc.
- ------------------------------
- ------------------------------
- ------------------------------
Rayco Management L.L.C.
- ------------------------------
- ------------------------------
- ------------------------------
Ray Ellison Grandchildren Trust
- ------------------------------
- ------------------------------
- ------------------------------
Gentlemen:
I have acted as counsel to Kaufman and Board Home Corporation, a
Delaware corporation (the "Purchaser"), in connection with the purchase and
sale of all the outstanding common stock (the "Shares") of Satex Properties,
Inc., Texas Homestead Mortgage Company and San Antonio Title Co., the general
partnership interest (the "GP Interest") in Rayco, Ltd., a Texas limited
partnership (the "Partnership"), and the limited partnership interest (the "LP
Interest") in the Partnership, under a Purchase Agreement dated January __,
1996, (the "Agreement") between the Purchaser and you. This opinion is given
pursuant to Section 6.2.3 of the Agreement. Capitalized terms not otherwise
defined herein are defined as set forth in the Agreement.
In connection with the opinions expressed below, I have examined the
Agreement and the Conveyance Agreements. I have participated in the
preparation of the Agreement and the other documents referred to therein. As
to various questions of fact material to my opinion I have relied upon the
representations made in the Agreement and upon certificates of officers of the
Purchaser. I have also examined such certificates of public officials,
corporate documents and records and other certificates, opinions and
instruments and have made such other investigations as we have deemed necessary
in connection with the opinions hereinafter set forth.
In rendering the opinions set forth below, I have assumed that (i) all
parties to the Agreement and the Conveyance Agreements other than the Purchaser
(the "Other Parties") have all necessary power and authority to enter into the
Agreement and the Conveyance Agreements to which they are a party and to
exercise their respective rights thereunder and (ii) the Agreement and the
Conveyance Agreements have been duly and validly authorized, executed and
delivered by the Other Parties and that the Agreement and the Conveyance
Agreements constitute the legal,
<PAGE> 182
valid and binding obligations of the Other Parties, enforceable in accordance
with their respective terms. In addition, we have assumed (i) the legal
capacity of natural persons, (ii) the genuineness of all signatures, (iii) the
authenticity of all documents submitted to us as originals, and (iv) the
conformity to original documents of all documents submitted to us as copies.
Based upon the foregoing and upon such investigation as we have deemed
necessary, I am of the opinion that:
8. The Purchaser and each Purchaser Entity has been duly
organized and is validly existing and in good standing under
the laws of (a) the State of Delaware with respect to the
Purchaser and (b) the state of incorporation of each other
Purchaser Entity.
9. The Purchaser and each Purchaser Entity has the corporate
power and authority to enter into and perform the Agreement
and the Conveyance Agreements. The execution, delivery and
performance of the Agreement and the Conveyance Agreements
have been duly authorized by all requisite corporate action,
and the Agreement and the Conveyance Agreements have been duly
executed and delivered by the Purchaser and each Purchaser
Entity.
10. The Agreement and the Conveyance Agreements are legal, valid
and binding obligations of the Purchaser and each Purchaser
Entity. Had Section 13.3.2 of the Agreement and paragraph 3
of each of the Conveyance Documents provided that each such
document shall be governed by and construed in accordance with
the laws of the State of California (without regard to choice
of law principles), rather than the laws of the State of Texas
(without regard to choice of law principles) as they now
provide, the Agreement and the Conveyance Agreements would be
enforceable against the Purchaser and each Purchaser Entity in
accordance with their respective terms.
11. The execution and delivery of the Agreement and the Conveyance
Agreements do not and the performance by the Purchaser and
each Purchaser Entity of the terms of the Agreement and the
Conveyance Agreements will not conflict with or result in a
violation of the Certificate of Incorporation or By-laws of
the Purchaser or any Purchaser Entity or any agreement,
instrument, order, writ, judgment or decree known to us to
which the Purchaser or any Purchaser Entity is a party or
is subject.
12. I have no knowledge of any action, suit, proceeding or
investigation pending or threatened against the Purchaser or
any Purchaser Entity seeking to enjoin or otherwise prevent
consummation of the transactions contemplated by the Agreement
or the Conveyance Agreements.
The foregoing opinions are qualified by the following:
2
<PAGE> 183
A. I am a member of the Bar of the State of California.
Accordingly, as to matters of law set forth above, my opinions are limited to
matters of California law and the federal laws of the United States of America.
B. My opinions are subject to the further qualifications that the
enforceability of the Agreement and the Conveyance Agreements may be limited by
and subject to (i) applicable bankruptcy, insolvency, reorganization,
fraudulent transfer or conveyance, moratorium or other similar laws affecting
creditors' rights and (ii) general principles of equity, commercial
reasonableness and conscionability.
C. In rendering the opinion expressed in numbered paragraphs 4
and 5 above, my inquiry has been limited to discussions with attorneys on the
legal staff of the Purchaser who have performed legal services for the
Purchaser or any Purchaser Entity.
This opinion may be relied upon only by you and your counsel and only
in connection with the execution of the Agreement and the Conveyance Agreements
and the consummation of the transactions contemplated therein, and, without our
prior written consent, may not be quoted in whole or in part or otherwise
referred to in any report or document furnished to any person or entity.
Very truly yours,
3
<PAGE> 184
EXHIBIT D-2
TO
PURCHASE AGREEMENT
FORM OF OPINION OF OUTSIDE COUNSEL FOR THE PURCHASER
Ray Ellison Industries, Inc.
- ------------------------------
- ------------------------------
- ------------------------------
Rayco Management L.L.C.
- ------------------------------
- ------------------------------
- ------------------------------
Ray Ellison Grandchildren Trust
- ------------------------------
- ------------------------------
- ------------------------------
Gentlemen:
We have acted as counsel to Kaufman and Broad Home Corporation, a
Delaware corporation (the "Purchaser"), in connection with the purchase and
sale of all the outstanding common stock (the "Shares") of Satex Properties,
Inc., Texas Homestead Mortgage Company and San Antonio Title Co., the general
partnership interest (the "GP Interest") in Rayco, Ltd., a Texas limited
partnership (the "Partnership"), and the limited partnership interest (the "LP
Interest") in the Partnership, under a Purchase Agreement dated January __,
1996, (the "Agreement") between the Purchaser and you. This opinion is given
pursuant to Section 6.2.3 of the Agreement. Capitalized terms not otherwise
defined herein are defined as set forth in the Agreement.
In connection with the opinions expressed below, we have examined the
Agreement and the Conveyance Agreements. We have participated in the
preparation of the Agreement and the other documents referred to therein. As
to various questions of fact material to our opinion we have relied upon the
representations made in the Agreement and upon certificates of officers of the
Purchaser. We have also examined such certificates of public officials,
corporate documents and records and other certificates, opinions and
instruments and have made such other investigations as we have deemed necessary
in connection with the opinions hereinafter set forth.
In rendering the opinions set forth below, we have assumed that (i)
all parties to the Agreement and the Conveyance Agreements have all necessary
power and authority to enter into the Agreement and the Conveyance Agreements
to which they are a party and to exercise their respective rights thereunder
and (ii) the Agreement and the Conveyance Agreements have been duly and validly
authorized, executed and delivered by all parties and that the Agreement and
the Conveyance Agreements constitute the legal, valid and binding obligations
of all parties, and as to the parties to the Agreement and the Conveyance
Agreement other than the Purchaser are enforceable in accordance with their
respective terms. In addition, we have assumed (i) the legal capacity of
natural persons, (ii) the genuineness of all signatures, (iii) the authenticity
of all documents submitted to us as originals, and (iv) the conformity to
original documents of all
<PAGE> 185
documents submitted to us as copies.
Based upon the foregoing and upon such investigation as we have deemed
necessary, we are of the opinion that:
13. Had Section 13.3.2 of the Agreement and paragraph 3 of each of
the Conveyance Documents provided that each such document
shall be governed by and construed in accordance with the laws
of the State of New York (without regard to choice of law
principles), rather than the laws of the State of Texas
(without regard to choice of law principles) as they now
provide, the Agreement and the Conveyance Agreements would be
enforceable against the Purchaser and each Purchaser Entity in
accordance with their respective terms.
14. Except for filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, no approval,
authorization or other action by, or filing with, any U.S.
Federal or New York State governmental authority, is required
in connection with the execution and delivery of the Agreement
and the Conveyance Agreements by the Purchaser or any
Purchaser Entity or the performance by the Purchaser or any
Purchaser Entity of its obligations under the Agreement or the
Conveyance Agreements.
The foregoing opinions are qualified by the following:
A. We are members of the Bar of the State of New York.
Accordingly, as to matters of law set forth above, our opinions are limited to
matters of New York law and the federal laws of the United States of America.
B. Our opinions are subject to the further qualifications that
the enforceability of the Agreement and the Conveyance Agreements may be
limited by and subject to (i) applicable bankruptcy, insolvency,
reorganization, fraudulent transfer or conveyance, moratorium or other similar
laws affecting creditors' rights and (ii) general principles of equity,
commercial reasonableness and conscionability.
This opinion may be relied upon only by you and your counsel and only
in connection with the execution of the Agreement or the Conveyance Agreements
and the consummation of the transactions contemplated therein, and, without our
prior written consent, may not be quoted in whole or in part or otherwise
referred to in any report or document furnished to any person or entity.
Very truly yours,
5
<PAGE> 186
EXHIBIT E-1
TO
PURCHASE AGREEMENT
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (the
"AGREEMENT") dated as of January 22, 1996, is entered into between Rayco, Ltd.,
a Texas limited partnership (the "COMPANY"), and John H. Willome (the
"EXECUTIVE").
WHEREAS, the Executive has in the past served as the [specify
title] of the Company; and
WHEREAS, the Company and the Executive wish to enter into an
employment agreement whereby the Executive will continue to provide services to
the Company in accordance with the terms and conditions stated below;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
EMPLOYMENT AND RESPONSIBILITIES
Section 1.1 Employment and Term. (a) Until [specify date
of first anniversary of closing] (the "term" of this Agreement), the Executive
will be employed by the Company and will provide such services as the Company
may reasonably request consistent with the terms of this Agreement.
(b) During the first 60 days of this Agreement, the
Executive will work 5 days per week (approximately 35 hours per week) and will
be paid $1,000 per day ($5,000 per week). During the balance of the term of
this Agreement, the Executive will be available to work up to 3 days per week
as reasonably scheduled by Company and will be paid $1,000 for each day worked.
(c) The Executive agrees to perform all of the duties and
responsibilities requested of him pursuant to this Agreement efficiently and to
the best of his ability. The Executive also agrees that he will not engage in
any other activities that are inconsistent with the performance of his duties
and responsibilities hereunder. The Executive agrees that all of his
activities for the Company shall be in conformity with all present and future
policies, rules and regulations and directions of the Company not inconsistent
with this Agreement.
Section 1.2 Benefits. During the term of this Agreement,
the Executive shall participate in such health and major medical insurance
plans as are no less favorable to the Executive than the health and major
medical insurance plans that may be maintained during such period by the
Company for the benefit of the other employees of the Company generally.
Following the termination of the Executive's
<PAGE> 187
employment (a) by the Company other than for Cause, as hereinafter defined, or
(b) by reason of disability under Section 3.2, the Company shall continue to
provide the Executive such health and major medical insurance coverage for the
period of time ending on the fifth anniversary of the date of this Agreement.
Section 1.3 Expenses. The Company will reimburse the
Executive for reasonable business-related expenses incurred by him in
connection with the performance of his duties hereunder, subject, however, to
the Company's policies relating to business-related expenses as in effect from
time to time.
Section 1.4 Non-Contravention. The Executive represents
and warrants to the Company that neither the execution and delivery of this
Agreement nor the performance of his duties hereunder violates or will violate
the provisions of any other agreement to which he is a party or by which he is
bound.
ARTICLE II
CONFIDENTIALITY AND NONCOMPETITION
Section 2.1 Confidentiality. The Executive agrees that
he will not, at any time during or after the term of this Agreement, use or
disclose or cause to be used or disclosed any secret, confidential or
proprietary information of or concerning the Company or its affiliates, which
he may have learned in connection with his employment hereunder or his prior
employment with Rayco or its affiliates. The Executive's obligation under this
Section shall not apply to any information which is known publicly or hereafter
becomes publicly known without the fault of the Executive. The Executive
agrees not to remove from the premises of the Company, except in pursuit of the
business of the Company or except as specifically permitted in writing by the
Company, any document or other object containing or reflecting any such
confidential information. The Executive recognizes that all such documents and
objects, whether developed by him or by someone else, will be the sole and
exclusive property of the Company. Upon termination of his employment
hereunder, the Executive shall cooperate with the Company to return all such
confidential information as promptly as practicable. The provisions of this
Section shall survive any termination of this Agreement.
Section 2.2 Noncompetition. (a) During the period
commencing on the date hereof and ending on the third anniversary of the date
on which the Executive's employment by the Company terminates,
(i) the Executive shall not, on his own account,
or as an employee, consultant, independent contractor, partner, owner,
officer, director, stockholder or otherwise, engage in, be connected
with, have any interest in, or aid or assist anyone else to engage in,
be connected with, or have any interest in, any business or company
engaged in the home building business anywhere in the United States
where the Company or Kaufman and Broad
-2-
<PAGE> 188
Home Corporation or any of their respective subsidiaries is engaged in
the home building business as of the date of this Agreement and in
particular in the following states: California, Nevada, Arizona, Utah,
Colorado, New Mexico and Texas, provided that the Executive may
purchase securities in any corporation whose securities are listed or
traded on a national securities exchange or in an over-the-counter
securities market if such purchases do not result in the Executive
beneficially owning, directly or indirectly, at any time 2% or more of
the equity securities of any such corporation;
(ii) the Executive shall not, directly or
indirectly, (A) solicit or induce, or in any manner attempt to solicit
or induce, any person employed by, or as an agent of, the Company to
terminate such person's employment or agency, as the case may be, with
the Company or (B) divert, or attempt to divert, any person, concern
or entity from doing business with the Company;
(iii) if any provision contained in this Section
shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Section, but this Section shall be
construed as if such invalid, illegal or unenforceable provision had
never been contained herein. It is the intention of the parties that
if any of the restrictions or covenants contained herein is held to
cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad
or to any extent invalid, such provision shall not be construed to be
null, void and of no effect, but to the extent such provision would be
valid or enforceable under applicable law, a court of competent
jurisdiction shall construe and interpret or reform this Section to
provide for a covenant having the maximum enforceable geographic area,
time period and other provisions (not greater than those contained
herein) as shall be valid and enforceable under such applicable law.
The Executive acknowledges that the Company would be irreparably
harmed by any breach of this Section and that there would be no
adequate remedy at law or in damages to compensate the Company for any
such breach. Therefore, if any controversy arises concerning the
obligations under this Section, such obligations shall be specifically
enforced by an injunctive order issued by a court of competent
jurisdiction and the Executive hereby waives any requirement that a
bond be posted as a condition thereto; and
(iv) the provisions of this Section shall survive
any termination of this Agreement.
-3-
<PAGE> 189
ARTICLE III
TERMINATION
Section 3.1 Termination by the Company. The Company
shall have the right to terminate the Executive's employment at any time with
or without "Cause". For purposes of this Agreement, "CAUSE" shall mean:
(a) the breach by the Executive of any of his covenants
or obligations under this Agreement or the failure by the Executive to perform
his duties for the Company, but only if such breach or failure is not cured
within 15 days after written notice of such breach or failure is delivered to
the Executive by the Company;
(b) the commission by the Executive of a significant act
of dishonesty, deceit or breach of fiduciary duty in the performance of his
duties with the Company; or
(c) the commission by the Executive of an act or acts
constituting a crime involving moral turpitude.
Section 3.2 Death, Disability. If the Executive dies
during the term of this Agreement, this Agreement shall automatically terminate
effective on the date of the Executive's death. If the Executive suffers a
disability which has prevented him from performing satisfactorily his
obligations hereunder for a period of at least 30 out of 45 consecutive days,
the Company shall have the right to terminate this Agreement effective upon the
giving of notice thereof to the Executive in accordance with Section 4.2
hereof.
Section 3.3 Effect of Termination. (a) In the event of
termination of the Executive's employment by either party for any reason, or by
reason of the Executive's death or disability, the Company shall pay to the
Executive (or his beneficiary in the event of his death) any salary or other
compensation earned but not paid to the Executive prior to the date of such
termination.
(b) In the event of termination of the Executive's
employment by the Company other than for Cause, the Company shall continue to
pay to the Executive, in addition to the amounts described in Section 3.3(a), a
salary of $5,000 per week for each remaining week during the first sixty days
of this Agreement, but will have no obligation to make any payment of salary
for any subsequent period.
-4-
<PAGE> 190
ARTICLE IV
MISCELLANEOUS
Section 4.1 Benefit of Agreement; Assignment. This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns, including, without limitation, any corporation or
person which may acquire all or substantially all of the Company's assets or
business, or with or into which the Company may be consolidated or merged.
This Agreement shall also inure to the benefit of, and be enforceable by, the
Executive and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. This Agreement shall
not be assignable by the Executive.
Section 4.2 Notices. Any notice required or permitted
hereunder shall be in writing and shall be sufficiently given if personally
delivered or if sent by telegram or telex or by registered or certified mail,
postage prepaid, with return receipt requested, addressed:
(a) in the case of the Company, to Rayco, Ltd., 4800
Fredericksburg Road, San Antonio, Texas 78229 Attention: General Counsel, with
a copy to Kaufman and Broad Home Corporation, 10990 Wilshire Blvd., Los
Angeles, California 90024, Attention: General Counsel or to such other
addresses and/or to the attention of such other person as the Company shall
designate by written notice to the Executive; and
(b) in the case of the Executive, to John H. Willome at
the address appearing on the employment records of the Company, from time to
time, or to such other address as the Executive shall designate by written
notice to the Company. Any notice given hereunder shall be deemed to have been
given at the time of receipt thereof by the person to whom such notice is
given.
Section 4.3 Entire Agreement; Amendment. This Agreement
and the Executive's Deferred Compensation Death Plan Benefit contain the entire
agreement of the parties hereto with respect to the terms and conditions of the
Executive's employment during the term of this Agreement and supersedes any and
all prior agreements and understandings, whether written or oral, between the
parties hereto (including in the case of the Company any of its affiliates)
with respect to compensation due for services rendered hereunder, in particular
the Company, Satex Properties, Inc., Texas Homestead Mortgage Company and San
Antonio Title Company are hereby released from any liabilities or obligations
under the Employment Agreement dated January 31, 1995 among the Company and
John H. Willome. This Agreement may not be changed or modified except by an
instrument in writing signed by both of the parties hereto.
Section 4.4 Waiver. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be construed as
a continuing waiver or as a consent to or waiver of any subsequent breach
hereof.
-5-
<PAGE> 191
Section 4.5 Headings. The article and section headings
herein are for convenience of reference only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section 4.6 Governing Law. This Agreement shall be
governed by, and construed and interpreted in accordance with, the internal
laws of the State of Texas without reference to the principles of conflict of
laws.
Section 4.7 Agreement to Take Actions. Each party hereto
shall execute and deliver such documents, certificates, agreements and other
instruments, and shall take such other actions, as may be reasonably necessary
or desirable in order to perform his or its obligations under this Agreement or
to effectuate the purposes hereof.
Section 4.8 Arbitration. Any dispute between the parties
with respect to this Agreement or any of its terms and provisions shall be
submitted to arbitration in San Antonio, Texas, in accordance with the
Commercial Rules of the American Arbitration Association then in effect, and
the arbitration determination resulting from any such submission shall be final
and binding upon the parties hereto. The arbitrator shall have the authority,
but not the obligation, to award reasonable attorney's fees to the prevailing
party in any dispute subject to this Section. Judgment upon any arbitration
award may be entered in any court of competent jurisdiction.
Section 4.9 Severability. The invalidity or
unenforceability of any provision or provisions of this Agreement shall not
affect the validity or enforceability of any other provision or provisions of
this Agreement, which shall remain in full force and effect.
Section 4.10 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same instrument.
-6-
<PAGE> 192
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement as of the date first above written.
RAYCO, LTD.
By: /s/ MICHAEL HENN
----------------------------------
Name: Michael Henn
Title: Vice President
JOHN H. WILLOME
By: /s/ JOHN H. WILLOME
----------------------------------
Name:
Title:
-7-
<PAGE> 193
EXHIBIT E-2
TO
PURCHASE AGREEMENT
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (the
"AGREEMENT") dated as of January 26, 1996, is entered into between Rayco, Ltd.,
a Texas limited partnership (the "COMPANY"), and Jack E. Biegler (the
"EXECUTIVE").
WHEREAS, the Executive has in the past served as the [specify
title] of the Company; and
WHEREAS, the Company and the Executive wish to enter into an
employment agreement whereby the Executive will continue to provide services to
the Company in accordance with the terms and conditions stated below;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
EMPLOYMENT AND RESPONSIBILITIES
Section 1.1 Employment and Term. (a) Until [specify date
of first anniversary of closing] (the "term" of this Agreement), the Executive
will be employed by the Company and will provide such services as the Company
may reasonably request consistent with the terms of this Agreement.
(b) During the first 60 days of this Agreement, the
Executive will work 5 days per week (approximately 35 hours per week) and will
be paid $1,000 per day ($5,000 per week). During the balance of the term of
this Agreement, the Executive will be available to work up to 3 days per week
as reasonably scheduled by Company and will be paid $1,000 for each day worked.
(c) The Executive agrees to perform all of the duties and
responsibilities requested of him pursuant to this Agreement efficiently and to
the best of his ability. The Executive also agrees that he will not engage in
any other activities that are inconsistent with the performance of his duties
and responsibilities hereunder. The Executive agrees that all of his
activities for the Company shall be in conformity with all present and future
policies, rules and regulations and directions of the Company not inconsistent
with this Agreement.
Section 1.2 Benefits. During the term of this Agreement,
the Executive shall participate in such health and major medical insurance
plans as are no less favorable to the Executive than the health and major
medical insurance plans that may be maintained during such period by the
Company for the benefit of the other employees of the Company generally.
Following the termination of the Executive's
<PAGE> 194
employment (a) by the Company other than for Cause, as hereinafter defined, or
(b) by reason of disability under Section 3.2, the Company shall continue to
provide the Executive such health and major medical insurance coverage for the
period of time ending on the fifth anniversary of the date of this Agreement.
Section 1.3 Expenses. The Company will reimburse the
Executive for reasonable business-related expenses incurred by him in
connection with the performance of his duties hereunder, subject, however, to
the Company's policies relating to business-related expenses as in effect from
time to time.
Section 1.4 Non-Contravention. The Executive represents
and warrants to the Company that neither the execution and delivery of this
Agreement nor the performance of his duties hereunder violates or will violate
the provisions of any other agreement to which he is a party or by which he is
bound.
ARTICLE II
CONFIDENTIALITY AND NONCOMPETITION
Section 2.1 Confidentiality. The Executive agrees that
he will not, at any time during or after the term of this Agreement, use or
disclose or cause to be used or disclosed any secret, confidential or
proprietary information of or concerning the Company or its affiliates, which
he may have learned in connection with his employment hereunder or his prior
employment with Rayco or its affiliates. The Executive's obligation under this
Section shall not apply to any information which is known publicly or hereafter
becomes publicly known without the fault of the Executive. The Executive
agrees not to remove from the premises of the Company, except in pursuit of the
business of the Company or except as specifically permitted in writing by the
Company, any document or other object containing or reflecting any such
confidential information. The Executive recognizes that all such documents and
objects, whether developed by him or by someone else, will be the sole and
exclusive property of the Company. Upon termination of his employment
hereunder, the Executive shall cooperate with the Company to return all such
confidential information as promptly as practicable. The provisions of this
Section shall survive any termination of this Agreement.
Section 2.2 Noncompetition. (a) During the period
commencing on the date hereof and ending on the third anniversary of the date
on which the Executive's employment by the Company terminates,
(i) the Executive shall not, on his own account,
or as an employee, consultant, independent contractor, partner, owner,
officer, director, stockholder or otherwise, engage in, be connected
with, have any interest in, or aid or assist anyone else to engage in,
be connected with, or have any interest in, any business or company
engaged in the home building business anywhere in the United States
where the Company or Kaufman and Broad
-2-
<PAGE> 195
Home Corporation or any of their respective subsidiaries is engaged in
the home building business as of the date of this Agreement and in
particular in the following states: California, Nevada, Arizona, Utah,
Colorado, New Mexico and Texas, provided that the Executive may
purchase securities in any corporation whose securities are listed or
traded on a national securities exchange or in an over-the-counter
securities market if such purchases do not result in the Executive
beneficially owning, directly or indirectly, at any time 2% or more of
the equity securities of any such corporation;
(ii) the Executive shall not, directly or
indirectly, (A) solicit or induce, or in any manner attempt to solicit
or induce, any person employed by, or as an agent of, the Company to
terminate such person's employment or agency, as the case may be, with
the Company or (B) divert, or attempt to divert, any person, concern
or entity from doing business with the Company;
(iii) if any provision contained in this Section
shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Section, but this Section shall be
construed as if such invalid, illegal or unenforceable provision had
never been contained herein. It is the intention of the parties that
if any of the restrictions or covenants contained herein is held to
cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad
or to any extent invalid, such provision shall not be construed to be
null, void and of no effect, but to the extent such provision would be
valid or enforceable under applicable law, a court of competent
jurisdiction shall construe and interpret or reform this Section to
provide for a covenant having the maximum enforceable geographic area,
time period and other provisions (not greater than those contained
herein) as shall be valid and enforceable under such applicable law.
The Executive acknowledges that the Company would be irreparably
harmed by any breach of this Section and that there would be no
adequate remedy at law or in damages to compensate the Company for any
such breach. Therefore, if any controversy arises concerning the
obligations under this Section, such obligations shall be specifically
enforced by an injunctive order issued by a court of competent
jurisdiction and the Executive hereby waives any requirement that a
bond be posted as a condition thereto; and
(iv) the provisions of this Section shall survive
any termination of this Agreement.
-3-
<PAGE> 196
ARTICLE III
TERMINATION
Section 3.1 Termination by the Company. The Company
shall have the right to terminate the Executive's employment at any time with
or without "Cause". For purposes of this Agreement, "CAUSE" shall mean:
(a) the breach by the Executive of any of his covenants
or obligations under this Agreement or the failure by the Executive to perform
his duties for the Company, but only if such breach or failure is not cured
within 15 days after written notice of such breach or failure is delivered to
the Executive by the Company;
(b) the commission by the Executive of a significant act
of dishonesty, deceit or breach of fiduciary duty in the performance of his
duties with the Company; or
(c) the commission by the Executive of an act or acts
constituting a crime involving moral turpitude.
Section 3.2 Death, Disability. If the Executive dies
during the term of this Agreement, this Agreement shall automatically terminate
effective on the date of the Executive's death. If the Executive suffers a
disability which has prevented him from performing satisfactorily his
obligations hereunder for a period of at least 30 out of 45 consecutive days,
the Company shall have the right to terminate this Agreement effective upon the
giving of notice thereof to the Executive in accordance with Section 4.2
hereof.
Section 3.3 Effect of Termination. (a) In the event of
termination of the Executive's employment by either party for any reason, or by
reason of the Executive's death or disability, the Company shall pay to the
Executive (or his beneficiary in the event of his death) any salary or other
compensation earned but not paid to the Executive prior to the date of such
termination.
(b) In the event of termination of the Executive's
employment by the Company other than for Cause, the Company shall continue to
pay to the Executive, in addition to the amounts described in Section 3.3(a), a
salary of $5,000 per week for each remaining week during the first sixty days
of this Agreement, but will have no obligation to make any payment of salary
for any subsequent period.
-4-
<PAGE> 197
ARTICLE IV
MISCELLANEOUS
Section 4.1 Benefit of Agreement; Assignment. This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns, including, without limitation, any corporation or
person which may acquire all or substantially all of the Company's assets or
business, or with or into which the Company may be consolidated or merged.
This Agreement shall also inure to the benefit of, and be enforceable by, the
Executive and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. This Agreement shall
not be assignable by the Executive.
Section 4.2 Notices. Any notice required or permitted
hereunder shall be in writing and shall be sufficiently given if personally
delivered or if sent by telegram or telex or by registered or certified mail,
postage prepaid, with return receipt requested, addressed:
(a) in the case of the Company, to Rayco, Ltd., 4800
Fredericksburg Road, San Antonio, Texas 78229 Attention: General Counsel, with
a copy to Kaufman and Broad Home Corporation, 10990 Wilshire Blvd., Los
Angeles, California 90024, Attention: General Counsel or to such other
addresses and/or to the attention of such other person as the Company shall
designate by written notice to the Executive; and
(b) in the case of the Executive, to Jack E. Biegler at
the address appearing on the employment records of the Company, from time to
time, or to such other address as the Executive shall designate by written
notice to the Company. Any notice given hereunder shall be deemed to have been
given at the time of receipt thereof by the person to whom such notice is
given.
Section 4.3 Entire Agreement; Amendment. This Agreement
and the Executive's Deferred Compensation Death Plan Benefit contain the entire
agreement of the parties hereto with respect to the terms and conditions of the
Executive's employment during the term of this Agreement and supersedes any and
all prior agreements and understandings, whether written or oral, between the
parties hereto (including in the case of the Company any of its affiliates)
with respect to compensation due for services rendered hereunder, in particular
the Company, Satex Properties, Inc., Texas Homestead Mortgage Company and San
Antonio Title Company are hereby released from any liabilities or obligations
under the Employment Agreement dated January 31, 1995 among the Company and
Jack E. Biegler. This Agreement may not be changed or modified except by an
instrument in writing signed by both of the parties hereto.
Section 4.4 Waiver. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be construed as
a continuing waiver or as a consent to or waiver of any subsequent breach
hereof.
-5-
<PAGE> 198
Section 4.5 Headings. The article and section headings
herein are for convenience of reference only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section 4.6 Governing Law. This Agreement shall be
governed by, and construed and interpreted in accordance with, the internal
laws of the State of Texas without reference to the principles of conflict of
laws.
Section 4.7 Agreement to Take Actions. Each party hereto
shall execute and deliver such documents, certificates, agreements and other
instruments, and shall take such other actions, as may be reasonably necessary
or desirable in order to perform his or its obligations under this Agreement or
to effectuate the purposes hereof.
Section 4.8 Arbitration. Any dispute between the parties
with respect to this Agreement or any of its terms and provisions shall be
submitted to arbitration in San Antonio, Texas, in accordance with the
Commercial Rules of the American Arbitration Association then in effect, and
the arbitration determination resulting from any such submission shall be final
and binding upon the parties hereto. The arbitrator shall have the authority,
but not the obligation, to award reasonable attorney's fees to the prevailing
party in any dispute subject to this Section. Judgment upon any arbitration
award may be entered in any court of competent jurisdiction.
Section 4.9 Severability. The invalidity or
unenforceability of any provision or provisions of this Agreement shall not
affect the validity or enforceability of any other provision or provisions of
this Agreement, which shall remain in full force and effect.
Section 4.10 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same instrument.
-6-
<PAGE> 199
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement as of the date first above written.
RAYCO, LTD.
Kaufman and Broad
of San Antonio, Inc.,
a Texas corporation
General Partner
By: /s/ MICHAEL HENN
-------------------
Name: Michael Henn
Title: Vice President
JACK E. BIEGLER
---------------
Jack E. Biegler
-7-
<PAGE> 200
EXHIBIT E-3
TO
PURCHASE AGREEMENT
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (the
"AGREEMENT") dated as of January 22, 1996, is entered into between Rayco, Ltd.,
a Texas limited partnership (the "COMPANY"), and Jack Robinson (the
"EXECUTIVE").
WHEREAS, the Executive has in the past served as the [specify
title] of the Company; and
WHEREAS, the Company and the Executive wish to enter into an
employment agreement whereby the Executive will continue to provide services to
the Company in accordance with the terms and conditions stated below;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
EMPLOYMENT AND RESPONSIBILITIES
Section 1.1 Employment and Term. (a) Until [specify date
of first anniversary of closing] (the "term" of this Agreement), the Executive
will be employed by the Company and will provide such services as the Company
may reasonably request consistent with the terms of this Agreement.
(b) During the first 90 days of this Agreement, the
Executive will work 5 days per week (approximately 35 hours per week) and will
be paid $1,000 per day ($5,000 per week). During the balance of the term of
this Agreement, the Executive will work 3 days per week and will be paid $1,000
per day ($3,000 per week).
(c) The Executive agrees to perform all of the duties and
responsibilities requested of him pursuant to this Agreement efficiently and to
the best of his ability. The Executive also agrees that he will not engage in
any other activities that are inconsistent with the performance of his duties
and responsibilities hereunder. The Executive agrees that all of his
activities for the Company shall be in conformity with all present and future
policies, rules and regulations and directions of the Company not inconsistent
with this Agreement.
Section 1.2 Benefits. During the term of this Agreement,
the Executive shall participate in such health and major medical insurance
plans as are no less favorable to the Executive than the health and major
medical insurance plans that may be maintained during such period by the
Company for the benefit of the other employees of the Company generally.
Following the termination of the Executive's
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employment (a) by the Company other than for Cause, as hereinafter defined, or
(b) by reason of disability under Section 3.2, the Company shall continue to
provide the Executive such health and major medical insurance coverage for the
period of time ending on the fifth anniversary of the date of this Agreement.
Section 1.3 Expenses. The Company will reimburse the
Executive for reasonable business-related expenses incurred by him in
connection with the performance of his duties hereunder, subject, however, to
the Company's policies relating to business-related expenses as in effect from
time to time.
Section 1.4 Non-Contravention. The Executive represents
and warrants to the Company that neither the execution and delivery of this
Agreement nor the performance of his duties hereunder violates or will violate
the provisions of any other agreement to which he is a party or by which he is
bound.
ARTICLE II
CONFIDENTIALITY AND NONCOMPETITION
Section 2.1 Confidentiality. The Executive agrees that
he will not, at any time during or after the term of this Agreement, use or
disclose or cause to be used or disclosed any secret, confidential or
proprietary information of or concerning the Company or its affiliates, which
he may have learned in connection with his employment hereunder or his prior
employment with Rayco or its affiliates. The Executive's obligation under this
Section shall not apply to any information which is known publicly or hereafter
becomes publicly known without the fault of the Executive. The Executive
agrees not to remove from the premises of the Company, except in pursuit of the
business of the Company or except as specifically permitted in writing by the
Company, any document or other object containing or reflecting any such
confidential information. The Executive recognizes that all such documents and
objects, whether developed by him or by someone else, will be the sole and
exclusive property of the Company. Upon termination of his employment
hereunder, the Executive shall cooperate with the Company to return all such
confidential information as promptly as practicable. The provisions of this
Section shall survive any termination of this Agreement.
Section 2.2 Noncompetition. (a) During the period
commencing on the date hereof and ending on the third anniversary of the date
on which the Executive's employment by the Company terminates,
(i) the Executive shall not, on his own account,
or as an employee, consultant, independent contractor, partner, owner,
officer, director, stockholder or otherwise, engage in, be connected
with, have any interest in, or aid or assist anyone else to engage in,
be connected with, or have any interest in, any business or company
engaged in the home building business anywhere in the United States
where the Company or Kaufman and Broad
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Home Corporation or any of their respective subsidiaries is engaged in
the home building business as of the date of this Agreement and in
particular in the following states: California, Nevada, Arizona, Utah,
Colorado, New Mexico and Texas, provided that the Executive may
purchase securities in any corporation whose securities are listed or
traded on a national securities exchange or in an over-the-counter
securities market if such purchases do not result in the Executive
beneficially owning, directly or indirectly, at any time 2% or more of
the equity securities of any such corporation;
(ii) the Executive shall not, directly or
indirectly, (A) solicit or induce, or in any manner attempt to solicit
or induce, any person employed by, or as an agent of, the Company to
terminate such person's employment or agency, as the case may be, with
the Company or (B) divert, or attempt to divert, any person, concern
or entity from doing business with the Company;
(iii) if any provision contained in this Section
shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Section, but this Section shall be
construed as if such invalid, illegal or unenforceable provision had
never been contained herein. It is the intention of the parties that
if any of the restrictions or covenants contained herein is held to
cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad
or to any extent invalid, such provision shall not be construed to be
null, void and of no effect, but to the extent such provision would be
valid or enforceable under applicable law, a court of competent
jurisdiction shall construe and interpret or reform this Section to
provide for a covenant having the maximum enforceable geographic area,
time period and other provisions (not greater than those contained
herein) as shall be valid and enforceable under such applicable law.
The Executive acknowledges that the Company would be irreparably
harmed by any breach of this Section and that there would be no
adequate remedy at law or in damages to compensate the Company for any
such breach. Therefore, if any controversy arises concerning the
obligations under this Section, such obligations shall be specifically
enforced by an injunctive order issued by a court of competent
jurisdiction and the Executive hereby waives any requirement that a
bond be posted as a condition thereto; and
(iv) the provisions of this Section shall survive
any termination of this Agreement.
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ARTICLE III
TERMINATION
Section 3.1 Termination by the Company. The Company
shall have the right to terminate the Executive's employment at any time with
or without "Cause". For purposes of this Agreement, "CAUSE" shall mean:
(a) the breach by the Executive of any of his covenants
or obligations under this Agreement or the failure by the Executive to perform
his duties for the Company, but only if such breach or failure is not cured
within 15 days after written notice of such breach or failure is delivered to
the Executive by the Company;
(b) the commission by the Executive of a significant act
of dishonesty, deceit or breach of fiduciary duty in the performance of his
duties with the Company; or
(c) the commission by the Executive of an act or acts
constituting a crime involving moral turpitude.
Section 3.2 Death, Disability. If the Executive dies
during the term of this Agreement, this Agreement shall automatically terminate
effective on the date of the Executive's death. If the Executive suffers a
disability which has prevented him from performing satisfactorily his
obligations hereunder for a period of at least 30 out of 45 consecutive days,
the Company shall have the right to terminate this Agreement effective upon the
giving of notice thereof to the Executive in accordance with Section 4.2
hereof.
Section 3.3 Effect of Termination. (a) In the event of
termination of the Executive's employment by either party for any reason, or by
reason of the Executive's death or disability, the Company shall pay to the
Executive (or his beneficiary in the event of his death) any salary or other
compensation earned but not paid to the Executive prior to the date of such
termination.
(b) In the event of termination of the Executive's
employment by the Company other than for Cause, the Company shall continue to
pay to the Executive, in addition to the amounts described in Section 3.3(a), a
salary of $5,000 per week for each remaining week during the first 90 days of
this Agreement and $3,000 per week for such subsequent week during the term of
the Agreement.
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ARTICLE IV
MISCELLANEOUS
Section 4.1 Benefit of Agreement; Assignment. This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns, including, without limitation, any corporation or
person which may acquire all or substantially all of the Company's assets or
business, or with or into which the Company may be consolidated or merged.
This Agreement shall also inure to the benefit of, and be enforceable by, the
Executive and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. This Agreement shall
not be assignable by the Executive.
Section 4.2 Notices. Any notice required or permitted
hereunder shall be in writing and shall be sufficiently given if personally
delivered or if sent by telegram or telex or by registered or certified mail,
postage prepaid, with return receipt requested, addressed:
(a) in the case of the Company, to Rayco, Ltd., 4800
Fredericksburg Road, San Antonio, Texas 78229, Attention: General Counsel, with
a copy to Kaufman and Broad Home Corporation, 10990 Wilshire Blvd., Los
Angeles, California 90024, Attention: General Counsel or to such other
addresses and/or to the attention of such other person as the Company shall
designate by written notice to the Executive; and
(b) in the case of the Executive, to Jack Robinson at the
address appearing on the employment records of the Company, from time to time,
or to such other address as the Executive shall designate by written notice to
the Company. Any notice given hereunder shall be deemed to have been given at
the time of receipt thereof by the person to whom such notice is given.
Section 4.3 Entire Agreement; Amendment. This Agreement
and the Executive's Deferred Compensation Death Plan Benefit contain the entire
agreement of the parties hereto with respect to the terms and conditions of the
Executive's employment during the term of this Agreement and supersedes any and
all prior agreements and understandings, whether written or oral, between the
parties hereto (including in the case of the Company any of its affiliates)
with respect to compensation due for services rendered hereunder, in particular
the Company, Satex Properties, Inc., Texas Homestead Mortgage Company and San
Antonio Title Company are hereby released from any liabilities or obligations
under the Employment Agreement dated January 31, 1995 among the Company and
Jack Robinson. This Agreement may not be changed or modified except by an
instrument in writing signed by both of the parties hereto.
Section 4.4 Waiver. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be construed as
a continuing waiver or as a consent to or waiver of any subsequent breach
hereof.
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Section 4.5 Headings. The article and section headings
herein are for convenience of reference only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section 4.6 Governing Law. This Agreement shall be
governed by, and construed and interpreted in accordance with, the internal
laws of the State of Texas without reference to the principles of conflict of
laws.
Section 4.7 Agreement to Take Actions. Each party hereto
shall execute and deliver such documents, certificates, agreements and other
instruments, and shall take such other actions, as may be reasonably necessary
or desirable in order to perform his or its obligations under this Agreement or
to effectuate the purposes hereof.
Section 4.8 Arbitration. Any dispute between the parties
with respect to this Agreement or any of its terms and provisions shall be
submitted to arbitration in San Antonio, Texas, in accordance with the
Commercial Rules of the American Arbitration Association then in effect, and
the arbitration determination resulting from any such submission shall be final
and binding upon the parties hereto. The arbitrator shall have the authority,
but not the obligation, to award reasonable attorney's fees to the prevailing
party in any dispute subject to this Section. Judgment upon any arbitration
award may be entered in any court of competent jurisdiction.
Section 4.9 Severability. The invalidity or
unenforceability of any provision or provisions of this Agreement shall not
affect the validity or enforceability of any other provision or provisions of
this Agreement, which shall remain in full force and effect.
Section 4.10 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement as of the date first above written.
RAYCO, LTD.
Kaufman and Broad
of San Antonio, Inc.,
a Texas corporation,
General Partner
By: /s/ MICHAEL HENN
----------------------------------
Name: Michael Henn
Title: Vice President
JACK ROBINSON
/s/ JACK ROBINSON
----------------------------------
Jack Robinson
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<PAGE> 207
AMENDMENT NO. 1 TO PURCHASE AGREEMENT
This AMENDMENT (the "Amendment") dated as of February 9, 1996,
among Ray Ellison Industries, Inc., a Delaware corporation ("Industries"),
Rayco Management, L.L.C., a Texas limited liability company (the "LLC"), and
the Ray Ellison Grandchildren Trust ("REGT") (Industries, the LLC and REGT
being referred to herein collectively as the "Sellers"); John H. Willome, Jack
E. Biegler and Jack Robinson (collectively, the "Executive Officers"); and
Kaufman and Broad Home Corporation, a Delaware corporation (the "Purchaser"),
W I T N E S S E T H:
WHEREAS, Industries, LLC, REGT, the Executive Officers and the
Purchaser wish to amend the Purchase Agreement (the "Agreement") dated as of
January 22, 1996 among Industries, LLC, REGT, the Executive Officers and the
Purchaser;
NOW, THEREFORE, in consideration of the premises and of the
respective agreements contained herein, the parties hereto hereby agree to
amend the Agreement as follows:
SECTION 1. Amendment of Article 1. Article 1 of the Agreement
is amended by:
(i) adding immediately after the paragraph starting with
the words "1995 Earnings Release" the following paragraph:
"Acquired Entity: means any Company and RLDI."
(ii) replacing in the paragraph starting with the words "Due
Diligence Period" the date "February 5, 1996" with the date "February
6, 1996";
(iii) adding immediately after the paragraph starting with the
words "Executive Officers" the following paragraph:
"Extended Title Due Diligence Period: in relation to
any Outstanding Title Policy Property means the period of time
beginning at 8:00 a.m. C.S.T. on the date of this Agreement
and ending at 11:59 p.m. C.S.T. on the date of the second full
business day after the Purchaser has received from the Sellers
copies of the title policies or title reports relating to such
property."
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(iv) adding immediately after the paragraph starting with
the words "Material Adverse Change" the following paragraph:
"Meadowbrook Properties: means those properties
listed and described in Exhibit F to this Agreement."
(v) adding immediately after the paragraph starting with
the words "Non-Remediation Properties" the following paragraph:
"Outstanding Title Policy Properties: means the
following properties (i) the properties located in Rayco's
home developments known as "Big Country", "Creekside",
"Crestridge", "Eckert Crossing", "Heritage Meadows", "Heritage
Park", "Huntington (De Zavala)", "Long's Creek", "The
Settlement", "Northampton", and "Sunrise", (ii) the Companies'
main office building at 4800 Fredericksburg Road, San Antonio,
Texas, (iii) Rayco's lumber yard located in San Antonio, Texas
and (iv) the Companies' realty offices located at 3393
Thousand Oaks, 225 N.E. Loop 410 and 7510 Culebra, in San
Antonio, Texas."
(vi) adding immediately after the paragraph starting with the
words "Redemption Agreement" the following paragraph:
"Required Board Approval Date: means the date that is
the earlier of the date of this Amendment and February 12,
1996."
(vii) adding immediately after the new paragraph starting with
the words "Required Board Approval Date" the following paragraph:
"RLDI: means Rayco Land Development, Inc."
SECTION 2. Amendment of Article 3. Article 3 of the
Agreement is amended by replacing the date "February 29, 1996" in the first
sentence of Article 3 with the date "March 1, 1996" and deleting the last
clause of the last sentence of Article 3 starting with the "; however".
SECTION 3. Amendment of Article 4. Article 4 of the
Agreement is amended by:
(i) inserting in Section 4.1.5(ii) and 4.2.5(ii) immediately
after the words "relating to" the words
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"the Real Estate Settlement Procedures Act ("RESPA") or";
(ii) restating Section 4.1.21 to read in its entirety as
follows:
"4.1.21 Subsidiaries. None of the Corporations has
any equity interest in any other Person nor any equitable or
legal ownership in any other corporation, partnership, joint
venture or business enterprise or in any material asset not
shown on the Financial Statements."
(iii) restating Section 4.2.21 to read in its entirety as
follows:
"4.2.21 Subsidiaries. Rayco has no equity interest
in any other Person nor any equitable or legal ownership in
any other corporation, partnership, joint venture or business
enterprise or in any material asset not shown on the Financial
Statements, except that Rayco owns all of the outstanding
equity securities of RLDI."
(v) amending Section 4.2.4, Section 4.2.5, Section 4.2.7
(except for Section 4.2.7 (viii)), Sections 4.2.9 through 4.2.18,
Section 4.2.20, Section 4.2.21 (except that the last clause of the
section starting with the word "except" shall be omitted in the case
of RLDI), and Sections 4.2.22 through 4.2.28, so that all
representations and warranties regarding or relating to Rayco are made
regarding and relating to both Rayco and RLDI;
(vi) inserting a new Section 4.2.29 thereto to read as follows:
"4.2.29 RLDI. RLDI is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Texas, and has all requisite corporate powers and
authority to own and lease the properties and assets it
currently owns and leases and to carry on its business as such
business is currently conducted. The character of the
properties and assets now owned or leased by RLDI and the
nature of the business now conducted by RLDI does not require
it to be licensed or qualified to do business as a foreign
corporation in any jurisdiction. RLDI is a wholly-owned
subsidiary of Rayco. There are no outstanding subscriptions,
options, convertible or
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exchangeable securities, warrants, calls or other obligations
of any kind issued or granted by, or binding upon, RLDI to
purchase or otherwise acquire any security of, equity interest
in or other ownership interest in RLDI. There are no
intercompany balances between the Sellers and their Affiliates
on the one hand and RLDI on the other hand."
(vi) inserting a new Section 4.2.30 to read as follows:
"4.2.30 Charitable Contributions. All charitable
contributions pledged, committed or promised by the LLC to the
San Antonio Area Foundation relating to the 1995 fiscal year
of Rayco, including, but not limited to, those contributions
described in a letter dated January 15, 1995 from the LLC to
the Chairman of the San Antonio Area Foundation, will have
been paid by the LLC prior to the Closing Date."
(vii) inserting a new Section 4.2.31 to read as follows:
"4.2.31 RLDI Taxes. The income, assets and
operations of RLDI have been correctly reflected in all
required material Tax returns for all required Pre-Closing Tax
Periods. RLDI has (or will have by the due date for such
return) caused timely to be filed with the appropriate
federal, state, local and other governmental authorities all
material returns, information returns or statements, and
reports with respect to Taxes required to be filed on or
before the Closing by, or with respect to, RLDI for any
Pre-Closing Tax Period and has (or will have by the Closing)
caused to be paid or deposited or made adequate provision (in
accordance with generally accepted accounting principles) for
the payment of all Taxes due. There is no material Tax
related claim, audit, action, suit, proceeding or
investigation now pending or threatened against, with respect
to or that could directly impact RLDI, (ii) RLDI is not
subject to any agreement or consent pursuant to Section 341(f)
of the Code, (iii) there are no material liens for Taxes upon
the assets of RLDI except liens for current Taxes not yet due,
(iv) RLDI has not been a member of a consolidated or combined
group other than one in which Ellison, Inc. was the common
parent and (v)
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RLDI is not under any contractual obligation to pay the Taxes
of another Person."
SECTION 4. Amendment of Article 5. Article 5 of the Agreement
is amended by:
(i) inserting in Section 5.1.1 immediately after the words
"covenants that Rayco" in the fifth clause of the first sentence the
words "and RLDI" and immediately after the words "permit any Company"
in the last sentence the words "or RLDI";
(ii) inserting in Sections 5.1.2 and 5.1.3 immediately after
the words "shall cause Rayco" the words "and RLDI";
(iii) inserting in Section 5.1.3 immediately after the words
"shall cause Rayco" the words "and RLDI" and immediately after the
words "Industries, the LLC, Rayco" the clause ", RLDI";
(iv) inserting in Section 5.1.9 immediately after the words
"and the Companies" the words "and RLDI";
(v) inserting in Section 5.1.10 immediately after the words
"Industries, LLC, REGT" the phrase ", RLDI";
(vi) inserting in Section 5.1.11 immediately after the words
"of any Corporation" the words "and RLDI";
(vii) inserting in Section 5.1.13 immediately after the words
"merger of any of the Companies" the words "or RLDI";
(viii) replacing in Section 5.2.3 the words "Prior to the end
of the Due Diligence Period" with the words "Prior to February 9,
1996";
(ix) inserting a new Section 5.1.16 to read as follows:
"5.1.16. Charitable Contributions. The LLC
acknowledges and agrees (i) that the LLC shall be solely
responsible for any obligations to the San Antonio Area
Foundation relating to the portion of the 1996 fiscal year of
Rayco that is prior to the Closing Date and (ii) to hold the
Acquired Entities and the Purchaser harmless and to indemnify
them against any obligations of the Sellers, the Purchasers or
any of the Acquired Entities to San Antonio Area Foundation
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established prior to the Closing Date and continuing
thereafter."
(x) replacing throughout Section 5.3 the word "Company" with
the words "Acquired Entity".
SECTION 5. Amendment of Section 6.1.7. Section 6.1.7 of the
Agreement is amended by adding immediately after the words "of each
Corporation" the words "and RLDI".
SECTION 6. Amendment of Article 7. Section 7.2 and 7.5 of
the Agreement is amended by replacing throughout each such Section the words
"Company" and "Companies" with the words "Acquired Entity" and "Acquired
Entities", respectively.
SECTION 7. Amendment of Article 8. Article 8 of the
Agreement is amended by replacing throughout Article 8 the words "Company" and
"Companies" with the words "Acquired Entity" and "Acquired Entities",
respectively.
SECTION 8. Amendment of Article 9. Article 9 of the Agreement
is amended by:
(i) deleting Section 9.1.4 and replacing it in its entirety
with the following:
"9.1.4 By any of the Sellers at any time after the
Required Board Approval Date or by the Purchaser at any time
by written notice thereof to the other if, on or prior to the
Required Board Approval Date, the Boards of Directors of the
Purchaser and the Purchaser Entities have not duly authorized
and approved (i) the execution and delivery by the Purchaser
and the Purchaser Entities of this Agreement and the various
other agreements contemplated herein to which each of the
Purchaser and the Purchaser Entities is a party, (ii) the
performance by the Purchaser and the Purchaser Entities of all
the terms and conditions hereof and thereof to be performed by
each of them, and (iii) the consummation of the transactions
contemplated hereby and thereby;"
(ii) deleting Section 9.1.5 and replacing it in its entirety
with the following:
"9.1.5 By any of the Sellers by written notice
thereof to the Purchaser if each of the Sellers have not
received by the Required Board Approval Date the Purchaser's
Due Authorization
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Notice stating that on or prior to the Required Board Approval
Date the Boards of Directors of the Purchaser and the
Purchaser Entities have duly authorized and approved (i) the
execution and delivery by the Purchaser and the Purchaser
Entities of this Agreement and the various other agreements
contemplated herein to which each of the Purchaser and the
Purchaser Entities is a party, (ii) the performance by the
Purchaser and the Purchaser Entities of all the terms and
conditions hereof and thereof to be performed by each of them,
and (iii) the consummation of the transactions contemplated
hereby and thereby;"
(iii) inserting a new Section 9.1.11 to read as follows:
"9.1.11. By the Purchaser by written notice thereof
to the Sellers if (i) one of the Outstanding Title Policy
Properties is subject to a material title defect which is
inconsistent with the manner in which Rayco holds title to
similar properties and which has not been disclosed in writing
by the Sellers to the Purchaser prior to February 7, 1995, and
(ii) the Extended Title Due Diligence Period relating to such
Outstanding Title Policy Property has not expired."
SECTION 9. Amendment of Article 10. Article 10 of the
Agreement is amended by:
(i) replacing throughout Section 10.2 the word "Company" with
the words "Acquired Entity";
(ii) inserting in Section 10.2 immediately after the words
"any such loss, damage or expense" the clause ", with the exception of
rights of indemnification provided under Sections 10.7 and 10.8,";
(iii) inserting in Section 10.2 immediately after the words
"under this Article 10" the clause ", with the exception of rights of
indemnification provided under Sections 10.7 and 10.8,";
(iv) inserting at the end of Section 10.4 immediately after
the words "the Closing Date" the following clause:
"and (iii) the indemnification obligations set forth in
Section 10.7 and 10.8 shall survive indefinitely";
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(v) inserting a new Section 10.7 to read as follows:
"10.7 Further Indemnification of the Purchaser
relating to Meadowbrook Properties. The Sellers jointly and
severally agree to indemnify the Purchaser against, and hold
the Purchaser and, after the Closing, each Company harmless
from, any loss, damage or expense (including reasonable
attorneys' fees) sustained by the Purchaser or any Company (as
applicable) arising out of or resulting from claims of
defective foundations, claims involving expansive soils or any
claims made in conjunction therewith by the current or future
owners of the Meadowbrook Properties (the "Meadowbrook
Claims"). The provisions set forth in Sections 10.5 and 10.6
shall apply to the indemnification obligations created by this
Section, except that (a) the Purchaser and the Companies shall
be deemed to have notified the Sellers of all Meadowbrook
Claims, and (b) a Claim Notice relating to all Meadowbrook
Claims shall be deemed to have been given on the date of this
Agreement by the Purchaser and the Companies to the Sellers
and the Sellers shall be deemed to have notified the Purchaser
and the Companies within the applicable Election Period that
(i) the Sellers do not dispute their potential liability to
the Purchaser and the Companies under Article 10 with respect
to any Meadowbrook Claims and (ii) the Sellers desire, at
their sole cost and expense, to defend the Purchasers and the
Companies against any Meadowbrook Claims."
(vi) inserting a new Section 10.8 to read as follows:
"Section 10.8. Further Indemnification of Purchasers
for Litigation. The Sellers jointly and severally agree to
indemnify the Purchaser against, and hold the Purchaser and,
after the Closing, each Company harmless from, any loss,
damage or expense (including reasonable attorneys' fees)
sustained by the Purchaser or any Company arising out of or
resulting from the default judgment which has been entered in
Vernon Motes v. Rayco, Ltd. (the "Judgment Losses"); provided
however that such indemnification shall be provided only to
the extent that the Judgment Losses exceed the amount
expressly reserved in the Financial Statements of Rayco for
satisfaction of
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the Judgment Losses. The provisions set forth in Sections
10.5 and 10.6 shall apply to the indemnification obligations
created by this section, except that (a) the Purchaser and the
Companies shall be deemed to have notified the Sellers of all
Judgment Losses, and (b) a Claim Notice relating to all
Judgment Losses shall be deemed to have been given on the date
of this Agreement by the Purchaser and the Companies to the
Sellers and the Sellers shall be deemed to have notified the
Purchaser and the Companies within the applicable Election
Period that (i) the Sellers do not dispute their potential
liability to the Purchaser and the Companies under Article 10
with respect to any Judgment Losses and (ii) the Sellers
desire, at their sole cost and expense, to defend the
Purchasers and the Companies against any Judgment Losses. The
foregoing provisions of this Section 10.8 to the contrary
notwithstanding, it is specifically understood and agreed that
the Sellers will have no further liability with respect to or
arising out of Vernon Motes v. Rayco, Ltd. if the default
judgment which has been entered is set aside or is no longer
effective."
SECTION 10. Amendment of Articles 12 and 13. Article 12 and
Section 13.2 of the Agreement are amended by replacing the word "Company"
throughout Article 12 and Section 13.2 with the words "Acquired Entity".
SECTION 11. Exhibits. The Agreement is amended to include
Exhibit A hereto as Exhibit F to the Agreement.
SECTION 12. Choice of Law, Amendments, Headings. This
Amendment shall be governed by the internal laws of the State of Texas (without
regard to the choice of law provisions thereof). This Amendment may not be
changed or terminated orally. The headings contained in this Amendment are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Amendment.
SECTION 13. Counterparts. This Amendment may be executed in
any number of counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute but one and the same agreement.
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IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the date first written above.
SELLERS
-------
Ray Ellison Industries, Inc.
By: /s/ JOHN H. WILLOME
--------------------------------
John H. Willome, President
Rayco Management, L.L.C.
By: /s/ JOHN H. WILLOME
--------------------------------
John H. Willome, President
Ray Ellison Grandchildren Trust
By: /s/ RONALD K. CALGAARD
--------------------------------
Ronald K. Calgaard, Trustee
By: /s/ A. BAKER DUNCAN
--------------------------------
A. Baker Duncan, Trustee
By: /s/ BONNIE ELLISON
--------------------------------
Bonnie Ellison, Trustee
EXECUTIVE OFFICERS
------------------
/s/ JOHN H. WILLOME
-----------------------------------
John H. Willome
/s/ JACK E. BIEGLER
-----------------------------------
Jack E. Biegler
/s/ JACK ROBINSON
----------------------------------
Jack Robinson
10
<PAGE> 217
PURCHASER
---------
Kaufman and Broad Home Corporation
By: /s/ BRUCE E. KARATZ
-------------------------------
Name: Bruce E. Karatz
Title: Chairman & CEO
11
<PAGE> 218
EXHIBIT A
MEADOWBROOK PROPERTIES
<TABLE>
<CAPTION>
OWNER'S STREET ADDRESS BLOCK LOT
NAME NUMBER NUMBER
<S> <C> <C> <C> <C>
1 Rodriguez 8157 Chestnut Barr 16 53
2 Howell 8137 Chestnut Barr 16 60
3 Gomez 8135 Chestnut Barr 16 61
4 Orcutt 8123 Chestnut Barr 16 65
5 Callis 8119 Chestnut Barr 16 66
6 Straughn 8115 Chestnut Barr 16 67
7 Sallee 8107 Chestnut Barr 16 69
8 Roberson 8103 Chestnut Barr 16 70
9 Allen 8069 Chestnut Barr 16 77
10 Jay 8015 Coco Meadow 18 25
11 Villarreal 8021 Coral Meadow 16 36
12 Rosario 8052 Coral Meadow 18 15
13 Malone 8140 Chestnut Barr 18 33
14 Kindt 8025 Coral Meadow 17 35
15 Park 8050 Coral Meadow 18 14
16 Buehler 8035 Coral Meadow 17 30
17 Villarreal 8153 Chestnut Barr 16 54
18 Deleon 8042 Coral Meadow 18 12
19 Brahm 8038 Coral Meadow 18 11
20 Freeman 8133 Chestnut Barr 16 62
</TABLE>
<PAGE> 1
------------------------------------------
EXHIBIT 10.1
FOURTH AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of February 28, 1996
among
KAUFMAN AND BROAD HOME CORPORATION,
THE BANKS PARTY HERETO,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent,
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Co-Syndication Agents
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
THE FIRST NATIONAL BANK OF CHICAGO
CREDIT LYONNAIS LOS ANGELES BRANCH
and
NATIONSBANK OF TEXAS, N.A.,
as Managing Agents
------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS ................................................................................................... 1
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS.................................................................. 2
1.1 Defined Terms................................................................................. 2
1.2 Use of Defined Terms.......................................................................... 36
1.3 Accounting Terms.............................................................................. 36
1.4 Rounding ..................................................................................... 36
1.5 Miscellaneous Terms........................................................................... 37
1.6 Exhibits and Schedules........................................................................ 37
1.7 References to "Borrower and its Subsidiaries"................................................. 37
ARTICLE 2 LOANS............................................................................................. 37
2.1 Loans-General................................................................................. 37
2.2 Alternate Base Rate Loans..................................................................... 39
2.3 LIBOR Loans................................................................................... 40
2.4 Notes ..................................................................................... 40
2.5 Letters of Credit............................................................................. 40
2.6 Voluntary Reduction of Line A Commitment...................................................... 47
2.7 Termination of Line B Commitment.............................................................. 48
2.8 Voluntary Reduction of Line C Commitment...................................................... 48
2.9 Administrative Agent's Right to Assume Funds
Available............................................................................ 48
ARTICLE 3 PAYMENTS; FEES.................................................................................... 49
3.1 Principal and Interest........................................................................ 49
3.2 Commitment Fees............................................................................... 55
3.3 Amendment Fee................................................................................. 56
3.4 Underwriting Fee.............................................................................. 56
3.5 Syndication Fee............................................................................... 56
3.6 Agency Fees................................................................................... 56
3.7 Capital Adequacy.............................................................................. 56
3.8 LIBOR Fees and Costs.......................................................................... 58
3.9 Late Payments/Default Interest................................................................ 62
3.10 Computation of Interest and Fees.............................................................. 62
3.11 Holidays ..................................................................................... 63
3.12 Payment Free of Taxes......................................................................... 63
3.13 Funding Sources............................................................................... 64
3.14 Failure to Charge or Making of Payment Not
Subsequent Waiver............................................................................. 64
3.15 Pro Rata Treatment............................................................................ 64
3.16 Time and Place of Payments; Evidence of
Payments...................................................................................... 64
3.17 Administrative Agent's Right to Assume
Payments Will be Made......................................................................... 65
3.18 Survivability................................................................................. 65
3.19 Bank Calculation Certificate.................................................................. 65
ARTICLE 4 REPRESENTATIONS AND WARRANTIES.................................................................... 66
4.1 Existence and Qualification; Power; Compliance
with Law...................................................................................... 66
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
4.2 Authority; Compliance with Other Instruments
and Government Regulations.................................................................... 66
4.3 No Governmental Approvals Required............................................................ 67
4.4 Subsidiaries.................................................................................. 67
4.5 Financial Statements.......................................................................... 68
4.6 No Other Liabilities; No Material Adverse
Effect........................................................................................ 69
4.7 Title to Assets............................................................................... 69
4.8 Intangible Assets............................................................................. 70
4.9 Existing Indebtedness and Contingent Guaranty
Obligations................................................................................... 70
4.10 Governmental Regulation....................................................................... 70
4.11 Litigation.................................................................................... 70
4.12 Binding Obligations........................................................................... 70
4.13 No Default.................................................................................... 70
4.14 Pension Plans................................................................................. 70
4.15 Tax Liability................................................................................. 71
4.16 Regulation U.................................................................................. 71
4.17 Environmental Matters......................................................................... 71
4.18 Disclosure.................................................................................... 71
4.19 Projections................................................................................... 71
ARTICLE 5 AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION
AND REPORTING REQUIREMENTS)........................................................................ 72
5.1 Payment of Taxes and Other Potential Liens.................................................... 72
5.2 Preservation of Existence..................................................................... 72
5.3 Maintenance of Properties..................................................................... 73
5.4 Maintenance of Insurance...................................................................... 73
5.5 Compliance with Laws.......................................................................... 73
5.6 Inspection Rights............................................................................. 73
5.7 Keeping of Records and Books of Account....................................................... 73
5.8 Use of Proceeds............................................................................... 73
5.9 Subsidiary Guaranty........................................................................... 74
ARTICLE 6 NEGATIVE COVENANTS................................................................................ 74
6.1 Payment or Prepayment of Subordinated
Obligations................................................................................... 74
6.2 Dispositions.................................................................................. 75
6.3 Mergers and Sale of Assets.................................................................... 75
6.4 Investments and Acquisitions.................................................................. 75
6.5 ERISA Compliance.............................................................................. 77
6.6 Change in Business............................................................................ 77
6.7 Liens and Negative Pledges.................................................................... 77
6.8 Non-Recourse Indebtedness..................................................................... 79
6.9 Subsidiary Indebtedness and Contingent Guaranty
Obligations................................................................................... 79
6.10 Money Market Indebtedness..................................................................... 80
6.11 Transactions with Affiliates.................................................................. 81
6.12 Consolidated Tangible Net Worth............................................................... 81
6.13 Domestic Leverage Ratio....................................................................... 81
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
6.14 Domestic Interest Coverage Ratio.............................................................. 82
6.15 Distributions................................................................................. 82
6.16 Amendments.................................................................................... 82
6.17 Hostile Tender Offers......................................................................... 83
6.18 Inventory..................................................................................... 83
6.19 Domestic Standing Inventory................................................................... 83
6.20 Investments in Certain Subsidiaries........................................................... 84
6.21 Land Fund Joint Venture....................................................................... 84
ARTICLE 7 INFORMATION AND REPORTING REQUIREMENTS............................................................ 85
7.1 Financial and Business Information of Borrower
and Its Subsidiaries.......................................................................... 85
7.2 Compliance Certificate........................................................................ 89
ARTICLE 8 CONDITIONS........................................................................................ 89
8.1 Initial Advances.............................................................................. 89
8.2 Any Advance................................................................................... 91
8.3 Any Letter of Credit.......................................................................... 92
ARTICLE 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENTS OF
DEFAULT............................................................................................ 92
9.1 Events of Default............................................................................. 92
9.2 Remedies Upon Event of Default................................................................ 94
ARTICLE 10 THE ADMINISTRATIVE AGENT......................................................................... 97
10.1 Appointment and Authorization................................................................ 97
10.2 Administrative Agent and Affiliates.......................................................... 98
10.3 Banks' Credit Decisions...................................................................... 98
10.4 Action by Administrative Agent............................................................... 98
10.5 Liability of Administrative Agent............................................................ 100
10.6 Indemnification.............................................................................. 101
10.7 Successor Administrative Agent............................................................... 102
10.8 No Obligations of Borrower................................................................... 102
ARTICLE 11 MISCELLANEOUS.................................................................................... 103
11.1 Cumulative Remedies; No Waiver............................................................... 103
11.2 Amendments; Consents......................................................................... 103
11.3 Costs, Expenses and Taxes.................................................................... 104
11.4 Nature of Banks' Obligations................................................................. 105
11.5 Representations and Warranties............................................................... 105
11.6 Notices ..................................................................................... 106
11.7 Execution in Counterparts.................................................................... 106
11.8 Binding Effect; Assignment................................................................... 106
11.9 Sharing of Setoffs........................................................................... 107
11.10 Indemnity by Borrower........................................................................ 108
11.11 Nonliability of Banks........................................................................ 109
11.12 Confidentiality.............................................................................. 110
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<S> <C>
11.13 No Third Parties Benefited................................................................... 110
11.14 Other Dealings............................................................................... 110
11.15 Right of Setoff - Deposit Accounts........................................................... 110
11.16 Further Assurances........................................................................... 111
11.17 Integration.................................................................................. 111
11.18 Governing Law................................................................................ 111
11.19 Severability of Provisions................................................................... 111
11.20 Headings..................................................................................... 111
11.21 Conflict in Loan Documents................................................................... 112
11.22 Waiver Of Jury Trial......................................................................... 112
11.23 Purported Oral Amendments.................................................................... 112
11.24 Hazardous Materials Indemnity................................................................ 112
Exhibits
A - Compliance Certificate
B - Line A Note
C - Line B Note
D - Line C Note
E - Line B/C Commitment Assignment and Acceptance
F-1 - Opinion of Counsel
F-2 - Opinion of Counsel
G - Request for Letter of Credit
H - Request for Loan
I - Request for Redesignation
J - Subsidiary Guaranty
Schedules
1.1 Line B Commitment/Line C Commitment
4.4 Subsidiaries
4.7 Existing Liens and Rights of Others
4.9 Existing Indebtedness and Contingent Obligations
6.4 Investments
</TABLE>
- iv -
<PAGE> 6
FOURTH AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of February 28, 1996
This Fourth Amended and Restated Loan Agreement ("Agreement")
is entered into by and among Kaufman and Broad Home Corporation, a Delaware
corporation ("Borrower"), each bank 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"), Bank of America National Trust and Savings
Association, as Administrative Agent, The First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch and NationsBank of Texas, N.A., as
Managing Agents.
RECITALS
This Agreement is an amendment and restatement in full of that
certain Third Amended and Restated Loan Agreement dated as of November 21, 1994,
by and among Borrower, the Banks named therein, Bank of America National Trust
and Savings Association, as Administrative Agent, and various of such other
Banks in various agent capacities (the "Prior Loan Agreement"). The purpose of
this amendment and restatement is to add two new credit facilities (the Line B
Commitment and the Line C Commitment, as more completely defined hereinafter),
to redesignate the existing Commitment as the "Line A Commitment," to provide
for Banks to participate in the Line A Commitment, on the one hand, and the Line
B Commitment and Line C Commitment, on the other hand, at differing Pro Rata
Shares (or to participate in the Line A Commitment and not in the Line B
Commitment and Line C Commitment, or vice versa), and to amend various covenants
and other provisions of the Prior Loan Agreement. The Prior Loan Agreement, as
amended and restated by this Agreement including all loans made thereunder,
continues in full force and effect from the date thereof to the Amendment
Effective Date and at all times on and after the Amendment Effective Date.
The new Line B Commitment and Line C Commitment are for the
purpose of financing the Rayco Acquisition (defined herein) and the increased
working capital requirements arising therefrom. In the event that the Rayco
Acquisition does not occur promptly following the Amendment Effective Date, the
parties agree to reinstate the Prior Loan Agreement.
- 1 -
<PAGE> 7
WHEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE 1
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 Amendment Effective Date, by which
Borrower and/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 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 partnership, joint venture or other business
entity.
"Administrative Agent" means Bank of America or any
successor administrative agent.
"Administrative Agent's Office" means Bank of America National
Trust and Savings Association, Agency Management Services, 1455 Market
Street, San Francisco, California 94103, or such other office as the
Administrative Agent may designate in writing to Borrower and the
Banks.
"Advance" means an advance made or to be made to
Borrower by a Bank pursuant to Article 2.
"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
- 2 -
<PAGE> 8
100 record holders of such interests will be deemed to control such
corporation or other Person.
"Agent" means any of the Administrative Agent, the
Documentation Agent, the Co-Syndication Agents, the Managing Agents or
any successor agent.
"Agreement" means this Fourth Amended and Restated Loan
Agreement, either as originally executed or as it may from time to time
be supplemented, modified, amended, renewed, extended or supplanted.
"Alternate Base Rate" means, as of any date of determination,
the rate per annum which is the greater of (a) the Reference Rate and
(b) the Federal Funds Rate plus one half percent (1/2%).
"Alternate Base Rate Advance" means an Advance made by a Bank
to fund its Pro Rata Share of an Alternate Base Rate Loan.
"Alternate Base Rate Loan" means a Loan made hereunder and
designated or redesignated as an Alternate Base Rate Loan in accordance
with Article 2, or converted to an Alternate Base Rate Loan in
accordance with Section 3.6.
"Amendment Effective Date" means the time and Banking Day on
which the conditions set forth in Section 8.1 are satisfied or waived
pursuant to Section 11.2.
"Amortization Amount" means, with respect to each Amortization
Date set forth below, the amount set forth opposite such Amortization
Date:
<TABLE>
<CAPTION>
Amortization Date Amount
<S> <C>
May 31, 1996 $10,000,000
August 31, 1996 $25,000,000
November 30, 1996 $25,000,000
Line B/C Maturity Date Principal balance of
all Line B Loans and
Line C Loans;
</TABLE>
provided that (a) if Borrower elects to extend the Line B/C Maturity
Date to May 31, 1997 pursuant to Section 3.1(e)(i), the Amortization
Amount for February 28, 1997 shall be $17,000,000 and (b) if Borrower
elects to extend the Line B/C Maturity Date to August 31, 1997 pursuant
to Section 3.1(e)(ii), the Amortization Amount for May 31, 1997 shall
be $11,000,000.
- 3 -
<PAGE> 9
"Applicable Incremental Spread" means, as of any date of
determination, the interest rate spread set forth below opposite the
period during which such date occurs:
<TABLE>
<CAPTION>
Incremental
Period Spread
------ ------
<S> <C>
Amendment Effective Date
through August 31, 1996 .00%
September 1, 1996
through November 30, 1996 .25%
December 1, 1996
through February 28, 1997 .50%
March 1, 1997
through May 31, 1997 .75%
June 1, 1997
through August 31, 1997 1.00%
</TABLE>
"Applicable Line A Alternate Base Rate Spread" means, as of
any date of determination, the interest rate spread set forth below
opposite the Line A Credit Rating Level as of such date:
<TABLE>
<CAPTION>
Applicable Line A
Line A Alternate Base Rate
Credit Rating Level Spread
------------------- ------
<S> <C>
I .00%
II .00%
III .25%
IV .50%
V .75%
VI 1.00%
</TABLE>
"Applicable Line A Commitment Fee Rate" means, as of any date
of determination, the commitment fee rate set forth below opposite the
Line A Credit Rating Level as of such date:
- 4 -
<PAGE> 10
<TABLE>
<CAPTION>
Line A Applicable Line A
Credit Rating Commitment
Level Fee Rate
----- --------
<S> <C>
I .25%
II .30%
III .50%
IV .50%
V .50%
VI .50%
</TABLE>
"Applicable Line A Letter of Credit Fee" means, as of any date
of determination, the letter of credit fee set forth below under the
caption "Financial L/C's" (in the case of Financial Letters of Credit)
and under the caption "Performance L/C's" (in the case of Performance
Letters of Credit), in each case opposite the Line A Credit Rating
Level as of such date:
<TABLE>
<CAPTION>
Line A Line A
Line A Credit Financial Performance
Rating Level L/C's L/C's
------------ ----- -----
<S> <C> <C>
I 0.9875% 0.8625%
II 1.1375% 1.0125%
III 1.4375% 1.3125%
IV 1.6875% 1.5625%
V 1.9375% 1.8125%
VI 2.1875% 2.0625%
</TABLE>
"Applicable Line A LIBOR Spread" means, as of any date of
determination, the interest rate spread set forth below opposite the
Line A Credit Rating Level as of such date:
<TABLE>
<CAPTION>
Line A
Credit Rating Applicable Line A
Level LIBOR Spread
----- ------------
<S> <C>
I 1.05%
II 1.20%
III 1.50%
IV 1.75%
V 2.00%
VI 2.25%
</TABLE>
"Applicable Line B/C Alternate Base Rate Spread" means, as of
any date of determination, the sum of (a) the interest rate spread set
forth below opposite the Line B/C Credit Rating Level as of such date
plus (b) the Applicable Incremental Spread:
- 5 -
<PAGE> 11
<TABLE>
<CAPTION>
Applicable Line
Line B/C B/C Alternate Base
Credit Rating Level Rate Spread
------------------- -----------
<S> <C>
I .25%
II .50%
III .75%
IV 1.00%
</TABLE>
"Applicable Line B/C LIBOR Spread" means, as of any date of
determination, the sum of (a) the interest rate spread set forth below
opposite the Line B/C Credit Rating Level as of such date plus (b) the
Applicable Incremental Spread:
<TABLE>
<CAPTION>
Line B/C Applicable Line
Credit B/C LIBOR
Rating Level Rate Spread
------------ -----------
<S> <C>
I 1.50%
II 1.75%
III 2.00%
IV 2.25%
</TABLE>
"Applicable Line C Letter of Credit Fee" means, as of any date
of determination, the sum of (a) the letter of credit fee set forth
below under the caption "Financial L/C's" (in the case of Financial
Letters of Credit) and under the caption "Performance L/C's" (in the
case of Performance Letters of Credit), in each case opposite the Line
B/C Credit Rating Level as of such date plus (b) the Applicable
Incremental Spread:
<TABLE>
<CAPTION>
Line B/C
Credit Rating
Level Financial L/C's Performance L/C's
----- --------------- -----------------
<S> <C> <C>
I 1.4375% 1.3125%
II 1.6875% 1.5625%
III 1.9375% 1.8125%
IV 2.1875% 2.0625%
</TABLE>
"Asset Sale" means the sale or other disposition by Borrower
or any of its Domestic Subsidiaries of (a) shares of capital stock of
any Domestic Subsidiary or Foreign Subsidiary, (b) all or substantially
all of the assets of any Domestic Subsidiary or Foreign Subsidiary, (c)
any Domestic Unimproved Unmapped Land, (d) any Domestic Unimproved Land
and (e) any developed lots, Model Homes or residential housing units to
a Person who is not the end-user thereof in a bulk transaction.
- 6 -
<PAGE> 12
"Authorizations" has the meaning set forth for that
term in Section 4.1.
"Bank" means, as the context may require, a Line A Bank or a
Line B/C Bank and "Banks" means all of the Line A Banks and the Line
B/C Banks.
"Bank of America" means Bank of America National Trust and
Savings Association, a national banking association.
"Banking Day" means any Monday, Tuesday, Wednesday, Thursday,
or Friday other than a day on which banks are authorized or required to
be closed in California or New York.
"Bond Facility" means any bond facility pursuant to which a
municipality, or a community facilities district formed by a
municipality, at the request of Borrower or one of its Subsidiaries,
will issue bonds to finance a portion of the costs of acquisition of
and improvements to real property located in such municipality (or
district) by Borrower or one of its Subsidiaries (or to pay development
or "impact" fees in lieu thereof), and with respect to which Borrower
or one of its Subsidiaries will provide a letter of credit or other
reimbursement support. The real property that is the subject of any
such bond facility will be subject to a Lien for special taxes to repay
the Indebtedness evidenced by such bonds.
"Borrower" means Kaufman and Broad Home Corporation, a
Delaware corporation, and its successors and permitted assigns.
"Both Majority Banks" means Banks comprising both the
Line A Majority Banks and the Line B/C Majority Banks.
"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.
"Cash" means all monetary items (including currency, coin and
bank demand deposits) that are treated as cash under Generally Accepted
Accounting Principles.
"Cash Equivalents" means, with respect to any Person,
that Person's Investments in:
- 7 -
<PAGE> 13
(a) Government Securities due within one year
of the making of the Investment;
(b) certificates of deposit issued by, deposits in,
bankers' acceptances of, and repurchase agreements covering
Government Securities executed by, (i) any Bank or (ii) any
bank and/or savings and loan association doing business in and
incorporated under the Laws of the United States of America or
any state thereof 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 Moody's Investors Service,
Inc. (or a successor rating agency) or A-1 or higher by
Standard & Poor's Rating Group (a division of McGraw-Hill,
Inc.) (or a successor rating agency), in each case due within
one year after the date of the making of the Investment; and
(c) readily marketable commercial paper of (i) any
Bank that is a Bank as of the Amendment Effective Date or (ii)
corporations doing business in and incorporated under the Laws
of the United States of America or any state thereof given on
the date of such Investment a credit rating of P-1 or higher
by Moody's Investors Service, Inc. (or a successor rating
agency), of A-1 or higher by Standard & Poor's Rating Group (a
division of McGraw-Hill, Inc.) (or a successor rating agency),
or F-1 or higher by Fitch Investor Services, Inc. (or a
successor rating agency), in each case due within one year of
the making of the Investment.
"Change in Control" has the meaning set forth for
such term in Section 3.1(j).
"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.
"Commitments" means, collectively, the Line A Commitment, the
Line B Commitment and the Line C Commitment.
"Common Stock" means the $1.00 par value common stock and
special common stock of Borrower.
"Compliance Certificate" means a compliance certificate in the
form of Exhibit A signed, on behalf of Borrower, by a Senior Officer of
Borrower.
- 8 -
<PAGE> 14
"Consolidated Subsidiary" means, with respect to any Person
and as of any date of determination, a Subsidiary of that Person whose
financial statements should be consolidated with the financial
statements of the Person in accordance with Generally Accepted
Accounting Principles.
"Consolidated Tangible Net Worth" means, as of any date of
determination, the Tangible Net Worth of Borrower and its Consolidated
Subsidiaries on a consolidated basis; provided that (a) any positive or
negative adjustment to consolidated net worth attributable to foreign
currency translations shall be ignored and (b) for purposes only of
Section 6.12 (and not for purposes of determining Domestic Adjusted
Tangible Net Worth) Consolidated Tangible Net Worth shall be adjusted
by (i) adding thereto the lesser of (A) the after-tax effect of the
Contemplated Charge as applied to assets of Borrower and its
Consolidated Subsidiaries and (B) $96,000,000 and (ii) by subtracting
therefrom an amount equal to 50% of the amount, if any, by which the
after-tax effect of the Contemplated Charge exceeds $96,000,000.
"Contemplated Charge" means the Net Realizable Value
Adjustment contemplated to be made by Borrower in its Fiscal Year
ending November 30, 1996.
"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),
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, or 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. The amount of any Contingent Guaranty Obligation
shall be deemed to be an amount equal to the stated or determinable
amount of the
- 9 -
<PAGE> 15
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.
"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.
"Co-Syndication Agents" means Bank of America and The
First National Bank of Chicago.
"Curable KBMC Default" means a Material KBMC Default or a
Material KBMC Event of Default that can be cured by the payment of
money, including those arising under the following Sections of the
Mortgage Warehousing Agreement: 10.1, 10.2, 10.3, 10.4, 10.5, 10.21,
11.1(a), 11.1(e), 11.1(g), 11.1(h), 11.1(m), 11.1(o) and 11.1(q).
"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 notice or
passage of time or both, would be an Event of Default.
"Default Rate" means the interest rate described in
Section 3.7.
"Designated Deposit Account" means a demand deposit account to
be maintained by Borrower with Bank of America, as from time to time
designated by Borrower by written notification to the Administrative
Agent.
"Disposition" means the sale, transfer or other disposition of
any of the capital stock of any Significant Subsidiary or of all or
substantially all of the assets of any Significant Subsidiary.
"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
- 10 -
<PAGE> 16
Person, (a) the retirement, redemption, purchase, or other acquisition
for value (other than for common stock 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 common stock 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 6.19(a)(ii).
"Documentation Agent" means The First National Bank
of Chicago. The Documentation Agent shall have no duties
under the Loan Documents beyond those of a Bank.
"Dollars" means the national currency of the United
States of America.
"Domestic Adjusted Interest Expense" means, with respect to
any fiscal period of Borrower and its Consolidated Subsidiaries (other
than any Financial Subsidiary or Foreign Subsidiary), the aggregate
amount of interest, fees, charges and related expenses paid or payable
to a lender in connection with borrowed money that is treated as
interest (including without limitation accretion of original issue
discount on long-term debt existing during such fiscal period) and the
interest portion of any capitalized lease payment of Borrower and such
Consolidated Subsidiaries.
"Domestic Adjusted Operating Income" means, with respect to
any fiscal period of Borrower and its Consolidated Subsidiaries (other
than any Financial Subsidiary), (a) the consolidated gross revenues of
Borrower and its Consolidated Subsidiaries (other than any Financial
Subsidiary) for that fiscal period, minus (b) construction and land
costs for that fiscal period, minus (c) selling, general and
administrative expenses for that fiscal period, minus (d) with respect
to Foreign Subsidiaries, on a consolidated basis, consolidated gross
revenues during that fiscal period, minus (i) construction and land
costs for that fiscal period, minus (ii) selling, general and
administrative expenses for that fiscal period, plus (e) interest
income earned by Borrower and its Consolidated Subsidiaries (other than
any Foreign
- 11 -
<PAGE> 17
Subsidiary) during that fiscal period, plus (f) dividend, royalty and
(without duplication) other intercompany payments paid in Cash by a
Foreign Subsidiary or a Financial Subsidiary to Borrower or any of its
Guarantor Subsidiaries, plus (g) Domestic Adjusted Interest Expense
which had previously been capitalized and has been amortized during
that fiscal period to the aggregate cost of sales of Borrower and its
Domestic Subsidiaries, plus (h) non-Cash losses incurred (and minus
non-Cash gains earned) by Borrower and its Consolidated Subsidiaries
(other than any Financial Subsidiary or any Foreign Subsidiary) in
connection with the abandonment of options to purchase Property, plus
(i) non-Cash Net Realizable Value Adjustments to Inventory located in
the United States of America (to the extent not reflected as an
extraordinary item), plus (j) depreciation expense for that fiscal
period, minus (k) Cash Investments made by Borrower during such fiscal
period in Financial Subsidiaries and Foreign Subsidiaries, all as
reported on the financial statements of Borrower and its Consolidated
Subsidiaries delivered to the Banks pursuant to Section 7.1.
"Domestic Adjusted Tangible Net Worth" means, as of any date
of determination, Consolidated Tangible Net Worth on that date minus
(a) an amount equal to 100% of the aggregate Tangible Net Worth of
Foreign Subsidiaries of Borrower and its Subsidiaries on that date,
minus (b) the amount by which the aggregate Investments of Borrower on
that date in Domestic Joint Ventures exceed 10% times the difference
between Consolidated Tangible Net Worth and the aggregate Tangible Net
Worth of Foreign Subsidiaries as of that date, minus (c) the aggregate
amount of intercompany receivables owed to Borrower and its Domestic
Subsidiaries by any Foreign Subsidiary as of that date, and plus (d)
the lesser of (A) the after-tax effect of the Contemplated Charge as
applied to assets of Borrower and its Domestic Subsidiaries and (B)
$70,000,000.
"Domestic Indebtedness" means, as of any date of
determination, the total outstanding Indebtedness of Borrower and its
Domestic Subsidiaries (other than Financial Subsidiaries) as of the
last day of the most recently ended Fiscal Quarter.
"Domestic Interest Coverage Ratio" means, with respect to any
Fiscal Quarter of Borrower and its Consolidated Subsidiaries (other
than any Financial Subsidiary), the ratio of (a) Domestic Adjusted
Operating Income for the twelve month period ending on the last day of
such Fiscal Quarter to (b) the sum of (i) Domestic Adjusted Interest
Expense (without including accretion of
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<PAGE> 18
original issue discount on long-term debt existing during such fiscal
period) plus (ii) all dividends paid on any preferred stock of Borrower
issued subsequent to the Amendment Effective Date, in each case for the
twelve month period ending on the last day of such Fiscal Quarter.
"Domestic Joint Venture" means a Joint Venture (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 Joint Venture prepared in accordance with
Generally Accepted Accounting Principles) is located in the United
States of America.
"Domestic Lending Office" means, with respect to each Bank,
its office, branch or affiliate identified on the signature pages
hereof as its Domestic Lending Office or such other office, branch or
affiliate as such Bank may hereafter designate as its Domestic Lending
Office by notice to the Borrower and the Administrative Agent.
"Domestic Leverage Ratio" means, as of any date of
determination, the ratio of (a) Domestic Indebtedness on that date to
(b) Domestic Adjusted Tangible Net Worth on that date.
"Domestic Standing Inventory" means, as of any date of
determination, all items of unsold housing inventory (other than Model
Homes) of Borrower and its Domestic Subsidiaries, and with respect to
which either (a) 90% of the direct construction costs has been incurred
on such date or (b) at least ten months has elapsed from the date its
construction was commenced through and including such date.
Construction for purposes of this definition shall be deemed to have
commenced upon the pouring of foundation concrete.
"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) is located in the United States of
America; provided that in no event shall Kaufman and Broad
International or KBMHG 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
(including real Property owned by the Land Fund
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<PAGE> 19
Joint Venture for at least four years) (a) owned by Borrower or any of
its Subsidiaries if on that date there has been expended by Borrower
and its Subsidiaries less than 50% of the physical construction costs
reasonably estimated by Borrower (in accordance with its past practices
as of the Amendment Effective Date) to bring such real Property to
"finished lot" status and (b) owned by other Persons but which, if
owned by Borrower or any of its Subsidiaries on that date, would have
satisfied the requirement set forth in clause (a), if on that date
Borrower or any of its Domestic Subsidiaries holds an option to
purchase such real Property for which it has paid an amount equal to
20% or more of the purchase price provided for in such option to
purchase. The "book value" with respect to Domestic Unimproved Land
referred to in Section 6.18 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.
"Domestic Unimproved Unmapped Land"" means, as of any date of
determination, Domestic Unimproved Land that is not then covered by a
"tentative" or "final" subdivision map in compliance with applicable
Laws respecting subdivision maps or, in the opinion of the
Administrative Agent, an equivalent entitlement that authorizes the
development of real Property.
"Eligible Assignee" shall have the meaning for such term set
forth in the Override Agreement.
"ERISA" means, at any date, the Employee Retirement Income
Security Act of 1974 and the regulations there- under, 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.
"Event of Default" has the meaning set forth for that
term in Section 9.1.
"Federal Funds Rate" means the rate per annum equal to the
weighted average (rounded upwards, if necessary, to the nearest 1/100th
of one percent) of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers as published for such day (or, if such day is not a Banking
Day, for the next preceding Banking Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a
Banking Day, the
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<PAGE> 20
average, the average (rounded upwards, if necessary,
to the nearest 1/100th of one percent) of the quotations for such day
on transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by the Administrative
Agent.
"Financial Letter of Credit" means any standby letter of
credit issued pursuant to this Agreement, other than a Performance
Letter of Credit.
"Financial Subsidiary" means (a) the Mortgage Company, so long
as it continues to engage in the mortgage banking business, and its
Subsidiaries and (b) 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.
"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.
"Fiscal Year" means each of the fiscal years of Borrower
ending on each November 30.
"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 Kaufman and Broad International, a
California corporation, but excludes KBMHG.
"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 1.3) to those applied to financial statements of
that Person as of prior dates and for prior periods.
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<PAGE> 21
"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 any Domestic Subsidiary which is
a Significant Subsidiary, other than the Financial Subsidiaries.
"Indebtedness" means, with respect to any Person, (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, (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, (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 letters of
credit issued for the account of such Person and that is not otherwise
a Contingent Guaranty Obligation and (h) any obligation of such Person
under a Swap Agreement.
- 16 -
<PAGE> 22
"Intangible Assets" means assets that are considered
intangible assets under Generally Accepted Accounting Principles,
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 the Amendment Effective Date, as
such write-up may decrease (but not increase) from time to time.
"Interest Period" means, as to each LIBOR Loan, a period of
one, two, three or six months (and one or two weeks; provided, that so
long as the restricted period for LIBOR Loans described in Section
2.1(i) is in effect, availability of one and two week Interest Periods
shall not be subject to funding availability), as designated by
Borrower; provided that (a) the first day of each Interest Period must
be a LIBOR Market Day, (b) any Interest Period that would otherwise end
on a day that is not a LIBOR Market Day (other than an Interest Period
of one or two weeks) shall be extended to the next succeeding LIBOR
Market Day, unless such LIBOR Market Day falls in the next calendar
month, in which case the LIBOR Period shall end on the next preceding
LIBOR Market Day, and (c) no Interest Period with respect to a Line A
Loan may extend beyond the Line A Maturity Date and no Interest Period
with respect to a Line B Loan or a Line C Loan may extend beyond the
Line B/C 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, guarantee, 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. The amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in
the market value of such Investment.
"Issuing Bank" means Bank of America and, with the consent of
the subject Bank and the approval of the Administrative Agent, any
other Bank as may be designated by Borrower from time to time.
"Joint Venture" means any joint venture or limited partnership
(i) in which Borrower or any Domestic
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<PAGE> 23
Subsidiary of Borrower is, with respect to any joint venture, a partner
or, with respect to any limited partnership, the general partner, and
(ii) which has at least one partner that is not an Affiliate of
Borrower or any Subsidiary of Borrower.
"Joint Venturers" means, collectively, Borrower and certain
pension funds or a joint venture comprised of such pension funds which
are parties to the Land Fund Joint Venture.
"KBMHG" means Kaufman and Broad Multi-Housing Group,
Inc., a Subsidiary of Borrower.
"Land Fund Joint Venture" means that certain land fund created
by the Joint Venturers on or about August 30, 1989 for the purpose of
acquiring unimproved real Property and processing it into legally
sub-divided lots.
"Laws" means, collectively, all foreign, federal, state and
local statutes, treaties, codes, ordinances, rules, regulations and
controlling precedents of any Governmental Agency.
"Letters of Credit" means, collectively, the Line A Letters of
Credit and the Line C Letters of Credit.
"Letter of Credit Usage" means, as of any date of
determination, the aggregate undrawn face amount of outstanding Letters
of Credit plus the aggregate amount of unreimbursed draws under Letters
of Credit (that is, draws for which no Alternate Base Rate Loan was
made pursuant to Section 2.5).
"LIBOR" means, for each LIBOR Loan, that rate per annum,
determined solely by the Administrative Agent, pursuant to the
following formula (with each component expressed as a decimal and
rounded upward to the nearest 1/100 of 1%):
London Interbank Offered Rate for that LIBOR Loan
1.00 - Reserve Percentage
"LIBOR Advance" means an Advance made by a Bank to fund its
Pro Rata Share of a LIBOR Loan.
"LIBOR Lending Office" means, with respect to each Bank, its
office, branch or affiliate identified on the signature page hereof as
its LIBOR Lending Office or such other office, branch or affiliate as
such Bank may hereafter designate as its LIBOR Lending Office by notice
to Borrower and the Administrative Agent.
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<PAGE> 24
"LIBOR Loan" means a Loan made hereunder and designated or
redesignated as a LIBOR Loan in accordance with Article 2.
"LIBOR Market" means the London, England market established by
and among banks for the solicitation, offer and acceptance of Dollar
deposits in such banks.
"LIBOR Market Day" means any Banking Day on which commercial
banks are open for international business (including dealing in Dollar
deposits) in London, England.
"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 (other than the Administrative Agent and the Banks
with respect to the Obligations) 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, and/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.
"Line A Banks" means any of the banks signatory to this
Agreement as a "Line A Bank", their successors and permitted assigns.
"Line A Commitment" means, as of any date of determination,
the amount of the "KBHC Commitment" then in effect pursuant to the
Override Agreement.
"Line A Commitment Assignment and Acceptance" means a
commitment assignment and acceptance prescribed by the Override
Agreement.
"Line A Credit Rating Level" means, as of any date of
determination, the credit rating level set forth below opposite the
specified credit ratings of Borrower's senior long-term unsecured debt
then in effect:
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<PAGE> 25
<TABLE>
<CAPTION>
Line A Credit
Rating Level Credit Ratings
------------ --------------
<S> <C>
I S&P BBB- or better or
Moody's Baa 3 or better
II S&P BB+ or
Moody's Ba1
III S&P BB or
Moody's Ba2
IV S&P BB- or
Moody's Ba3
V S&P B+ or
Moody's B1
VI S&P B or lower or
Moody's B2 or lower
</TABLE>
Determination of the Line A Credit Rating Level shall be based on the
lower of the credit ratings assigned by S&P and Moody's. For purposes
of the foregoing, "S&P" means Standard & Poor's Rating Group, a
division of McGraw Hill, Inc. (or a successor rating agency) and
"Moody's" means Moody's Investors Service, Inc. (or a successor rating
agency). The Line A Credit Rating Levels in effect as of any date shall
be as set forth in the then most recent Officer's Certificate delivered
to the Administrative Agent, attaching such evidence of the Line A
Credit Ratings, as may be reasonably required by the Administrative
Agent.
"Line A Financial Letter of Credit" means a Financial Letter
of Credit issued under the Line A Commitment.
"Line A Letters of Credit" means, collectively, the
Line A Financial Letters of Credit and the Line A Performance
Letters of Credit.
"Line A Letter of Credit Usage" means Letter of Credit Usage
with respect to Line A Letters of Credit.
"Line A Loan" means a Loan made by the Line A Banks under the
Line A Commitment.
"Line A Majority Banks" means, as of any date of
determination, Banks holding in the aggregate at least 51% of the
principal Indebtedness then evidenced by the Line A Notes or, if there
is then no such outstanding
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<PAGE> 26
Indebtedness, Banks having in the aggregate at least a 51% Pro Rata
Share of the Line A Commitment.
"Line A Maturity Date" means December 31, 1997.
"Line A Note" means any of the promissory notes issued by
Borrower to each Line A Bank evidencing Advances by that Bank of its
Pro Rata Share under the Line A Commitment substantially in the form of
Exhibit B, either as originally executed or the same may from time to
time be supplemented, modified, amended, renewed, extended or
supplanted.
"Line A Obligations" means the Obligations with
respect to the Line A Provisions.
"Line A Performance Letter of Credit" means a Performance
Letter of Credit issued under the Line A Commitment.
"Line A Provisions" means (a) all of the provisions of the
Loan Documents relating to (or as related to) the Line A Commitment,
the Line A Notes and the Line A Letters of Credit and (b) all of the
representations, warranties, covenants, events of default and other
provisions of the Loan Documents insofar as they are obligations of
Borrower or any other Party running in favor of the Line A Banks.
"Line B Commitment" means, subject to Section 2.7,
$110,000,000. The respective Pro-Rata Shares of the Line B/C Banks with
respect to the Line B Commitment are set forth in Schedule 1.1.
"Line B Loan" means a Loan made by the Line B/C Banks under
the Line B Commitment.
"Line B Note" means any of the promissory notes issued by
Borrower to each Line B/C Bank evidencing Advances by that Bank of its
Pro Rata Share under the Line B Commitment substantially in the form of
Exhibit C, either as originally executed or the same may from time to
time be supplemented, modified, amended, renewed, extended or
supplanted.
"Line B/C Banks" means any of the banks signatory to this
Agreement as a "Line B/C Bank", their successors and permitted assigns.
"Line B/C Commitment Assignment and Acceptance" means a
commitment assignment and acceptance in the form of Exhibit E.
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<PAGE> 27
"Line B/C Credit Rating Level" means, as of any date of
determination, the credit rating level set forth below opposite the
specified credit ratings of Borrower's senior long-term unsecured debt
then in effect:
<TABLE>
<CAPTION>
Line B/C Credit
Rating Level Credit Ratings
------------ --------------
<S> <C>
I S&P BB or better or
Moody's Ba2 or better
II S&P BB- or
Moody's Ba3
III S&P B+ or
Moody's B1
IV S&P B or lower or
Moody's B2 or lower
</TABLE>
Determination of the Line B/C Credit Rating Level shall be based on the
lower of the credit ratings assigned by S&P and Moody's. For purposes
of the foregoing, "S&P" means Standard & Poor's Rating Group, a
division of McGraw Hill, Inc. (or a successor rating agency) and
"Moody's" means Moody's Investors Service, Inc. (or a successor rating
agency). The Line B/C Credit Rating Levels in effect as of any date
shall be as set forth in the then most recent Officer's Certificate
delivered to the Administrative Agent, attaching such evidence of the
Line B/C Credit Ratings, as may be reasonably required by then
Administrative Agent.
"Line B/C Majority Banks" means, as of any date of
determination, Banks holding in the aggregate at least 51% of the
principal Indebtedness then evidenced by the Line B Notes and Line C
Notes or, if there is then no such outstanding Indebtedness, Banks
having in the aggregate at least a 51% Pro Rata Share of the Line C
Commitment.
"Line B/C Maturity Date" means (a) February 28, 1997, (b) if
Borrower has so elected in compliance with Section 3.1(e)(i), May 31,
1997 or (c) if Borrower has so elected in compliance with Section
3.1(e)(ii), August 31, 1997.
"Line B/C Obligations" means the Obligations with
respect to the Line B/C Provisions.
"Line B/C Provisions" means (a) all of the provisions
of the Loan Documents relating to (or as related to), the
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<PAGE> 28
Line B Commitment, the Line B Notes, the Line C Commitment, the Line C
Notes and the Line C Letters of Credit and (b) all of the
representations, warranties, covenants, events of default and other
provisions of the Loan Documents insofar as they are obligations of
Borrower or any other Party running in favor of the Line B/C Banks.
"Line C Commitment" means, subject to Section 2.8,
$20,000,000. The respective Pro Rata Shares of the Line B/C Banks with
respect to the Line C Commitment are set forth in Schedule 1.1.
"Line C Financial Letter of Credit" means a Financial Letter
of Credit issued under the Line C Commitment.
"Line C Letters of Credit" means, collectively, the Line C
Financial Lettersof of Credit and the Line C Performance Letters of
Credit.
"Line C Letter of Credit Usage" means Letter of Credit Usage
with respect to Line C Letters of Credit.
"Line C Loan" means a Loan made by the Line B/C Banks under
the Line C Commitment.
"Line C Note" means any of the promissory notes issued by
Borrower to each Line B/C Bank evidencing Advances by that Bank of its
Pro Rata Share under the Line C Commitment substantially in the form of
Exhibit D, either as originally executed or the same may from time to
time be supplemented, modified, amended, renewed, extended or
supplanted.
"Line C Performance Letter of Credit" means a Performance
Letter of Credit issued under the Line C Commitment.
"Loan" means any of the groups of Advances made at any one
time by the Line A Banks or the Line B/C Banks, as the case may be.
"Loan Documents" means, collectively, this Agreement, the
Notes, the Subsidiary Guaranty, the Override Agreement and any other
agreement or instrument that may hereafter be executed and delivered by
Borrower or a Subsidiary of Borrower in favor of the Banks relating to
or in furtherance of this Agreement.
"London Interbank Offered Rate" means (a) for each LIBOR Loan
with an Interest Period of one month or more, the per annum rate
(rounded upward to the nearest 1/100 of 1%), determined solely by the
Administrative Agent, at which Bank of America's branch in London,
England would
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<PAGE> 29
offer deposits of Dollars in the LIBOR Market at or about 11:00 a.m.,
London time, on the day two LIBOR Market Days preceding the first day
of the applicable Interest Period for approximately the same time
period as the applicable Interest Period and in an amount approximately
equal to Bank of America's Pro Rata Share of that LIBOR Loan and (b)
for each LIBOR Loan with an Interest Period of one or two weeks, the
rate per annum for such Interest Periods appearing on the Telerate
Screen Page 3750 as of 11:00 a.m. London time on the day two LIBOR
Market Days preceding the first day of the applicable Interest Period.
"Majority Banks" means (a) where used in any Loan Document
with respect to a waiver or amendment of the Line A Provisions, or any
consent or approval related thereto, or enforcement of any remedies
with respect to the Line A Notes or Line A Letters of Credit, the Line
A Majority Banks and (b) where used in any Loan Documents with respect
to a waiver or amendment of the Line B/C Provisions, or any consent or
approval related thereto, or enforcement of any remedies with respect
to the Line B Notes, the Line C Notes or Line C Letters of Credit, the
Line B/C Majority Banks.
"Managing Agents" means Bank of America National Trust and
Savings Association, The First National Bank of Chicago, Credit
Lyonnais Los Angeles Branch and NationsBank of Texas, N.A. The Managing
Agents shall have no duties under the Loan Documents beyond those of a
Bank.
"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 probably
will have any material adverse effect upon the validity or
enforceability of any Loan Document, (b) is or probably will be
material and adverse to the condition (financial or otherwise) or
operations of Borrower and its Subsidiaries, taken as a whole, (c)
materially impairs or probably will materially impair the ability of
Borrower and its Subsidiaries, taken as a whole, to perform the
Obligations or (d) were initiated or approved by Borrower or any of its
Subsidiaries and which materially impairs or probably will materially
impair the ability of the Banks to enforce any material legal remedy
pursuant to the Loan Documents.
"Material KBMC Default" means an event which, with the giving
of notice or passage of time or both, would become a Material KBMC
Event of Default.
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<PAGE> 30
"Material KBMC Event of Default" means any "Event of Default"
described in Section 11.1(a), 11.1(b) (but only to the extent the same
relates to failure to comply with a covenant contained in Sections 10.1
through 10.23, inclusive, of the Mortgage Warehousing Agreement and, in
the case of Sections 10.16, 10.19, 10.20 and 10.22, only to the extent
the failure to comply has a Material Adverse Effect), 11.1(d) (but only
to the extent that the misrepresentation therein described has a
Material Adverse Effect) and 11.1(e) through 11.1(q), inclusive, of the
Mortgage Warehousing Agreement.
"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 project, provided that up to twenty
percent (20%) of the total number of residential home projects may each
have up to six units that may be considered Model Homes, and in all
other residential home projects no more than four units shall be
considered Model Homes.
"Mortgage Company" means Kaufman and Broad Mortgage
Company, an Illinois corporation and a wholly owned
Financial Subsidiary of Borrower.
"Mortgage Warehousing Agreement" means that certain Loan
Agreement dated as of September 15, 1993 among Mortgage Company, the
banks party thereto and Credit Lyonnais Los Angeles Branch, as agent
for the banks, as heretofore amended as of November 21, 1994, as
further amended as of the Amendment Effective Date and as the same may
from time to time be amended or modified.
"Mortgage Warehousing Guaranty" means Borrower's Guaranty
dated September 15, 1993, as amended or modified from time to time, of
up to $30,000,000 of the obligations of Mortgage Company under the
Mortgage Warehousing Agreement in the event of a "Delivery Failure", as
defined in such Guaranty.
"Multiemployer Plan" means any employee benefit plan of a type
described in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
sum of (a) the gross cash consideration received by Borrower and its
Domestic Subsidiaries in connection therewith plus (b) the aggregate
cash payments received by Borrower and its Domestic Subsidiaries in
respect of any promissory note or similar obligation received by
Borrower and its Domestic Subsidiaries in connection therewith plus (c)
the aggregate cash payments received by Borrower and its Domestic
Subsidiaries in consideration of the
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<PAGE> 31
disposition of any non-Cash asset received by Borrower or its Domestic
Subsidiaries in connection therewith, net of (i) all transactional
costs (legal, accounting, brokerage and the like) incurred by Borrower
and its Domestic Subsidiaries in connection with such Asset Sale, (ii)
any development or entitlement expenditures which Borrower or its
Domestic Subsidiary is obligated to make with respect to the asset
which is the subject of such Asset Sale, (iii) any federal and state
income taxes payable by Borrower with respect to any gain realized on
such Asset Sale and (iv) the amount of any obligation secured by a Lien
on the asset which is the subject of such Asset Sale required by the
purchaser thereof to be released as a condition of such Asset Sale. In
determining Net Cash Proceeds where less than 100% of the sales price
is received in cash at the time of the Asset Sale, Borrower shall
reasonably estimate the deductions described in clauses (i), (ii),
(iii) and (iv) and deduct from all cash as received the same proportion
of such deductible amounts as the proportion which the cash received is
of the sales price for the Asset Sale, subject to confirmation when all
such cash has been received by Borrower or its Domestic Subsidiary.
"Net Orders" means, as of any date of determination, the
number of items of housing inventory that are in the process of being
sold and with respect to which a purchase contract has been signed, as
reported in Borrower's filings with the Securities Exchange Commission.
"Net Realizable Value Adjustment" means the adjustment
required pursuant to Generally Accepted Accounting Principles
(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.
"Notes" means, collectively, the Line A Notes, the
Line B Notes and the Line C Notes.
"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
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<PAGE> 32
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) Davis, Polk & Wardwell, special counsel to Borrower,
and (b) Barton P. Pachino, General Counsel of Borrower substantially in
the form of Exhibits F-1 and F-2, respectively, together with copies of
all factual certificates and legal opinions upon which such counsel has
relied.
"Override Agents" means Bank of America National
Trust and Savings Association and The First National Bank
of Chicago, in their capacity as the Override Agents under
the Override Agreement.
"Override Agreement" means that certain Amended And Restated
Override Agreement dated of even date herewith among Borrower, Mortgage
Company, the Override Agents and the Line A Banks, as the same may from
time to time be amended or modified.
"Party" means any Person other than the Banks or the Agents
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.
"Performance Letter of Credit" means any standby letter of
credit issued pursuant to this Agreement to assure completion of
performance of a nonfinancial or commercial obligation of Borrower or
any of its Subsidiaries.
"Permitted Encumbrances" means:
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<PAGE> 33
(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 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 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 in a shopping center or similar real property
project affecting real property 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;
(f) rights reserved to or vested in any
Governmental Agency to control or regulate the use of
any real property;
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<PAGE> 34
(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
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<PAGE> 35
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.
"Person" means an individual, trustee, corporation, general
partnership, limited partnership, joint stock company, trust, estate,
unincorporated organization, union, tribe, business association or
firm, joint venture, Governmental Agency, or other entity.
"Prior Loan Agreement" has the meaning set forth for
that term in the Recitals hereto.
"Projections" means the financial projections of Borrower
transmitted to the Banks by letter dated February 20, 1996, giving
effect to the Rayco Acquisition and this Agreement.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Pro-Rata Share" means (a) with respect to each Line A Bank,
the percentage set forth opposite the name of that Bank on Schedule 1.1
to the Override Agreement and (b) with respect to each Line B/C Bank,
the percentage set forth on Schedule 1.1 to this Agreement.
"Quarterly Payment Date" means March 31, 1996 and each June
30, September 30, December 31 and March 31, thereafter through and
including the Line A Maturity Date.
"Rayco Acquisition" means the acquisition by Borrower
of all of the partnership interests of Rayco, Ltd. and the
capital stock of certain affiliated corporations pursuant
to the Rayco Acquisition Agreement.
"Rayco Acquisition Agreement" means that certain Purchase
Agreement dated as of January 22, 1996 among Borrower, the owners of
the partnership interests of
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<PAGE> 36
Rayco, Ltd., and the owners of the capital stock of the corporations
affiliated with Rayco, Ltd.
"Recapture Gain" means any after tax gain realized by Borrower
or any of its Domestic Subsidiaries upon the sale or other disposition
of Domestic Unimproved Land which is a subject of the Contemplated
Charge; provided that, for the purpose of calculating such gain, any
amount expended by Borrower or its Domestic Subsidiaries to improve
such Domestic Unimproved Land subsequent to the date of the
Contemplated Charge shall be added to the book value of the Domestic
Unimproved Land.
"Reference Rate" means the per annum rate of interest publicly
announced from time to time by Bank of America at San Francisco,
California, as its Reference Rate. The Reference Rate is set by Bank of
America based on various factors, including Bank of America's costs and
desired return, general economic conditions and other factors, and is
used as a reference point for pricing loans. Bank of America may price
loans at, above or below the Reference Rate. Any change in the
Reference Rate shall take effect on the day specified in the public
announcement of such change.
"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.
"Regulatory Development" means (a) any change in the Laws, (b)
change in the application of any existing Laws or the interpretation
thereof by any Governmental Agency or central bank or comparable
authority (whether or not having the force of Law), or (c) compliance
by any Bank with any request or directive (whether or not having the
force of Law) of any Governmental Agency or central bank or comparable
authority.
"Request for Letter of Credit" means a written request for the
issuance of a Letter of Credit signed by a Responsible Official of
Borrower, substantially in the form of Exhibit G.
"Request for Loan" means a request for a Loan signed by a
Responsible Official of Borrower, substantially in the form of Exhibit
H.
"Request for Redesignation of Loans" means a written request
for redesignation of Loans signed by a Responsible Official of
Borrower, substantially in the form of Exhibit I.
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<PAGE> 37
"Requirement of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or
governing documents of such 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.
"Reserve Percentage" means, for each LIBOR Loan, the total of
the maximum reserve percentages for determining the reserves to be
maintained by member banks of the Federal Reserve System for
Eurocurrency Liabilities, as defined in Regulation D. The Reserve
Percentage shall be expressed in decimal form and rounded upward, if
necessary, to the nearest 1/100th of one percent, and shall include
marginal, emergency, supplemental, special and other reserve
percentages. The Reserve Percentage shall be determined solely by the
Administrative Agent, which determination shall be conclusive absent
manifest error.
"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 and/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).
"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 Officer" means the (a) chief executive officer, (b)
chief operating officer, (c) chief financial
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<PAGE> 38
officer, or (d) treasurer, in each case whatever the title nomenclature
may be, of the Person designated.
"Shareholders' Equity" means, as of any date of determination,
shareholders' equity as of that date determined in accordance with
Generally Accepted Accounting Principles; 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 Amendment Effective
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 or years of such Subsidiary exceeds the
greater of (i) an amount equal to 5% of the consolidated net
income 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) $3,000,000.
"Subordinated Obligations" means, collectively, all
obligations of Borrower or any of its Subsidiaries that (a) do not
provide for any payment of principal, any sinking fund payment or any
scheduled redemption prior to the Line A Maturity Date, (b) are
expressly subordinated to the Obligations by a written instrument
containing subordination and related provisions (including interest
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<PAGE> 39
payment blockage, standstill and related provisions) not materially
less favorable to the Banks in any respect whatsoever from those
applicable to Borrower's 9-3/8% Senior Subordinated Notes due 2003 (the
"Subordinated Notes") (or such other subordination and related
provisions as may be approved in writing by Both Majority Banks), (c)
are subject to financial covenants not materially more burdensome to
Borrower in any respect than those applicable to the Subordinated
Notes, except such covenants as may be approved in writing by Both
Majority 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 Both Majority Banks.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership or joint venture
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 and/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, or (c)
in the case of a partnership, joint venture or other business entity
which would qualify as a Foreign Subsidiary, in which such Person or a
Subsidiary of such Person owns an equity interest of more than 50%,
provided that the Land Fund Joint Venture shall not be a Subsidiary so
long as each of the following conditions remains satisfied: (1) all
real Property purchased by the Land Fund Joint Venture shall be located
within the state of California, (2) the aggregate amount of Borrower's
Investment in the Land Fund Joint Venture shall not exceed the lesser
of $15,000,000 or 10% of the total capitalization of the Land Fund
Joint Venture, (3) the Land Fund Joint Venture shall not create, incur,
assume or suffer to exist any Indebtedness other than Non-Recourse
Indebtedness, (4) the aggregate outstanding principal amount of
Non-Recourse Indebtedness of the Land Fund Joint Venture (other than to
Joint Venturers as defined below) shall not exceed an amount equal to
50% of its total capitalization, and (5) Borrower shall not be liable
in any capacity for any amount in excess of its Investment in the Land
Fund Joint Venture.
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<PAGE> 40
"Subsidiary Guaranty" means the guaranty of the Obligations
executed by each Guarantor Subsidiary of Borrower substantially in the
form of Exhibit J, either as originally executed or as the same may
from time to time be supplemented, modified, amended, renewed, extended
or supplanted.
"Swap Agreement" means one or more written agreements between
Borrower and one or more financial institutions providing for "swap",
"cap", "collar" or other interest rate protection with respect to any
Indebtedness.
"Tangible Net Worth" means, with respect to any Person and as
of any date of determination, the Shareholders' Equity of that Person
on that date minus all Intangible Assets of that Person on that date.
"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
apportionment 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.
1.2 Use of Defined Terms. Any defined term used in the plural preceded
by the definite article shall be taken to
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<PAGE> 41
encompass all members of the relevant class. Any defined term used in the
singular preceded by "any" shall be taken to indicate any number of the members
of the relevant class.
1.3 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 6.4, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12,
6.13, 6.14, 6.18, 6.19, and 6.20 would then be 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.
1.4 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.
1.5 Miscellaneous Terms. The term "or" is disjunctive; the term "and"
is conjunctive. The term "shall" is mandatory; the term "may" is permissive.
Masculine terms also apply to females; feminine terms also apply to males. The
term "including" is by way of example and not limitation.
1.6 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.
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<PAGE> 42
1.7 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.
ARTICLE 2
LOANS
2.1 Loans-General.
(a) Subject to the terms and conditions set forth in this
Agreement (including Section 8.2) and the Override Agreement, at any
time and from time to time from the Amendment Effective Date through
the Banking Day immediately preceding the Line A Maturity Date, each
Line A Bank shall, pro rata according to that Bank's Pro Rata Share of
the Line A Commitment then in effect, make Advances to Borrower under
the Line A Commitment in such amounts as Borrower may request; provided
that (i) after giving effect to such Advance, the aggregate outstanding
principal of the Line A Loans evidenced by that Bank's Line A Note plus
that Bank's Pro Rata Share of the Line A Letter of Credit Usage shall
not exceed that Bank's Pro Rata Share of the Line A Commitment and (ii)
no Advance under the Line A Commitment may be made if, giving effect
thereto and the application of proceeds therefrom, there is any Line C
Loan outstanding. Subject to the limitations set forth herein, Borrower
may borrow, repay and reborrow under this Section 2.1(a) without
premium or penalty.
(b) Subject to the terms and conditions set forth in this
Agreement (including Section 8.2), at any time from the Amendment
Effective Date through April 15, 1996, each Line B/C Bank shall, pro
rata according to that Bank's Pro Rata Share of the Line B Commitment
then in effect, make Advances to Borrower under the Line B Commitment
in such amounts as Borrower may request; provided that (i) after giving
effect to such Advance, the aggregate outstanding principal of the Line
B Loans evidenced by that Bank's Line B Note shall not exceed that
Bank's Pro Rata Share of the Line B Commitment and (ii) Borrower may
only request two (2) Line B Loans. Borrower may not repay and reborrow
under this Section 2.1(b).
(c) Subject to the terms and conditions set forth in this
Agreement (including Section 8.2), at any time and from time to time
from the Amendment Effective Date through the Banking Day immediately
preceding the Line C Maturity Date, each Line B/C Bank shall, pro rata
according to that Bank's Pro Rata Share of the Line C
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Commitment then in effect, make Advances to Borrower under the Line C
Commitment in such amounts as Borrower may request; provided that (i)
on that date there is no unused availability under the Line A
Commitment and (ii) after giving effect to such Advance, the aggregate
outstanding principal of the Line C Loans evidenced by that Bank's Line
C Note plus that Bank's Pro Rata Share of the Line C Letter of Credit
Usage shall not exceed that Bank's Pro Rata Share of the Line C
Commitment. Subject to the limitations set forth herein, Borrower may
borrow, repay and reborrow under this Section 2.1(c) without premium or
penalty.
(d) Subject to the next sentence and to Section 2.5(d), each
Loan shall be made pursuant to a Request for Loan which shall specify
whether such Loan is to be a Line A Loan, a Line B Loan or a Line C
Loan and the requested (i) date of such Loan, (ii) type of Loan, (iii)
amount of such Loan, and (iv) in the case of a LIBOR Loan, Interest
Period for such Loan. Unless the Administrative Agent, in its sole and
absolute discretion, has notified Borrower to the contrary, each Loan
shall be requested by telephone (promptly confirmed in writing) or
telecopier by a Responsible Official of Borrower, and Borrower shall
confirm such request by promptly mailing a Request for Loan conforming
to the preceding sentence to the Administrative Agent.
(e) Promptly following receipt of a Request for Loan, the
Administrative Agent shall notify each Line A Bank or Line B/C Bank (as
applicable) by telephone, tele-copier or telex of the date and type of
the Loan, the applicable Interest Period in the case of an LIBOR Loan,
and that Bank's Pro Rata Share of the Loan. Not later than 11:00 a.m.,
San Francisco time, on the date specified for any Loan, each Bank shall
make its Pro-Rata Share of the Loan in immediately available funds
available to the Administrative Agent at the Administrative Agent's
Office. Upon fulfillment of the applicable conditions set forth in
Article 8, all Advances shall be credited in immediately available
funds to the Designated Deposit Account.
(f) The principal amount of each Loan shall be an integral
multiple of $1,000,000 and shall be in an amount not less than (i)
$1,000,000 if such Loan is an Alternate Base Rate Loan, (ii)
$10,000,000 if such Loan is a Line A Loan or a Line B Loan that is a
LIBOR Loan and (iii) $5,000,000 if such Loan is a LIBOR Loan that is a
Line C Loan.
(g) A Request for Loan shall be irrevocable upon the
Administrative Agent's first notification thereof. The
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obligation of each Bank to make any Advance is several, and not joint
or joint and several, and is not conditioned upon the performance by
any other Bank of its obligation to make Advances. The failure by any
Bank to perform its obligation to make any Advance will not increase
the obligation of any other Bank to make Advances.
(h) Borrower may redesignate an Alternate Base Rate Loan as a
LIBOR Loan, or a LIBOR Loan as an Alternate Base Rate Loan or a LIBOR
Loan with a new Interest Period, by delivering a Request for
Redesignation to the Administrative Agent, within the time periods and
pursuant to the conditions set forth in Section 2.1(d), 2.2 or 2.3, as
applicable, and elsewhere in this Agreement (including Section 8.3). If
no Request for Redesignation (or telephonic or other request referred
to in the second sentence of Section 2.1(d), if applicable) has been
made prior to the last day of the Interest Period for an outstanding
LIBOR Loan within the requisite notice periods set forth in Section
2.3, then Borrower shall be deemed to have requested that such LIBOR
Loan be redesignated as an Alternate Base Rate Loan.
(i) Notwithstanding anything contained in this Section or
Section 2.3, Borrower may not request a LIBOR Loan that is a Line B
Loan or a Line C Loan with an Interest Period in excess of one week or
two weeks prior to the earlier of (A) the date upon which the
Co-Syndication Agents notify the Administrative Agent and Borrower that
the primary syndication of the Line B Commitment and Line C Commitment
has been completed or (B) the sixtieth (60th) day after the Amendment
Effective Date.
2.2 Alternate Base Rate Loans. Each request by Borrower
for an Alternate Base Rate Loan shall be made pursuant to a
Request for Loan (or telephonic or other request for loan
referred to in the second sentence of Section 2.1(d), if
applicable) received by the Administrative Agent, at the
Administrative Agent's Office, not later than 9:00 a.m., San
Francisco time, on the Banking Day on which the requested
Alternate Base Rate Loan is to be made. The Administrative
Agent shall notify each Bank of a request for an Alternate Base Rate Loan as
soon as practicable after receipt of the same. All Loans shall constitute
Alternate Base Rate Loans unless properly designated as LIBOR Loans pursuant to
Section 2.3.
2.3 LIBOR Loans.
(a) Each request by Borrower for a LIBOR Loan shall be made
pursuant to a Request for Loan (or telephonic or other request for loan
referred to in the second sentence
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<PAGE> 45
of Section 2.1(d), if applicable) received by the Administrative Agent,
at the Administrative Agent's Office, not later than 9:00 a.m., San
Francisco time, at least three (3) LIBOR Market Days before the first
day of the applicable Interest Period. The Administrative Agent shall
notify each Bank of a request for a LIBOR Loan as soon as practicable
after receipt of the same.
(b) At or about 10:00 a.m., San Francisco time, two (2) LIBOR
Market Days before the first day of the applicable Interest Period, the
Administrative Agent shall determine the applicable LIBOR (which
determination shall be conclusive in the absence of manifest error) and
promptly shall give notice of the same to Borrower and the Banks by
telephone, telecopier or telex.
(c) No more than ten (10) LIBOR Loans may be
outstanding at any particular time.
(d) Unless the Majority Banks otherwise consent, no
LIBOR Loan may be requested during the continuance of an Event of
Default.
2.4 Notes. The Advances made by each Line A Bank under the Line A
Commitment shall be evidenced by that Bank's Line A Note, the Advances made by
each Line B/C Bank under the Line B Commitment shall be evidenced by that Bank's
Line B Note and the Advances made by each Line B/C Bank under the Line C
Commitment shall be evidenced by that Bank's Line C Note.
2.5 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement
(including Section 8.4) and the Override Agreement, Borrower may
request from time to time during the period from the Amendment
Effective Date through the day prior to the Line A Maturity Date that
an Issuing Bank issue Line A Letters of Credit for the account of
Borrower, and each Issuing Bank agrees to issue for the account of
Borrower one or more Line A Letters of Credit, provided that (i)
Borrower shall not request that an Issuing Bank issue any Line A Letter
of Credit if, after giving effect to such issuance, the aggregate
outstanding principal of the Line A Loans evidenced by the Line A Notes
plus the Line A Letter of Credit Usage exceeds the Line A Commitment,
(ii) Borrower shall not request that an Issuing Bank issue any Line A
Letter of Credit if Borrower would not be in compliance with Sections
6.13 and 6.14, (iii) in no event shall an Issuing Bank issue any Line A
Letter of Credit having an expiration date after the Line A Maturity
Date, (iv) the Borrower shall not request any Line A Financial Letter
of Credit or Line A
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<PAGE> 46
Performance Letter of Credit if, after giving effect to such issuance,
the Line A Letter of Credit Usage with respect to Line A Financial
Letters of Credit and Line A Performance Letters of Credit would exceed
$50,000,000 or any limit established by Law after the Amendment
Effective Date on that Issuing Bank's ability to issue the requested
Letter of Credit at any time, and (v) prior to the issuance of any
Letter of Credit the Issuing Bank shall request confirmation by
telephone from the Administrative Agent that such Letter of Credit may
be issued. Notwithstanding the foregoing, the Issuing Bank shall not be
obligated to issue a Letter of Credit if, on or prior to the Banking
Day immediately preceding the issuance thereof any Bank has notified
the Issuing Bank in writing that the conditions set forth in Section
8.4 have not been satisfied with respect to the issuance of such Letter
of Credit.
(b) Subject to the terms and conditions of this Agreement
(including Section 8.4), Borrower may request from time to time during
the period from the Amendment Effective Date through the day prior to
the Line B/C Maturity Date that an Issuing Bank issue Line C Letters of
Credit for the account of Borrower, and each Issuing Bank agrees to
issue for the account of Borrower one or more Line C Letters of Credit,
provided that (i) Borrower shall not request that an Issuing Bank issue
any Line C Letter of Credit if, after giving effect to such issuance,
the aggregate outstanding principal of the Line C Loans evidenced by
the Line C Notes plus the Line C Letter of Credit Usage exceeds the
Line C Commitment, (ii) Borrower shall not request that an Issuing Bank
issue any Line C Letter of Credit if Borrower would not be in
compliance with Sections 6.13 and 6.14, (iii) in no event shall an
Issuing Bank issue any Line C Letter of Credit having an expiration
date after the Line B/C Maturity Date, (iv) the Borrower shall not
request any Line C Financial Letter of Credit or Line C Performance
Letter of Credit if, after giving effect to such issuance, the Line C
Letter of Credit Usage with respect to Line C Financial Letters of
Credit and Performance Letters of Credit would exceed $5,000,000 or any
limit established by Law after the Amendment Effective Date on that
Issuing Bank's ability to issue the requested Line C Letter of Credit
at any time, and (v) prior to the issuance of any Letter of Credit
the Issuing Bank shall request confirmation by telephone from the
Administrative Agent that such Letter of Credit may be issued.
Notwithstanding the foregoing, the Issuing Bank shall not be obligated
to issue a Letter of Credit if, on or prior to the Banking Day
immediately preceding the issuance thereof any Bank has notified the
Issuing Bank in writing that the conditions set forth in Section 8.4
have
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<PAGE> 47
not been satisfied with respect to the issuance of such Letter of
Credit.
(c) Whenever Borrower requests that an Issuing Bank issue a
Letter of Credit it shall deliver to such Issuing Bank (with a copy to
the Administrative Agent) (i) an executed application for such Letter
of Credit in the form customarily required by the Issuing Bank and a
Request for Letter of Credit by 10:00 a.m., San Francisco time, at
least three (3) Banking Days prior to the proposed date of issuance,
provided that the Issuing Bank shall use its best efforts to issue the
proposed Letter of Credit within two Banking Days after receipt of such
request, and (ii) the form of the Letter of Credit requested, together
with such other information or materials as the Issuing Bank may
reasonably request with respect to such Letter of Credit. The
Administrative Agent shall promptly thereafter notify each of the Line
A Banks or the Line B/C Banks, as applicable, of the contents of such
Request for Letter of Credit and proposed form of Letter of Credit.
Prior to the issuance of any Letter of Credit, the Issuing Bank shall
confirm by telephone with the Administrative Agent that, giving effect
to the issuance of such Letter of Credit, the limitations set forth in
Section 2.5(a) or 2.5(b), as applicable, have been satisfied.
(d) Each Issuing Bank shall notify the Administrative Agent
and Borrower of each issuance or amendment of any Letter of Credit
issued by it on the Banking Day upon which such issuance or amendment
occurs. Such notice shall indicate whether such Letter of Credit is, in
the reasonable determination of the Issuing Bank (which determination
shall be conclusive absent manifest error), a Financial Letter of
Credit or a Performance Letter of Credit. Upon the issuance of a Line A
Letter of Credit, each Line A Bank (other than the respective Issuing
Bank and any Bank that has notified the Issuing Bank pursuant to the
last sentence of Section 2.5(a) with respect to such Letter of Credit)
shall be deemed to have purchased a pro rata participation from the
Issuing Bank in an amount equal to that Bank's Pro Rata Share, of the
face amount of such Line A Letter of Credit. Upon the issuance of a
Line C Letter of Credit, each Line B/C Bank (other than the respective
Issuing Bank and any Bank that has notified the Issuing Bank pursuant
to the last sentence of Section 2.5(b) with respect to such Letter of
Credit) shall be deemed to have purchased a pro rata participation from
the Issuing Bank in an amount equal to that Bank's Pro Rata Share, of
the face amount of such Line C Letter of Credit. Without limiting the
scope and nature of each such Bank's participation in any Letter of
Credit, to the extent that the Issuing Bank has not been reimbursed for
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<PAGE> 48
any payment required to be made by the Issuing Bank under any Letter of
Credit by the Banks through the making of an Alternative Base Rate Loan
in accordance with Section 2.5(e) or by the Borrower in accordance with
Section 2.5(f), each such Bank shall, according to its Pro Rata Share,
immediately reimburse the Issuing Bank upon demand for the amount of
such payment. If any Bank fails to reimburse the Issuing Bank in the
manner required by this Section on the same day upon which the related
payment has been made by the Issuing Bank, that Bank shall also pay
interest to the Issuing Bank on the amount of such reimbursement
obligations at the Federal Funds Rate for the first two days after
payment has been made by the Issuing Bank and at a rate equal to the
sum of the Federal Funds Rate plus 2% from and after the third day
after the date such payment was made (which interest shall not be for
the account of or otherwise reimbursable by Borrower). The obligation
of each such Bank to so reimburse the Issuing Bank shall be absolute
and unconditional and shall not be affected by (i) the occurrence of an
Event of Default or a Default, (ii) any set-off, counterclaim, defense
or other right that such Bank or Borrower may have against the Issuing
Bank, Borrower or any other Person, (iii) any adverse change in the
condition (financial or otherwise) of Borrower or (iv) any other
occurrence or event. Any such reimbursement shall not relieve or
otherwise impair the obligation of Borrower to reimburse the Issuing
Bank under any Letter of Credit together with interest as hereinafter
provided.
(e) The Issuing Bank shall provide notice to Borrower and the
Administrative Agent of the amount of each demand for a draw under any
Letter of Credit and, where practicable, such notice may be provided on
the Banking Day immediately preceding the Banking Day of an expected
payment. If all of the limitations and requirements set forth in this
Agreement with respect to the making of an Alternate Base Rate Loan
(except the requirement that a Request for Loan be made as and when
specified herein) have been satisfied then the Line A Banks or the Line
B/C Banks (as applicable) shall be obligated to make an Alternate Base
Rate Loan to Borrower (without notice to or the consent of the
Borrower) under the Line A Commitment or Line C Commitment (as
applicable) in an aggregate amount equal to the amount paid by the
Issuing Bank on the related Letter of Credit. The Administrative Agent
shall thereupon promptly provide notice of such payment under the
Letter of Credit to the Banks, and within one Banking Day after such
notice from the Administrative Agent, each Line A Bank or Line B/C Bank
(as applicable) shall make its Pro Rata Share of the Alternate Base
Rate Loan made by the Issuing Bank (plus
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<PAGE> 49
interest at the Federal Funds Rate for the first two days after the
date payment has been made by the Issuing Bank and at a rate equal to
the sum of the Federal Funds Rate plus 2% from and after the third day
after the date such payment has been made by he Issuing Bank, which
interest shall not be for the account of or otherwise reimbursable by
Borrower) available to the Administrative Agent for the account of the
Issuing Bank in immediately available funds, and such funds shall
collectively constitute the aforementioned Alternate Base Rate Loan,
the proceeds of which shall be paid to the Issuing Bank to reimburse it
for the payment made by it under the Letter of Credit.
(f) In the event that not all of the limitations and
requirements set forth in this Agreement with respect to the making of
an Alternative Base Rate Loan (other than the requirement that a
Request for Loan be made as and when specified herein) have been
satisfied, then Borrower agrees to pay to the Issuing Bank an amount
equal to the amount of the applicable demand for a draw under a Letter
of Credit (i) on the same Banking Day any payment is made, if the
Issuing Bank notifies Borrower of such payment prior to 12:00 p.m., San
Francisco time, on the Banking Day immediately preceding the Banking
Day upon which such payment is to be made or (ii) on the Banking Day
immediately following the Banking Day of the payment, if later notice
is given. The principal amount of any such payment made by Borrower to
the Issuing Bank shall be used to reimburse the Issuing Bank for the
payment made by it under the Letter of Credit. In the event that
Borrower does not make such payment when due, Borrower shall also pay
interest to the Administrative Agent for the account of the Line A
Banks or Line B/C Banks (as applicable) on such amount from the date of
any payment to, but not including, the date of payment by Borrower at
the rate provided for in Section 3.7; provided that not less than one
day's interest shall be due. Each Bank that has reimbursed the Issuing
Bank pursuant to this Section 2.5(f) in accordance with its Pro Rata
Share of any payment made by the Issuing Bank under a Letter of Credit
shall thereupon acquire a pro rata participation, to the
extent of such reimbursement, in the claim of the Issuing Bank against
Borrower under this Section 2.5(f).
(g) Borrower agrees to pay to the Administrative Agent (which
shall promptly pay the same to the Banks or the respective Issuing
Bank, as the case may be), (i) for the account of the Line A Banks
(other than a Bank that has notified the Issuing Bank pursuant to the
last sentence of Section 2.5(a) with respect to such Letter of Credit)
with respect to each Line A Letter of Credit (whether a Financial
Letter of Credit or a Performance
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Letter of Credit), a per annum letter of credit fee in an amount equal
to the Line A Applicable Letter of Credit Fee times the face amount of
such Line A Letter of Credit (including increases in the undrawn face
amount thereof) for the term of such Line A Letter of Credit, and (ii)
for the account of the applicable Issuing Bank with respect to each
Line A Letter of Credit (whether a Financial Letter of Credit or a
Performance Letter of Credit), an issuance fee in an amount equal to
the greater of $500 or one eighth percent (1/8%) per annum times the
face amount of such Line A Letter of Credit (including increases in the
undrawn face amount thereof) for the term of such Line A Letter of
Credit, together with such Issuing Bank's standard charges and
out-of-pocket costs in connection with such issuance. Borrower agrees
to pay to the Administrative Agent (which shall promptly pay the same
to the Line B/C Banks or the respective Issuing Bank, as the case may
be), (i) for the account of the Line B/C Banks (other than a Bank that
has notified the Issuing Bank pursuant to the last sentence of Section
2.5(b) with respect to such Line C Letter of Credit) with respect to
each Line C Letter of Credit (whether a Financial Letter of Credit or a
Performance Letter of Credit), a per annum letter of credit fee in an
amount equal to the Line C Applicable Letter of Credit Fee times the
face amount of such Line C Letter of Credit (including increases in the
undrawn face amount thereof) for the term of such Line C Letter of
Credit, and (ii) for the account of the applicable Issuing Bank with
respect to each Line C Letter of Credit (whether a Financial Letter of
Credit or a Performance Letter of Credit), an issuance fee in an amount
equal to the greater of $500 or one eighth percent (1/8%) per annum
times the face amount of such Line C Letter of Credit (including
increases in the undrawn face amount thereof) for the term of such Line
C Letter of Credit, together with such Issuing Bank's standard charges
and out-of-pocket costs in connection with such issuance. The letter of
credit fees for each Letter of Credit are payable in advance for each
six month period (or portion thereof) during the term of the applicable
Letter of Credit, on the issuance date and on each six month
anniversary thereof during the term the applicable Letter of Credit is
outstanding. In the event a Letter of Credit is cancelled or terminated
prior to its original expiration date, the fee provided for in clause
(i) of the first and second sentences in this subsection (g) shall be
refundable by the Banks on a pro rata basis over the period such Letter
of Credit will no longer be outstanding, and one-half of the issuance
fee referred to in clause (ii) of the first and second sentences in
this subsection (g) shall be refundable by the Issuing Bank
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over the period such Letter of Credit will no longer be outstanding
(and the balance will be non-refundable).
(h) The obligation of Borrower to reimburse each Issuing Bank
for drawings or payments made under each Letter of Credit shall be
unconditional and irrevocable. Without limiting the foregoing, such
obligation of Borrower shall not be affected by any of the following
circumstances:
(A) any lack of validity or enforceability of the
Letter of Credit, this Agreement, or any letter of credit application
or other agreement or instrument relating thereto;
(B) compliance by the Issuing Bank with any amendment
or waiver of or any consent to departure from the Letter of Credit,
this Agreement or any letter of credit application or other agreement
or instrument relating thereto previously approved by Borrower pursuant
to Section 2.5(c);
(C) the existence of any claim, setoff, defense, or
other rights which Borrower may have at any time against any Bank, any
beneficiary of the Letter of Credit (or any Persons for whom any such
beneficiary may be acting) or any other Person, whether in connection
with the Letter of Credit, this Agreement, or any letter of credit
application or other agreement or instrument relating thereto, or any
unrelated transactions;
(D) any demand, statement, or any other document
presented under a Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect whatsoever so long as any such
document appeared to comply with the terms of the Letter of Credit;
(E) the solvency or financial responsibility of any
party issuing any documents in connection with a Letter of Credit;
(F) any failure or delay in notice of shipments or
arrival of any property;
(G) any error in the transmission of any message
relating to a Letter of Credit not caused by the Issuing Bank, or any
delay or interruption in any such message;
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(H) any error, neglect or default of any
correspondent of any Bank in connection with a Letter of
Credit;
(I) any consequence arising from acts of God, war,
insurrection, disturbances, labor disputes, emergency conditions or
other causes beyond the control of the Banks;
(J) the form, accuracy, genuineness or legal effect
of any contract or document referred to in any document submitted to
the Issuing Bank in connection with a Letter of Credit so long as the
Issuing Bank in good faith determines that the draft or document
appears to comply with the terms of the Letter of Credit; and
(K) where the Issuing Bank has acted in good faith
and without gross negligence and observed general banking usage, any
other circumstance whatsoever. IN DETERMINING WHETHER TO PAY UNDER ANY
LETTER OF CREDIT, THE ISSUING BANK SHALL BE RESPONSIBLE ONLY TO
DETERMINE THAT THE DOCUMENTS AND CERTIFICATES REQUIRED TO BE DELIVERED
UNDER THAT LETTER OF CREDIT HAVE BEEN DELIVERED AND THAT THEY COMPLY ON
THEIR FACE WITH THE REQUIREMENTS OF THAT LETTER OF CREDIT AND THE
ISSUING BANK SHALL OBTAIN THE CONSENT OF THE BORROWER PRIOR TO MAKING
ANY PAYMENT WITH RESPECT TO ANY DOCUMENT OR CERTIFICATE WHICH DOES NOT
SO COMPLY ON ITS FACE.
(i) Each Issuing Bank shall be entitled to the protections
accorded to the Administrative Agent pursuant to Article 10, mutatis
mutandis.
2.6 Voluntary Reduction of Line A Commitment. Borrower shall have the
right, at any time and from time to time, without penalty or charge, voluntarily
to reduce or terminate all or a portion of any of the unused Line A Commitment,
on the terms and conditions set forth in Section 2.4 of the Override Agreement.
Borrower shall pay to the Administrative Agent on the date of such termination
all commitment fees which have accrued to such date in respect of the terminated
portion of the Line A Commitment.
2.7 Termination of Line B Commitment. Any unused portion of the Line B
Commitment shall automatically terminate at the close of business on April 15,
1996.
2.8 Voluntary Reduction of Line C Commitment. Borrower shall have the
right, at any time and from time to time, without penalty or charge, upon at
least five (5) Banking Days' prior written notice to the Administrative Agent,
voluntarily to reduce, permanently and irrevocably, in aggregate principal
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<PAGE> 53
amounts in an integral multiple of $1,000,000 but not less than $5,000,000, or
to terminate, all or a portion of the unused Line C Commitment.
2.9 Administrative Agent's Right to Assume Funds Available. Unless the
Administrative Agent shall have been notified by any Bank at least two hours
prior to the funding by the Administrative Agent of any Loan that such Bank does
not intend to make available to the Administrative Agent such Bank's Pro Rata
Share of such Loan, the Administrative Agent may, in its discretion (but shall
not be so obligated), assume that such Bank has made such amount available to
the Administrative Agent on the date of the Loan and the Administrative Agent
may, in reliance upon such assumption, make available to Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Administrative Agent by such Bank, the Administrative Agent shall be
entitled to recover such corresponding amount on demand from such Bank, which
demand shall be made in a reasonably prompt manner. If such Bank does not pay
such corresponding amount forthwith upon the Administrative Agent's demand
therefor, the Administrative Agent promptly shall notify Borrower and Borrower
shall pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from such Bank interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to Borrower
to the date such corresponding amount is recovered by the Administrative Agent,
at a rate per annum equal to the Federal Funds Rate as notified by the
Administrative Agent to such Bank or the Borrower, as the case may be. Nothing
herein shall be deemed to relieve any Bank from its obligation to fulfill its
Pro Rata Share of the Commitment hereunder or to prejudice any rights which the
Administrative Agent or Borrower may have against any Bank as a result of any
default by such Bank hereunder.
ARTICLE 3
PAYMENTS; FEES
3.1 Principal and Interest
(a) Interest shall be payable on the outstanding daily unpaid
principal amount of each Loan from the date thereof 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.
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(b) Interest accrued on each Alternate Base Rate Loan shall be
due and payable on the last day of each calendar month. Except as
otherwise provided in Section 3.9, the unpaid principal amount of any
Alternate Base Rate Loan that is a Line A Loan shall bear interest at a
fluctuating rate per annum equal to the sum of the Alternate Base Rate
plus the Applicable Line A Alternate Base Rate Spread; and the unpaid
principal amount of any Alternate Base Rate Loan that is a Line B Loan
or a Line C Loan shall bear interest at a fluctuating rate per annum
equal to the sum of the Alternate Base Rate plus the Applicable Line
B/C Alternate Base Rate Spread. Each change in the interest rate
hereunder shall take effect simultaneously with the corresponding
change in the Alternate Base Rate. Each change in the Alternate Base
Rate shall be effective as of the Banking Day on which the change in
the Alternate Base Rate is announced, unless otherwise specified in
such announcement, in which case the change shall be effective as so
specified.
(c) Interest accrued on each LIBOR Loan which has an Interest
Period of three months or less shall be due and payable on the last day
of the related Interest Period. Interest accrued on each other LIBOR
Loan shall be due and payable on the date which is three months after
the date such LIBOR Loan was made, every three months thereafter and on
last day of the related Interest Period. Except as otherwise provided
in Section 3.9, the unpaid principal amount of any LIBOR Loan that is a
Line A Loan shall bear interest at a rate per annum equal to the sum of
LIBOR for that LIBOR Loan plus the Applicable Line A LIBOR Spread; and
the unpaid principal amount of any LIBOR Loan that is a Line B Loan or
a Line C Loan shall bear interest at a rate per annum equal to the sum
of LIBOR for that LIBOR Loan plus the Applicable Line B/C LIBOR Rate
Spread.
(d) If not sooner paid, the principal Indebtedness
evidenced by the Notes shall be payable as follows:
(i) the principal Indebtedness evidenced by the Line
A Notes shall be immediately payable in Cash, to the extent
that such Indebtedness exceeds at any time the Line A
Commitment as then in effect;
(ii) the principal Indebtedness evidenced by the Line
B Notes shall be immediately payable in Cash, to the extent
that such Indebtedness exceeds at any time the Line B
Commitment as then in effect;
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(iii) the principal Indebtedness evidenced by the
Line C Notes shall be immediately payable in Cash, to the
extent that such Indebtedness exceeds at any time the Line C
Commitment as then in effect;
(iv) the principal Indebtedness evidenced by the Line
B Notes shall be payable on each Amortization Date by the
related Amortization Amount;
(v) the principal Indebtedness evidenced by the Line
A Notes shall in any event be immediately payable in Cash on
the Line A Maturity Date; and
(vi) the principal Indebtedness evidenced by the Line
B Notes and the Line C Notes shall in any event be immediately
payable in Cash on the Line B/C Maturity Date.
(e) Borrower may elect to extend the Line B/C Maturity Date
(i) to May 31, 1997 by delivering written notice thereof to the
Administrative Agent; provided that (A) such written notice shall have
been so delivered not later than February 15, 1997, (B) the Domestic
Leverage Ratio as of November 30, 1996 shall not have been greater than
2.10 to 1.00, (C) the Domestic Interest Coverage Ratio as of November
30, 1996 shall not have been less than 2.00 to 1.00, (D) the
outstanding principal balance of the Line B Loans as of February 28,
1997 shall not be greater than $33,000,000 (after giving effect to any
prepayment on that date) and (E) as of February 28, 1997, no Default or
Event of Default shall exist and (ii) to August 31, 1997 by delivering
written notice thereof to the Administrative Agent; provided that (A)
such written notice shall have been so delivered not later than May 15,
1997, (B) the Domestic Leverage Ratio as of February 28, 1997 shall not
have been greater than 2.40 to 1.00, (C) the Domestic Interest Coverage
Ratio as of February 28, 1997 shall not have been less than 2.25 to
1.00, (D) the outstanding principal balance of the Line B
Loans as of May 31, 1997 shall not be greater than $22,000,000 (after
giving effect to any prepayment on that date) and (E) as of May 31,
1997, no Default or Event of Default shall exist.
(f) The Line B Notes shall be prepaid within five (5) Banking
Days after the consummation of any Asset Sale in an amount equal to the
Net Cash Proceeds of such Asset Sale; provided that (i) to the extent
necessary to avoid the application of Section 3.8(d), such prepayment
may be delayed to the end of the Interest Period next ending but not in
any event for a period longer than thirty (30) days
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and (ii) if such prepayment would, when combined with all other
prepayments then deferred under this clause (ii), be less than
$1,000,000, such prepayment may be deferred until the next Quarterly
Payment Date, at which date all prepayments then deferred under this
clause (ii) shall be due and payable. Such prepayments shall be applied
to Amortization Amounts in the direct order of their maturity (provided
that if the Amortization Amount due on the next Amortization Date is
paid in full by such a mandatory prepayment, then an amount equal to
any excess Net Cash Proceeds may at the option of Borrower instead be
applied to permanently reduce the Line C Commitment in lieu of
application to further Amortization Amounts).
(g) The Line B Notes shall be prepaid within five (5) Banking
Days after the issuance by Borrower Subsidiaries of any equity security
or any debt security the proceeds of which may be used for general
corporate purposes, in an amount equal to the net Cash proceeds of such
issuance (net of transactional costs payable by Borrower); provided
that to the extent necessary to avoid the application of Section
3.8(d), such prepayment may be delayed to the end of the Interest
Period next ending but not in any event for a period longer than thirty
(30) days. Such prepayments shall be applied to Amortization Amounts in
the reverse order of their maturity.
(h) The Line B Notes shall be prepaid within five (5) Banking
Days after Borrower receives any payment from the sellers under the
Rayco Acquisition Agreement in respect of (i) a downward adjustment of
the purchase price thereunder or (ii) a breach of any representation or
warranty by the sellers in the Rayco Acquisition Agreement; provided
that such payment is not in compensation for an unanticipated liability
of Rayco, Ltd. or any of the corporations affiliated with Rayco, Ltd.
whose capital stock is purchased by Borrower pursuant to the Rayco
Acquisition Agreement. Such prepayments shall be applied to
Amortization Amounts in the reverse order of their maturity.
(i) 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
Alternate Base Rate Loan, and not less than $5,000,000 on a LIBOR Loan,
(iii) the Administrative Agent must have received written notice (or
telecopied notice confirmed promptly in writing) of any prepayment at
least three Banking Days before the date of prepayment in the case of a
LIBOR Loan
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<PAGE> 57
and by 10:00 a.m., San Francisco time, on the date of prepayment in the
case of an Alternate Base Rate Loan, (iv) each prepayment of principal,
except for partial prepayments on Alternate Base Rate Loans, shall be
accompanied by prepayment of interest accrued to the date of payment on
the amount of principal paid, (v) in the case of any prepayment of any
LIBOR 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 3.6 and (vi) no prepayment may be
made on the Line A Notes if there is then any principal amount
outstanding under the Line C Notes.
(j) (i) If a Change in Control (as defined below) shall have
occurred, at the option of the Line A Majority Banks, Borrower shall
repay in Cash the entire principal Indebtedness evidenced by the Line A
Notes, together with Interest thereon and all other amounts due in
connection with the Line A Notes and this Agreement, and deliver to the
Administrative Agent an amount equal to the Line A Letter of Credit
Usage then outstanding, to be held as cash collateral as provided in
Section 9.2(c) (the "Change in Control Line A Repayment"), on the date
that is 27 Banking Days after the occurrence of the Change of Control
(the "Change of Control Line A Payment Date"), subject to receipt by
Borrower of Change in Control Line A Payment Notice as set forth in
Section 3.1(j)(iii). On the Change in Control Line A Payment Date, the
Line A Commitment shall automatically terminate. If a Change in Control
shall have occurred, at the option of the Line B/C Majority Banks,
Borrower shall repay in Cash the entire principal Indebtedness
evidenced by the Line B Notes and the Line C Notes, together with
Interest thereon and all other amounts due in connection with the Line
B Notes and the Line C Notes and this Agreement, and deliver to the
Administrative Agent an amount equal to the Line C Letter of Credit
Usage then outstanding, to be held as cash collateral as provided in
Section 9.2(c) (the "Change in Control Line B/C Repayment"), on the
date that is 27 Banking Days after the occurrence of the Change of
Control (the "Change of Control Line B/C Payment Date"), subject to
receipt by Borrower of Change in Control Line B/C Payment Notice as set
forth in Section 3.1(j)(iii). On the Change in Control Line B/C Payment
Date, the Line B Commitment and the Line C Commitment shall
automatically terminate.
A "Change in Control" shall be deemed to have occurred at such
time as any of the following events shall occur:
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(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 Voting Stock
(as defined below) would be converted into Cash, securities or
other property, other than a merger of Borrower in which the
holders of Voting Stock immediately prior to the merger have
the same or greater proportionate ownership, directly or
indirectly, of the Voting Stock of the surviving corporation
immediately after such merger as they had of the Voting Stock
immediately prior to such merger; 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
Securities Exchange Act of 1934 (the "Exchange Act"),
disclosing that such person (for the purposes of this Section
3.1(j) 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 (as defined below) 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 an indenture or agreement governing any
Subordinated Obligation occurs.
Notwithstanding the foregoing provisions of this
Section 3.1(j), 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
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<PAGE> 59
Borrower, or any person holding 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 Voting Stock, whether in excess of 50% or
otherwise.
"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).
"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.
(ii) Within 15 Banking 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(j)(iii))
must be given; and
(c) the Change in Control Payment Date.
(iii) At the direction of the Line A Majority Banks, the
Administrative Agent shall, on behalf of the Line A Banks, exercise the
rights specified in Section 3.1(j)(i) by delivery of a written notice
(a "Change in Control Line A Payment Notice") to Borrower at any time
prior to or on the Change in Control Payment Date, stating that the
Line A Notes shall be prepaid and cash collateral shall be provided for
the Line A Letter of Credit Usage on the Change in Control Line A
Payment Date. On the Change in Control Line A Payment Date, Borrower
shall make the Change in Control Line A Repayment to the Administrative
Agent for the benefit of the Line A Banks, and the Line A Commitment
shall terminate.
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<PAGE> 60
At the direction of the Line B/C Majority Banks, the
Administrative Agent shall, on behalf of the Line B/C Banks, exercise
the rights specified in Section 3.1(j)(i) by delivery of a written
notice (a "Change in Control Line B/C Payment Notice") to Borrower at
any time prior to or on the Change in Control Line B/C Payment Date,
stating that the Line B Notes and the Line C Notes shall be prepaid and
cash collateral shall be provided for the Line C Letter of Credit Usage
on the Change in Control Payment Date. On the Change in Control Line
B/C Payment Date, Borrower shall make the Change in Control Line B/C
Repayment to the Administrative Agent for the benefit of the Line B/C
Banks, and the Line B Commitment and the Line C Commitment shall
terminate.
3.2 Commitment Fees. From the Amendment Effective Date to the Line A
Maturity Date, Borrower shall pay to the Administrative Agent, for the account
of each Line A Bank pro rata according to that Bank's Pro Rata Share of the Line
A Commitment, a commitment fee equal to the Applicable Line A Commitment Fee
Rate per annum in effect from time to time times the average daily amount by
which the Line A Commitment exceeds the aggregate outstanding principal of the
Line A Loans evidenced by the Notes plus the Line A Letter of Credit Usage. This
commitment fee shall accrue daily and be payable in arrears with respect to each
calendar quarter on the Quarterly Payment Date falling at the end of such
calendar quarter. The Administrative Agent shall calculate the commitment fee
and the amount thereof allocable to each Line A Bank according to that Bank's
Pro Rata Share of the Line A Commitment and shall notify Borrower in writing of
such amounts.
From the Amendment Effective Date to the Line B/C Maturity Date, Borrower shall
pay to the Administrative Agent, for the account of each Line B/C Bank pro rata
according to that Bank's Pro Rata Share of the Line C Commitment, a commitment
fee equal to .50% (50 basis points) per annum times the average daily amount by
which the Line C Commitment exceeds the aggregate outstanding principal of the
Line C Loans evidenced by the Line C Notes plus the Line C Letter of Credit
Usage. This commitment fee shall accrue daily and be payable in arrears with
respect to each calendar quarter on the Quarterly Payment Date falling at the
end of such calendar quarter. The Administrative Agent shall calculate the
commitment fee and the amount thereof allocable to each Bank according to that
Bank's Pro Rata Share of the Line C Commitment and shall notify Borrower in
writing of such amounts.
3.3 Amendment Fee. On the Amendment Effective Date, Borrower shall pay
to the Administrative Agent, for the account of each Line A Bank pro rata
according to that Bank's Pro Rata
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Share of the Line A Commitment, an amendment fee equal to .125% (12.5 basis
points) times the Line A Commitment.
3.4 Underwriting Fee. On the Amendment Effective Date, Borrower shall
pay to the Administrative Agent, for the account of the Managing Agents, an
underwriting fee as set forth in a letter agreement between Borrower and the
Managing Agents.
3.5 Syndication Fee. On the Amendment Effective Date, Borrower shall
pay to the Administrative Agent, for the account of the Co-Syndication Agents, a
syndication fee as set forth in a letter agreement between Borrower and the
Co-Syndication Agents.
3.6 Agency Fees. Borrower shall pay to the Administrative Agent and the
Override Agents, respectively, for the account solely of each respective Agent,
such agency fees as are referred to in the Override Agreement.
3.7 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 Amendment
Effective 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 Commitment
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 3.7 (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
3.7(a) unless the demand for such compensation is delivered to Borrower
within six 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 3.7(a), submitted to Borrower and
the Administrative
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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 3.7(a), Borrower may, within 60 days following any demand by
an Affected Bank, request that one or more Persons that constitute
"Eligible Assignees" under the Override Agreement and that are
acceptable to Borrower and approved by the Managing Agents (which
approval shall not be unreasonably withheld) purchase all (but not
part) of the Affected Bank's then outstanding Advances, its Notes and
its participation interest in outstanding Letters of Credit, and assume
its Pro Rata Share of the Commitments and its obligations hereunder.
Borrower shall have the same right as to any Bank which has claimed
compensation for a capital adequacy charge pursuant to Section 4.4 of
the Mortgage Warehousing Agreement, and such a Bank shall be an
"Affected Bank" for purposes of this Section 3.7(d). 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
Pro Rata Share of the Commitments, together with the Indebtedness then
evidenced by its Notes and its participation interest in outstanding
Letters of Credit, to the Assuming Bank or Assuming Banks in accordance
with Section 5.1 of the Override Agreement. 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
Advances then outstanding and (y) from Borrower all interest and fees
accrued and then unpaid with respect to such Advances, together with
any other amounts then payable to such Bank by Borrower. In the event
the Affected Bank is also an Issuing Bank, then the Assuming Bank shall
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also become an Issuing Bank for all purposes of this Agreement and
shall either (at the Affected Bank's election, subject to the approval
of Borrower, the Administrative Agent and the Assuming Bank (which
approvals shall not be unreasonably withheld) and the approval of the
applicable Letter of Credit beneficiary) (i) issue new Letters to
Credit to replace the outstanding Letters of Credit issued by the
Affected Bank, or (ii) issue new Letters of Credit in support of the
outstanding Letters of Credit issued by the Affected Bank, whereupon
such outstanding letters shall no longer be considered "Letters of
Credit" under this Agreement, and such new Letters of Credit shall be
considered Letters of Credit for all purposes of this Agreement
(including the participation therein by the other Banks pursuant to
Section 2.5). The Affected Bank shall be obligated to reimburse to
Borrower a portion of the issuance fees referred to in clause (ii) of
the first and second sentences of Section 2.5(g) based on the period
during which each new Letter of Credit issued by the Assuming Bank will
be outstanding in replacement or support of a Letter of Credit issued
by the Affected Bank. Notwithstanding the foregoing, Borrower may not
cause the replacement of an Affected Bank under this Section 3.7 unless
the Affected Bank is also concurrently replaced as a Bank under Section
14.4 of the Mortgage Warehousing Agreement.
3.8 LIBOR Fees and Costs.
(a) If the occurrence of any Regulatory
Development after the Amendment Effective Date:
(1) shall subject any Bank or its LIBOR
Lending Office to any tax, duty or other charge or cost with
respect to any LIBOR Advance or its obligation to make LIBOR
Advances, or shall change the basis of taxation of payments to
any Bank of the principal of or interest on any LIBOR Advance
or any other amounts due under this Agreement in respect of
any LIBOR Advance or its obligation to make LIBOR Advances
(except for changes in any tax on the overall net income,
gross income or gross receipts of such Bank or its LIBOR
Lending Office);
(2) shall impose, modify or deem applicable
any reserve (including, without limitation, any reserve
imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirements (excluding
any such requirement included in any applicable Reserve
Percentage) against assets
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of, deposits with or for the account of, or credit extended
by, any Bank or its LIBOR Lending Office; or
(3) shall impose on any Bank or its LIBOR
Lending Office or the LIBOR Market any other condition
affecting any LIBOR Advance or its obligation to make LIBOR
Advances, or shall otherwise affect any of the same;
and the result of any of the foregoing, as determined by such Bank,
increases the cost to such Bank or its LIBOR Lending Office of making
or maintaining any LIBOR Advance or in respect of any LIBOR Advance or
its obligation to make LIBOR Advances or reduces the amount of any sum
received or receivable by such Bank or its LIBOR Lending Office with
respect to any LIBOR Advance or its obligation to make LIBOR Advances
(assuming such Bank's LIBOR Lending Office had funded 100% of its LIBOR
Advance in the LIBOR Market), then, within 15 days after demand by such
Bank (with a copy to the Administrative Agent), Borrower shall pay to
such Bank such additional amount or amounts as will compensate such
Bank for such increased cost or reduction (determined as though such
Bank's LIBOR Lending Office had funded 100% of its LIBOR Advance in the
LIBOR Market); provided that Borrower shall not be liable to any Bank
for any such increased cost or reduction pursuant to this Section in
respect of any period which is more than six months prior to such
Bank's demand for such compensation. A statement of any Bank claiming
compensation under this subsection and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the
absence of manifest error. Each Bank agrees to endeavor promptly to
notify Borrower of any event of which it has actual knowledge which
will entitle such Bank to compensation pursuant to this Section, and
agrees to designate a different LIBOR Lending Office if such
designation will avoid the need for or reduce the amount of such
compensation and will not, in the judgment of such Bank, otherwise be
disadvantageous to such Bank. If any Bank claims compensation under
this Section, Borrower may at any time, upon at least four (4) LIBOR
Market Days' prior notice to the Administrative Agent and such Bank and
upon payment in full of the amounts provided for in this Section
through the date of such payment plus any prepayment fee required by
Section 3.8(d), pay in full the affected LIBOR Advances of such Bank or
request that such LIBOR Advances be converted to Alternate Base Rate
Advances.
(b) If after the Amendment Effective Date the
occurrence of any Regulatory Development shall, in the opinion of any
Bank, make it unlawful or impossible for
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such Bank or its LIBOR Lending Office to make, maintain or fund its
portion of any LIBOR Loan, or to take deposits of, dollars in the LIBOR
Market, or to determine or charge interest rates based upon the LIBOR,
and such Bank shall so notify the Administrative Agent, then such
Bank's obligation to make LIBOR Advances shall be suspended for the
duration of such illegality or impossibility and the Administrative
Agent forthwith shall give notice thereof to the other Banks and
Borrower. Before giving any notice to the Administrative Agent pursuant
to this Section, such Bank shall designate a different Lending Office
if such designation will avoid the need for giving such notice and will
not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. Upon receipt of such notice, the outstanding principal amount of
such Bank's LIBOR Advances, together with accrued interest thereon,
automatically shall be converted to Alternate Base Rate Advances with
Interest Periods corresponding to the LIBOR Loans of which such LIBOR
Advances were a part on either (1) the last day of the Interest
Period(s) applicable to such LIBOR Advances if such Bank may lawfully
continue to maintain and fund such LIBOR Advances to such day(s) or (2)
immediately if such Bank may not lawfully continue to fund and maintain
such LIBOR Advances to such day(s), provided that in such event the
conversion shall not be subject to payment of a prepayment fee under
Section 3.8(d). In the event that any Bank is unable, for the reasons
set forth above, to make, maintain or fund its portion of any LIBOR
Loan, such Bank shall fund such amount as an Alternate Base Rate
Advance for the same period of time, and such amount shall be treated
in all respects as an Alternate Base Rate Advance.
(c) If, with respect to any proposed LIBOR Loan:
(1) the Administrative Agent reasonably
determines that, by reason of circumstances affecting the
LIBOR 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 LIBOR Market
for the applicable Interest Period; or
(2) the Majority Banks advise the
Administrative Agent that the LIBOR as determined by the
Administrative Agent will not adequately and fairly reflect
the cost to such Banks of making the applicable LIBOR
Advances;
then the Administrative Agent forthwith shall give notice thereof to
Borrower and the Banks, whereupon until the
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Administrative Agent notifies Borrower that the circumstances giving
rise to such suspension no longer exist, the obligation of the Banks to
make any future LIBOR Advances shall be suspended. If at the time of
such notice there is then pending a Request for Loan that specifies a
LIBOR Loan, such Request for Loan shall be deemed to specify an
Alternate Base Rate Loan.
(d) Upon payment or prepayment of any LIBOR Advance
(other than as the result of a conversion required under Section
3.8(b)) on a day other than the last day in the applicable Interest
Period (whether voluntarily, involuntarily, by reason of acceleration,
or otherwise), or upon the failure of Borrower to borrow on the date or
in the amount specified for a LIBOR Loan in any Request for Loan,
Borrower shall pay to each Bank an amount equal to the sum of
(1) $250; plus
(2) the amount, if any, by which (x) the additional interest
that would have accrued (without any Applicable LIBOR Spread) on the
principal amount prepaid on account of the LIBOR Advance had it
remained outstanding until the last day of the applicable Interest
Period, exceeds (y) the interest that Bank could recover by placing
funds in the amount of the prepayment on deposit in the LIBOR Market
selected by that Bank for a period beginning on the date of the
prepayment and ending on the last day of the applicable Interest
Period, or for a comparable period for which an appropriate rate quote
may be obtained; plus
(3) an amount equal to all costs and expenses which that Bank
incurred or reasonably expects to incur in liquidating and reinvesting
the prepayment.
Each Bank's determination of the amount of any prepayment fee or
failure to borrow fee payable under this Section 3.8(d) shall be
conclusive in the absence of manifest error.
(e) Any statement or certificate given by a Bank
under this Section 3.6 shall satisfy the requirements set forth in
Section 3.5(c) with respect to requests for reimbursement under Section
3.5(a)
3.9 Late Payments/Default Interest. If any installment of principal or
interest under the Line A Notes or any other amount payable to the Line A 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
Alternate Base Rate plus the Applicable Line A
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Alternate Base Rate Spread plus 2%, to the extent permitted by applicable Law,
until paid in full (whether before or after judgment). If any installment of
principal or interest under the Line B Notes or Line C Notes or any other amount
payable to the Line B/C 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 Alternate Base Rate plus the Applicable Line B/C
Alternate Base Rate Spread plus 2%, 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 Line A
Notes shall, at the election of the Line A Majority Banks and upon notice to
Borrower (and in lieu of interest provided for in the preceding sentences), bear
interest at a fluctuating interest rate per annum at all times equal to the sum
of the Alternate Base Rate plus the Applicable Line A Alternate Base Rate Spread
plus 2%, to the extent permitted by applicable Law, until no Event of Default
exists (whether before or after judgment). Upon and during the continuance of
any Event of Default, the Indebtedness evidenced by the Line B Notes and the
Line C Notes shall, at the election of the Line B/C Majority Banks and upon
notice to Borrower (and in lieu of interest provided for in the preceding
sentences), bear interest at a fluctuating interest rate per annum at all times
equal to the sum of the Alternate Base Rate plus the Applicable Line B/C
Alternate Base Rate Spread plus 2%, to the extent permitted by applicable Law,
until no Event of Default exists (whether before or after judgment).
Notwithstanding the preceding two sentences, after the occurrence of any Event
of Default under Section 6.7, 6.13 or 6.20, 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 Section 6.13 or 6.20.
3.10 Computation of Interest and Fees. All 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. Any Loan that is repaid on the same day on which it
is made shall bear interest for one day.
3.11 Holidays. If any principal payment to be made by Borrower on an
Alternate Base Rate Loan shall come due on a day other than a Banking Day,
payment shall be made on the next succeeding Banking Day and the extension of
time shall be reflected in computing interest. If any principal payment to be
made by Borrower on a LIBOR Loan shall come due on a day other than a LIBOR
Market Day, payment shall be made on the next preceding or succeeding LIBOR
Market Day as determined by
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the Administrative Agent in accordance with the then
current banking practice in the LIBOR Market and the adjustment shall be
reflected in computing interest.
3.12 Payment Free of Taxes.
(a) Any payments made by any Party under the Loan Documents
shall be made free and clear of, and without reduction by reason of,
any tax, assessment or other charge imposed by any Governmental Agency,
central bank or comparable authority (other than taxes on income or
gross receipts generally applicable to banks). To the extent that
Borrower is obligated by applicable Laws to make any deduction or
withholding on account of taxes, assessments or other charges imposed
by any Governmental Agency from any amount payable to any Bank under
this Agreement, Borrower shall (a) make such deduction or withholding
and pay the same to the relevant Governmental Agency and (b) pay such
additional amount to that Bank as is necessary to result in that Bank's
receiving a net after-tax (or after-assessment or after-charge) amount
equal to the amount to which that Bank would have been entitled under
this Agreement absent such deduction or withholding. If and when
receipt of such payment results in an excess payment or credit to that
Bank on account of such taxes, assessments or other charges, that Bank
shall refund such excess to Borrower. Each Bank that is incorporated
under the Laws of a jurisdiction other than the United States of
America or any state thereof shall deliver to Borrower, with a copy to
the Administrative Agent, within twenty days after the Amendment
Effective Date (or such later date on which such Bank becomes a "Bank"
hereunder), a certificate signed by a Responsible Official of that Bank
to the effect that such Bank is entitled to receive payments of
interest and other amounts payable under this Agreement without
deduction or withholding on account of United States of America federal
income taxes, which certificate shall be accompanied by two copies of
Internal Revenue Service Form 1001 or Form 4224, as applicable, also
executed by a Responsible Official of that Bank. Each such Bank agrees
(i) promptly to notify the Administrative Agent and Borrower if any
fact set forth in such certificate ceases to be true and correct and
(ii) to take such steps as may be reasonably necessary to avoid any
requirement of applicable Laws that Borrower make any deduction or
withholding for taxes from amounts payable to that Bank under this
Agreement.
(b) Without limiting its obligation to pay any additional
amount to a Bank pursuant to Section 3.12(a), Borrower, may within 60
days following any such payment by that Bank, treat that Bank as an
"Affected Bank" under
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Section 3.7(d), and exercise the remedies set forth in such Section
3.7(d).
3.13 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.
3.14 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.
3.15 Pro Rata Treatment. Except as otherwise provided herein, each
payment on account of the Obligations shall be made pro rata according to each
Bank's Pro Rata Share of the Line A Commitment or of the Line B Commitment and
Line C Commitment, as applicable.
3.16 Time and Place of Payments; Evidence of Payments. 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 Office, 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 and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking 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 Advances 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 hereunder.
3.17 Administrative Agent's Right to Assume Payments Will be Made.
Unless the Administrative Agent shall have been notified by Borrower prior to
the date on which any payment to be made by Borrower hereunder is due that
Borrower does not intend to remit such payment, the Administrative Agent may, in
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its discretion (but shall not be so obligated), assume that Borrower has
remitted such payment when so due and the Administrative Agent may, in its
discretion and in reliance upon such assumption, make available to each Bank on
such payment date an amount equal to such Bank's Pro Rata Share of such assumed
payment. If Borrower has not in fact remitted such payment to the Administrative
Agent, each Bank shall forthwith on demand repay to the Administrative Agent the
amount of such assumed payment made available to such Bank, 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 but excluding the
date such amount is repaid to the Administrative Agent at a rate per annum equal
to the actual cost to the Administrative Agent of funding such amount as
notified by the Administrative Agent to such Bank. In furtherance of the
foregoing, Borrower hereby authorizes the Administrative Agent, through Bank of
America, to automatically debit the Designated Deposit Account (or, upon notice
to Borrower, any other deposit account maintained by Borrower with Bank of
America) for payments as and when due hereunder.
3.18 Survivability. All of Borrower's obligations under this Article 3
shall survive for six months following the date on which all Loans hereunder
were fully paid.
3.19 Bank Calculation Certificate. Any request for compensation
pursuant to Section 3.7 or 3.8 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 3.7 hereof shall be consistent with the methodology used by such
Bank in making similar calculations in respect of loans or commitments to other
borrowers.
ARTICLE 4
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 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
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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, has obtained
all authorizations, consents, approvals, orders, licenses and permits
(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,
and by the Mortgage Company of the Override Agreement, have been duly authorized
by all necessary corporate 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 or bylaws;
(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
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(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;
and neither Borrower nor any 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 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 Significant
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 Amendment Effective Date and identifies each such
Subsidiary that is a Consolidated Subsidiary, a Significant Subsidiary,
a Guarantor Subsidiary, a Foreign Subsidiary and a Financial
Subsidiary. As of the Amendment Effective 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, 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 is as of the date of this
Agreement, and will be as of the Amendment Effective Date, a legal
entity of the form described for that Subsidiary in Schedule 4.4, and
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
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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 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 following financial statements:
(a) the audited consolidated financial statements of Borrower
and its Consolidated Subsidiaries as at November 30, 1995 and for the
Fiscal Year then ended;
(b) the unaudited consolidating financial statements of
Borrower and its Consolidated Subsidiaries as at November 30, 1995 for
the Fiscal Quarter then ended and for the portion of the Fiscal Year
ended with such Fiscal Quarter; and
(c) the unaudited combined financial statements of the
Financial Subsidiaries as at November 30, 1995 for the Fiscal Quarter
then ended and for the portion of the Fiscal Year ended with such
Fiscal Quarter.
The audited financial statements described in clause (a) are in accordance with
the books and records of Borrower and its Consolidated Subsidiaries, were
prepared in accordance with Generally Accepted Accounting Principles and fairly
present in accordance with Generally Accepted Accounting Principles consistently
applied the consolidated financial condition and results of operations of
Borrower and its Consolidated Subsidiaries as at the date and for the period
covered thereby. The unaudited financial statements described in clause (b),
are in accordance with the books and records of Borrower and its Consolidated
Subsidiaries, were prepared in accordance with Generally Accepted Accounting
Principles and fairly present in accordance with Generally Accepted Accounting
Principles consistently applied the consolidating financial condition
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and results of operation of Borrower and its Consolidated Subsidiaries as at
the date and for the period covered thereby. The unaudited financial
statements described in clause (c) are in accordance with the books and
records of the respective Subsidiaries of Borrower named, were prepared in
accordance with Generally Accepted Accounting Principles and fairly present in
accordance with Generally Accepted Accounting Principles consistently applied
the financial condition and results of operation of such Subsidiaries of
Borrower 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 not reflected or disclosed in the financial statements or
in the notes to the financial statements described in Section 4.5, other than
liabilities and contingent liabilities arising in the ordinary course of
business subsequent to November 30, 1995. Since November 30, 1995, no event or
circumstance has occurred that constitutes a Material Adverse Effect with
respect to Borrower and its Subsidiaries.
4.7 Title to Assets. As of the Amendment Effective Date, 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 owned by them or
any of them (other than assets disposed of in the ordinary course of business)
and all other assets owned on the date of this Agreement, free and clear of all
Liens and Rights of Others other than (a) those reflected or disclosed in the
notes to the financial statements described in Section 4.5, (b) immaterial Liens
or Rights of Others not required under Generally Accepted Accounting Principles
to be so reflected or disclosed, (c) Liens permitted pursuant to Section 6.7,
(d) Permitted Rights of Others, and (e) such existing Liens or Rights of Others
as are described on Schedule 4.7 hereto.
4.8 Intangible Assets. Borrower and its Subsidiaries own, or possess
the unrestricted 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 now 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
the Amendment Effective Date, except as set forth in Schedule 4.9, neither
Borrower nor any of its Subsidiaries has (a) any Indebtedness owed to any Person
or (b) outstanding any Contingent Guaranty Obligation with respect
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to obligations of another Person that is not a Subsidiary of Borrower.
4.10 Governmental Regulation. Neither Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act 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.
4.12 Binding Obligations. Each of the Loan Documents to which Borrower
or any Guarantor Subsidiary of Borrower is a Party will, when executed and
delivered by Borrower or the Guarantor Subsidiary, as the case may be,
constitute 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 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. As of the Amendment Effective Date, 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
balance sheet of Borrower and its Consolidated Subsidiaries as at November 30,
1995. There is no "accumulated funding deficiency" within the meaning of Section
302 of ERISA or any liability to the PBGC (other than for premiums) with respect
to any such Pension Plan other than a Multiemployer Plan.
4.15 Tax Liability. Borrower and its 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 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 Subsidiary has established adequate
reserves for the payment of the same), and (b) such taxes the failure of which
to pay will not constitute a Material Adverse Effect.
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4.16 Regulation U. Neither Borrower nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the meanings of Regulation U of the Board of Governors of the
Federal Reserve System, and no Loan hereunder will be used to purchase or carry
any such margin stock in violation of Regulation U.
4.17 Environmental Matters. To the best knowledge of Borrower, Borrower
and its 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 Borrower's best knowledge, neither
Borrower nor any of its Subsidiaries has received any notice from any
Governmental Agency respecting the alleged violation by Borrower or any
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 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 Amendment Effective 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 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
Amendment Effective Date or that the Projections will in fact be achieved by
Borrower.
ARTICLE 5
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND
REPORTING REQUIREMENTS)
As long as any Loan remains unpaid, or any other Obligation remains
unpaid, or any portion of the Commitment remains outstanding, Borrower shall,
and shall cause each of its Subsidiaries to, unless the Administrative Agent
(with the approval of the Line A Majority Banks with respect to the Line A
Provisions or with the approval of the Line B/C Majority Banks with respect to
the Line B/C Provisions) otherwise consents in writing:
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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 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 Subsidiary has established and maintains adequate reserves for the payment
of the same and by reason of such nonpayment no material Property of Borrower or
its Subsidiaries is subject to a risk of loss or forfeiture.
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 Sections 6.2 or 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 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 Properties, except that
the failure to so maintain, preserve or protect any particular Property, or the
permitting of waste on any particular Property, where such failure or waste with
respect to all Properties of Borrower and its Subsidiaries, in the aggregate,
would not constitute a Material Adverse Effect will not constitute a violation
of this covenant.
5.4 Maintenance of Insurance. Maintain insurance with responsible
insurance companies in such amounts (subject to customary deductibles and
retentions) and against such risks as is usually carried by responsible
companies of similar size
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engaged in similar businesses and owning similar assets in the general areas in
which Borrower and its Subsidiaries operate.
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 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 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 requested, permit any Bank or any employee, agent or representative
thereof at the expense of such Bank 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 Subsidiaries, and to discuss the affairs,
finances and accounts of Borrower and its 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 its
Subsidiaries.
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 Subsidiaries.
5.8 Use of Proceeds. Use the proceeds of (a) all Line A
Loans solely for working capital and other general corporate
purposes of Borrower and its Subsidiaries, (b) all Line B Loans solely to fund
the purchase price for the Rayco Acquisition and to retire certain Indebtedness
of Rayco, Ltd. and (c) the Line C Loans solely for working capital and other
general corporate purposes of Borrower and its Subsidiaries at such times as
there is no unused availability under the Line A Commitment.
5.9 Subsidiary Guaranty. Cause each of its Guarantor Subsidiaries
hereafter formed, acquired or qualifying as a Guarantor Subsidiary, to execute
and deliver a joinder of the Subsidiary Guaranty promptly following such
formation, acquisition or qualification.
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ARTICLE 6
NEGATIVE COVENANTS
As long as any Loan remains unpaid, or any other Obligation
remains unpaid, or any portion of the Commitment remains outstanding, Borrower
shall not, and shall not permit any of its Subsidiaries to, unless the
Administrative Agent (with the approval of the Line A Majority Banks with
respect to the Line A Provisions or with the approval of the Line B/C Majority
Banks with respect to the Line B/C Provisions) otherwise consents in writing:
6.1 Payment or Prepayment of Subordinated Obligations. 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 make a purchase or redemption of any
Subordinated Obligation, or make any payment with respect to any Subordinated
Obligation in violation of the subordination provisions in the instruments
governing such Subordinated Obligation; provided that: (a) Borrower may prepay
and refinance Subordinated Obligations of Borrower if through the issuance of
new Subordinated Obligations (i) such new Subordinated Obligations satisfy all
of the criteria set forth in the definition of "Subordinated Obligations," and
(ii) the incurrence of such new Subordinated Obligations is permitted under
Section 6.8 hereof; (b) Borrower may purchase or redeem any Subordinated
Obligation solely in exchange for shares of capital stock of Borrower which are
not subject to mandatory redemption provisions; and (c) Borrower may purchase or
redeem any Subordinated Obligation to the extent obligated to do so upon the
occurrence of a "Change in Control", as defined in the indenture governing such
Subordinated Obligation, if (i) Borrower has provided to the Administrative
Agent pro-forma calculations showing that, giving effect to such repurchase
(both as to source and application of funds), Borrower would be in compliance
with the covenants set forth herein on a pro-forma basis as of the end of the
Fiscal Quarter then most recently ended, and (ii) there has not then occurred
and is not then continuing any Default or Event of Default, provided that the
requirements of clauses (i) and (ii) above need not be satisfied if concurrently
with such repurchase Borrower prepays the Obligations in accordance with Section
3.1(f) and terminates the Commitment pursuant to Section 2.6.
6.2 Dispositions. Make any Disposition, except (a) a Disposition to
Borrower or to a wholly-owned Subsidiary of Borrower and (b) a Disposition of a
Foreign Subsidiary that does not hold a majority of its assets in the Republic
of France.
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6.3 Mergers and Sale of Assets. Merge or consolidate
with or into any Person, or sell all or substantially all of
its assets to any Person, except;
(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
wholly-owned Subsidiary of Borrower;
(c) liquidations of any Subsidiary of Borrower into Borrower
or into a wholly-owned Subsidiary of Borrower;
(d) a merger of Borrower or one of its Subsidiaries with
another Person if (i) Borrower or such Subsidiary is the corporation
surviving such merger and (ii) immediately after giving effect to such
merger, no Default or Event of Default shall have occurred and be
continuing; or
(e) Dispositions permitted under Section 6.2.
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 consisting of Cash or Cash Equivalents;
(b) advances to employees of Borrower or its Subsidiaries for
travel, housing expenses, 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) the Rayco Acquisition;
(e) Acquisitions of or Investments in Persons engaged in the
residential housing construction business and/or the residential land
development business in the United States of America, Canada, Mexico
and Europe, provided that (i) to the extent that any such Acquisition
or Investment is made by a Foreign Subsidiary, after giving effect
thereto Borrower shall be in compliance with Section 6.19, (ii) after
giving effect to such Acquisition
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or Investment on a proforma basis, no Default or Event of Default then
exists or would result therefrom and (iii) nothing in this clause (e)
shall limit Investments permitted by clause (c) above;
(f) Acquisitions or Investments in Persons engaged in the
commercial construction business in the United States of America or
Europe; provided that (i) to the extent that any such Acquisition or
Investment is made by a Foreign Subsidiary, after giving effect thereto
Borrower shall be in compliance with Section 6.19, (ii) the aggregate
cost of such Acquisitions of or Investments in such Persons engaged in
the commercial construction business in countries in Europe (other than
France) made after the Amendment Effective Date, shall not exceed at
any time $25,000,000, (iii) the aggregate cost of such Acquisitions of
and Investments in such Persons engaged in the commercial construction
business within the United States of America, when added to the
aggregate cost of investments in such inventory within the United
States of America made after the Amendment Effective Date, shall not
exceed $15,000,000 in the aggregate and (iv) nothing in this clause (f)
shall limit Investments permitted by clause (c) above;
(g) Investments by KBMHG in a Person owning one or more
multi-unit affordable housing projects, provided that such Investment
is made as a limited partner, or otherwise on a basis that will not
result in liability or contingent liability to Borrower or any of its
Subsidiaries for the obligations of such Person;
(h) Investments by the Mortgage Company that are permitted
under the Mortgage Warehousing Agreement;
(i) Investments in existence on the Amendment Effective Date
disclosed on Schedule 6.4;
(j) Acquisitions of or Investments in Persons engaged
primarily in businesses in addition to those permitted by Sections
6.4(e) through (g), provided that the aggregate cost of all such
Acquisitions and Investments made after the Amendment Effective Date
does not exceed at $5,000,000 in the aggregate.
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
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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 $5,000,000.
6.6 Change in Business. Engage in any business other than the
businesses as now conducted by Borrower or any of its Subsidiaries.
6.7 Liens and Negative Pledges. Create, incur, assume, or suffer to
exist, or cause or permit any Joint Venture to 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, any of its Subsidiaries or any
Joint Venture 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 Subsidiary other than the Property
subject to such Lien on the Amendment Effective Date;
(b) Liens on Property of any Financial Subsidiary or Foreign
Subsidiary securing Indebtedness of that Financial Subsidiary or
Foreign Subsidiary;
(c) Liens on real Property securing Non-Recourse Indebtedness;
provided that any such Non-Recourse Indebtedness complies with the
terms of Section 6.8 ;
(d) Liens consisting of a Capital Lease covering personal
Property;
(e) Permitted Encumbrances;
(f) 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 $5,000,000 and are being
contested in good faith by appropriate proceedings timely commenced and
diligently prosecuted;
(g) Liens existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation
of such event;
(h) Liens on any asset of any corporation existing at the time
such corporation is merged or consolidated
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with or into Borrower or any of its Subsidiaries and not created in
contemplation of such event;
(i) 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;
(j) 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;
(k) Liens arising in the ordinary course of business which (i)
do not secure Indebtedness, (ii) do not secure any obligation in an
amount exceeding $200,000 individually, or $500,000 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;
(l) Liens not otherwise permitted by the foregoing clauses of
this Section which secure Indebtedness not exceeding $500,000 in the
aggregate;
(m) Liens securing Indebtedness permitted by Section 6.9(e)
incurred in connection with the acquisition of Property;
(n) Liens referred to in the last sentence of the definition
of "Bond Facility" encumbering (i) real property owned by Borrower or
one of its Subsidiaries on September 1, 1994 or (ii) other real
property of Borrower or one of its Subsidiaries provided that the
aggregate obligations secured by such Liens does not exceed
$10,000,000;
(o) a Contractual Obligation wherein Borrower or any of its
Subsidiaries agrees not to a grant any Lien on any of their Properties,
if such Contractual Obligation does not, by its terms, prohibit the
grant of a Lien in favor of the Administrative Agent and the Banks with
respect to the Obligations (and Borrower shall, as soon as reasonably
possible, provide to the Banks a copy of such Contractual Obligation);
(p) Liens on property of a Joint Venture referred to in
Section 6.9(h) securing Indebtedness permitted by such Section;
provided, however, in no event may Borrower or any of its Subsidiaries create,
incur, assume or suffer to exist any Lien
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of any nature upon or with respect to any of their Investments in any Joint
Venture, or enter or suffer to exist any Contractual Obligation wherein Borrower
or any of its Subsidiaries agrees not to grant any Lien on any of their
Investments in any Joint Venture, except in connection with customary joint
venture agreements entered into in the ordinary course of business that restrict
a joint venture partner from granting a Lien on or Contractual Obligation with
respect to its ability to convey its interest in a Joint Venture and except that
any such Joint Venture may, to secure Indebtedness permitted under this
Agreement, grant a Lien on its Property which includes a provision that such
Indebtedness will be accelerated and due in its entirety upon the sale or other
transfer of such Property.
6.8 Non-Recourse Indebtedness. Create, incur, assume or suffer to
exist, directly or indirectly, any Non-Recourse Indebtedness of Borrower, its
Domestic Subsidiaries and Joint Ventures except Non-Recourse Indebtedness that
(a) is incurred only in the connection with the purchase and improvement of
Property, (b) constitutes Indebtedness owed to the seller of such Property for
the purchase or improvement thereof, (c) as of the date of the incurrence,
represents not less than 50% of the purchase price for such property and (d)
when aggregated with (x) the amount of all other Non-Recourse Indebtedness of
Borrower and its Domestic Subsidiaries plus (y) an amount equal to the aggregate
with respect to each Joint Venture of the amount of all Non-Recourse
Indebtedness of such Joint Venture times the percentage ownership interest of
Borrower and its Subsidiaries in such Joint Venture, does not exceed
$100,000,000.
6.9 Subsidiary Indebtedness and Contingent Guaranty Obligations. Permit
any Domestic Subsidiary to create, incur, assume or suffer to exist any
Indebtedness, or any Contingent Guaranty Obligation except:
(a) the Subsidiary Guaranty;
(b) Indebtedness of a Financial Subsidiary;
(c) Indebtedness owed to Borrower or to a wholly-owned
Subsidiary of Borrower;
(d) Contingent Guaranty Obligations of Indebtedness
owed to Borrower or to a wholly-owned Subsidiary of Borrower;
(e) Indebtedness other than Non-Recourse
Indebtedness, provided that the aggregate principal amount
outstanding at any time does not exceed $5,000,000;
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<PAGE> 85
(f) Indebtedness (including Indebtedness referred to in
subsections (e) above and (h) below) the aggregate outstanding
principal amount of which, when added to Indebtedness referred to in
Section 6.8, does not exceed $100,000,000 at any time;
(g) Indebtedness and Contingent Guaranty Obligations under any
Bond Facility; and
(h) Indebtedness incurred by an "Unimproved Land Joint
Venture" (as defined in the following sentence), provided that the
aggregate principal amount of all such Indebtedness outstanding at any
time does not exceed $35,000,000. As used herein, "Unimproved Land
Joint Venture" means a Joint Venture formed by a Subsidiary which does
not qualify as a Significant Subsidiary, and to which such Subsidiary
has contributed Domestic Unimproved Land.
6.10 Money Market Indebtedness. Create, incur or suffer to exist any
short term Indebtedness under domestic money market credit lines available to
Borrower and/or its Subsidiaries, if at any time (a) the sum of the aggregate
outstanding principal amount of the Line A Loans and the Line C Loans plus the
Line A Letter of Credit Usage plus the Line C Letter of Credit Usage plus the
aggregate principal amount of short term Indebtedness of Borrower and its
Subsidiaries under domestic money market lines then outstanding would exceed the
sum of the Line A Commitment plus the Line C Commitment or (b) the aggregate
principal amount of short term Indebtedness of Borrower and its Subsidiaries
under domestic money market credit lines extended by any Bank then outstanding
plus the aggregate principal amount of Indebtedness of Borrower and its
Subsidiaries under revolving lines of credit provided by that Bank would exceed
that Bank's Pro-Rata Share of the Commitments (unless the applicable Bank
otherwise elects). For purposes of this Section 6.10, "short term Indebtedness
under domestic money market credit lines" shall be deemed to be Indebtedness
that matures within one year of the date it is incurred.
6.11 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, or (b) a transaction between or among Borrower and its
wholly-owned Subsidiaries, or (c) a transaction that has been approved by a
resolution adopted 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, or (d) an arm's length transaction entered into on terms and
under conditions not less favorable to Borrower or
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<PAGE> 86
any of its Subsidiaries than could be obtained from a Person that is not an
Affiliate of Borrower.
6.12 Consolidated Tangible Net Worth. Permit Consolidated Tangible Net
Worth to be, at the end of each Fiscal Quarter, less than an amount equal to (a)
$355,000,000, plus (b) an amount equal to 60% of the positive sum of (i) the
consolidated net income (or consolidated net loss) of Borrower and its
Subsidiaries for the fiscal period commencing on December 1, 1995 and ending on
November 30, 1996 plus (ii) the after tax effect of the Contemplated Charge
minus (iii) an amount equal to 100% of the Recapture Gain arising in the period
commencing on December 1, 1995 and ending on November 30, 1996 (provided that
there shall be no reduction hereunder in the event that such sum is a negative
number), plus (c) an amount equal to 60% of consolidated net income of Borrower
and its Subsidiaries for the fiscal period commencing on December 1, 1996 and
then ending, but excluding from such consolidated net income any Recapture Gain
during such period (provided that there shall be no reduction hereunder in the
event of a consolidated net loss), plus (d) an amount equal to 100% of the
Recapture Gain arising in the period commencing on December 1, 1995 and then
ending, plus (e) an amount equal to 60% of the net proceeds received by Borrower
from the issuance of capital stock since the Amendment Effective Date and minus
(f) to the extent of an amount equal to 60% of any net proceeds received by
Borrower from the issuance of capital stock since the Amendment Effective Date,
an amount equal to the cost to Borrower of the repurchase of any capital stock
since the Amendment Effective Date.
6.13 Domestic Leverage Ratio. Permit the Domestic
Leverage Ratio to be, at the end of each Fiscal Quarter,
greater than the ratio set forth below opposite that Fiscal
Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Ratio
--------------------- -----
<S> <C>
February 29, 1996 3.00 to 1.00
May 31, 1996 2.80 to 1.00
August 31, 1996 2.50 to 1.00
November 30, 1996 2.10 to 1.00
February 28, 1997 2.40 to 1.00
May 31, 1997 2.20 to 1.00
August 31, 1997 2.10 to 1.00
November 30, 1997 1.80 to 1.00
and thereafter
</TABLE>
6.14 Domestic Interest Coverage Ratio. Permit the
Domestic Interest Coverage Ratio to be, at the end of each
Fiscal Quarter, less than the ratio set forth below opposite
that Fiscal Quarter:
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<PAGE> 87
<TABLE>
<CAPTION>
Fiscal Quarter Ending Ratio
--------------------- -----
<S> <C>
February 29, 1996 1.50 to 1.00
May 31, 1996 1.65 to 1.00
August 31, 1996 1.75 to 1.00
November 30, 1996 2.00 to 1.00;
and thereafter
</TABLE>
provided, however, that no Default shall exist under this Section by reason of a
failure to comply with the foregoing as of the last day of any Fiscal Quarter
(the "Test Date") if (a) the Domestic Interest Coverage Ratio as of the Test
Date was at least 1.10 to 1.00, (b) the Domestic Interest Coverage Ratio as of
the last day of the Fiscal Quarter immediately following the Test Date (the
"Second Test Date") is equal to or higher than that which was required under the
table set forth above on the Test Date and (c) the Domestic Interest Coverage
Ratio as of the last day of the Fiscal Quarter immediately following the Second
Test Date (the "Third Test Date") is in compliance with the table set forth
above. If this proviso becomes applicable and Borrower fails to satisfy the
requirement set forth in clause (b) hereof, then a Default shall exist under
this Section as of the Second Test Date and if Borrower fails to satisfy the
requirements set forth in clause (c) hereof, then a Default shall exist under
this Section as of the Third Test Date.
6.15 Distributions. Make any Distribution if an Event of
Default then exists or if an Event of Default or Default would
result therefrom.
6.16 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.
6.17 Hostile Tender Offers. Make any offer to the shareholders of a
publicly held corporation or business entity to purchase or acquire, or
consummate such a purchase or acquisition of, more than 5% of the shares of
capital stock or analogous ownership interests in such a corporation or business
entity if the board of directors or analogous body of such corporation or
business entity has notified Borrower that it opposes such offer or purchase,
except for consideration which consists solely of shares of capital stock or
other equity securities of Borrower or any of its Subsidiaries.
6.18 Inventory.
(a) Permit the book value (adjusted upward, for this purpose,
by the amount of any reduction in the book value
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thereof attributable to the Contemplated Charge to the extent that an
asset was reflected on the financial statements of the Borrower and its
Consolidated Subsidiaries as of the date the Contemplated Charge was
taken and continues to be reflected on such statements) of Domestic
Unimproved Land to exceed an amount equal to 100% of Domestic Adjusted
Tangible Net Worth as of the end of any two (2) consecutive Fiscal
Quarters.
(b) Permit the book value (adjusted upward, for this purpose,
by the amount of any reduction in the book value thereof attributable
to the Contemplated Charge to the extent that an asset was reflected on
the financial statements of the Borrower and its Consolidated
Subsidiaries as of the date the Contemplated Charge was taken and
continues to be reflected on such statements) of Domestic Unimproved
Unmapped Land to exceed an amount equal to 50% of Domestic Adjusted
Tangible Net Worth as of the end of any two (2) consecutive Fiscal
Quarters.
(c) Purchase or acquire (i) any additional Domestic Unimproved
Land or Domestic Unimproved Unmapped Land if Borrower fails to comply
with the ratio set forth in clause (a) above (even for a single Fiscal
Quarter) or (ii) any additional Domestic Unimproved Unmapped Land if
Borrower fails to comply with the ratio set forth in clause (b) above
(even for a single Fiscal Quarter), until in either case Borrower is in
compliance with such ratio for at least one Fiscal Quarter.
6.19 Domestic Standing Inventory. As of any date in any Fiscal Quarter,
permit Domestic Standing Inventory to exceed an amount equal to 15% of Net
Orders received during that Fiscal Quarter and the three immediately preceding
Fiscal Quarters.
6.20 Investments in Certain Subsidiaries. Make any
Investment:
(a) in any Foreign Subsidiary after the Amendment Effective
Date if, after giving effect thereto, the aggregate amount of all such
Investments made after the Amendment Effective Date exceeds the sum of
(i) $30,000,000 plus (ii) the aggregate amount of Distributions
declared and paid by all Foreign Subsidiaries to Borrower after the
Amendment Effective Date plus (iii) the aggregate amount of capital of
Foreign Subsidiaries returned to Borrower after the Amendment Effective
Date.
(b) in any Financial Subsidiary after the Amendment Effective
Date if, after giving effect thereto, the aggregate amount of all such
Investments made after the
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Amendment Effective Date exceeds the sum of (i) $40,000,000 plus (ii) the
aggregate amount of Distributions declared and paid by all Financial
Subsidiaries to Borrower after the Amendment Effective Date plus (iii) the
aggregate amount of capital of Financial Subsidiaries returned to Borrower
after the Amendment Effective Date. In calculating compliance with this
Section 6.20(b), the amount of Borrower's Contingent Guaranty Obligations
under the Mortgage Warehousing Guaranty shall be excluded from Investments;
(c) in the Land Fund Joint Venture in excess of $6,000,000
plus the amount of Distributions to Borrower or any of its
Subsidiaries paid by the Land Fund Joint Venture since the Amendment
Effective Date; and
(d) in KBMHG after the Amendment Effective Date if, giving effect
thereto, the aggregate amount of all such Investments made after the
Amendment Effective Date exceeds the sum of (i) $22,500,000 plus (ii) the
aggregate amount of Distributions declared and paid by KBMHG to Borrower
after the Amendment Effective Date plus (iii) the aggregate amount of capital
of KBMHG returned to Borrower after the Amendment Effective Date.
6.21 Land Fund Joint Venture. Make or permit to be made any material
amendment to the organization documents with respect to the Land Fund Joint
Venture without the prior written consent of the Majority Banks.
ARTICLE 7
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, or any portion of the Commitment remains outstanding, Borrower
shall, unless the Administrative Agent (with the approval of the Line A Majority
Banks with respect to the Line A Provisions or with the approval of the Line B/C
Majority Banks with respect to the Line B/C Provisions) 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 60 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 Consolidated Subsidiaries as of the end of such Fiscal
Quarter, setting forth in comparative form the corresponding figures for the
corresponding Fiscal Quarter of
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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 Consolidated 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 (other than those which require
footnote disclosure of certain matters) consistently applied, 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 balance sheets of Borrower and its Consolidated 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 statements of profit and loss and the
consolidated statements of cash flows of Borrower and its Consolidated
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 or other independent
certified public accountants of recognized standing selected by Borrower (to
which either the Line A Majority Banks or the Line B/C Majority Banks have
not reasonably objected), 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 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) not approved by Both Majority 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
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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 6.4(f) and (j), 6.8, 6.9(e) and (f), 6.12, 6.13,
6.14, 6.18 (a) and (b), 6.19 (without requiring any physical count of
inventory) and 6.20, as of the date of the balance sheet. Such consolidating
balance sheet and statements shall be certified by the principal financial
officer 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 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;
(e) Promptly upon a Senior Officer of Borrower becoming aware, and
in any event within ten Banking 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 Subsidiaries is taking or proposes to
take with respect thereto, and, when known, any action taken by the Internal
Revenue Service with respect thereto;
(f) Promptly upon a Senior Officer of Borrower becoming aware, and
in any event within five Banking 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 five Banking Days after becoming aware, that the holder
of any evidence of Indebtedness for borrowed money or Security of Borrower or
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any of its 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 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 five Banking 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 within 60 days
after the close of each Fiscal Quarter (except 90 days after the close of the
Fiscal Year) of the Land Fund Joint Venture and each other Joint Venture, a
report certified by a Senior Officer of Borrower setting forth (i) a complete
list of all real Property held by the Land Fund Joint Venture and each other
Joint Venture as of the end of such fiscal quarter, (ii) the aggregate
outstanding principal amount of Non-Recourse Indebtedness of the Land Fund
Joint Venture and each other Joint Venture as of the end of such fiscal
quarter and (iii) the aggregate amount of Borrower's Investment in the Land
Fund Joint Venture and each other Joint Venture as of the end of such fiscal
quarter;
(j) As soon as possible, and in any event within 60 days after the
close of each Fiscal Quarter of Borrower (except 90 days after the close of
the Fiscal Year of Borrower), (i) a sales report by geographical region,
certified by a Senior Officer of Borrower, setting forth the number of homes
or other units sold and delivered during such period and in backlog at the
end of such period, (ii) an inventory report for such Fiscal Quarter
summarizing such inventory by type and geographical region and otherwise in
form and substance satisfactory to Both Majority Banks, (iii) a quarterly
report in form and substance satisfactory to Both Majority Banks detailing
intercompany borrowings and repayments between Borrower and its Domestic
Subsidiaries during such Fiscal Quarter, (iv) a report of any change, as of
the last day of such Fiscal Quarter, in the listing of Financial Subsidiaries
and Foreign Subsidiaries set forth in Schedule 4.4 (as the same may
have been revised by previous reports under this clause
(j)(iv)) and (v) a written report in form satisfactory to
Both Majority Banks describing the Asset
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Sales that occurred during such Fiscal Quarter and any Asset Sales that
Borrower then contemplates may occur during the next Fiscal Quarter (provided
that this report shall only be required for Fiscal Quarters ending on or
before the Line B/C Maturity Date);
(k) As soon as reasonably possible, and in any event prior to the
date that is sixty (60) days after the commencement of each Fiscal Year,
deliver to the Administrative Agent the business plan of Borrower and its
Subsidiaries for that Fiscal Year, together with projections (in
substantially the same format as the Projections) covering the next two (2)
Fiscal Years;
(l) Promptly following obtaining knowledge thereof by a Senior
Officer of Borrower, written notice of any change in the Credit Rating Level;
(m) Promptly following Borrower's public announcement of the
Contemplated Charge, a written summary thereof setting forth, for each
operating division of Borrower, the categories of assets against which the
Contemplated Charge will be made, the number of lots and/or acres involved in
each such asset category and the aggregate book values thereof before and
after the Contemplated Charge, together with an express invitation to each
Bank to review at a reasonable time and location Borrower's detailed records
of the Contemplated Charge and to make reasonable copies and extracts
therefrom;
(n) As soon as available, and in any event not later than April 15,
1996, a copy of Borrower's "Debt Reduction Program," which shall include a
description of the contemplated role of Asset Sales as part of such Program,
in form reasonably satisfactory to the Administrative Agent; and
(o) Such other data and information as from time to time may be
reasonably requested by any of the Banks.
7.2 Compliance Certificate. Not later than 60 days after the close of each
Fiscal Quarter and 90 days after the close of each Fiscal Year, 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 Subsidiaries
were in compliance with their obligations to the Banks pursuant to Sections
6.4(f) and (j), 6.8, 6.9(e) and (f), 6.12, 6.13, 6.14, 6.18(a) and (b), 6.19 and
6.20; (b) 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
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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 (c) 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 8
CONDITIONS
8.1 Initial Advances. The effectiveness of this Agreement, and
obligations of the Banks to make the initial Advances and of the Issuing Bank to
issue the initial Letter of Credit are subject to the following conditions, each
of which shall be satisfied prior to or concurrently with the making of the
initial Advances:
(a) The Administrative Agent shall have received all of the
following, each dated as of the Amendment Effective Date (unless otherwise
specified or unless the Administrative Agent otherwise agrees) and all in
form and substance satisfactory to the Administrative Agent and legal counsel
for the Administrative Agent:
(1) executed counterparts of this Agreement,
sufficient in number for distribution to the Banks and Borrower;
(2) the Line A Notes executed by Borrower in favor
of each Line A Bank, each in a principal amount equal to that Bank's
Pro Rata Share of the Line A Commitment;
(3) the Line B Notes executed by Borrower in favor
of each Line B/C Bank, each in a principal amount equal to that
Bank's Pro Rata Share of the Line B Commitment;
(4) the Line C Notes executed in favor of each Line
B/C Bank, each in a principal amount equal to that Bank's Pro Rata
Share of the Line C Commitment;
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(5) the Subsidiary Guaranty executed by each
Subsidiary which is a Guarantor Subsidiary as of the Amendment
Effective Date;
(6) with respect to Borrower and each Subsidiary
which is a Guarantor Subsidiary as of the Amendment Effective Date,
such documentation as the Administrative Agent may reasonably
require to establish the due organization, valid existence and good
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, without limitation, certified
copies of articles of incorporation and amendments thereto, bylaws
and amendments thereto, certificates of good standing and/or
qualification to engage in business, tax clearance certificates,
certificates of corporate resolutions, incumbency certificates, and
the like;
(7) the Opinions of Counsel;
(8) a copy of the Rayco Acquisition Agreement,
together with all schedules and material ancillary agreements and
documents, certified by a Senior Officer to be a true copy;
(9) 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(b), 8.1(c) and
8.1(d) have been satisfied; and
(10) such other assurances, certificates,
documents, consents or opinions relevant hereto as the
Administrative Agent may reasonably require.
(b) With respect to availability under the Line B Commitment and the
Line C Commitment, the Rayco Acquisition shall be in a position to close
within the next two (2) Banking Days.
(c) The representations and warranties of Borrower contained in
Article 4 shall be true and correct in all material respects on and
as of the Amendment Effective Date.
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(d) Borrower and its Subsidiaries and any other Parties shall be in
compliance with all the terms and provisions of the Loan Documents.
(e) The Banks shall have received the written legal opinion of
Messrs. Sheppard, Mullin, Richter & Hampton, legal counsel to the
Administrative Agent, to the effect that the Opinions of Counsel are
acceptable and such other matters relating to the Loan Documents as the
Administrative Agent may request.
8.2 Any Advance. The obligations of the Banks to make any Advance are
subject to the following conditions precedent:
(a) the Administrative Agent shall have received a Request for Loan;
(b) the representations and warranties contained in Article 4 (other
than the representations and warranties contained in Sections 4.4(a), 4.5,
4.6, 4.7, 4.9, 4.12, 4.14, 4.18 and 4.19) shall be true and correct in all
material respects on and as of the date of the Loan as though made on and as
of that date and no event or circumstance that constitutes a Material Adverse
Effect shall have occurred since the Amendment Effective Date;
(c) no Material KBMC Default or Material KBMC Event of Default then
exists under the Mortgage Warehousing Agreement; provided that this
condition precedent shall not apply in respect of a Curable KBMC Default so
long as the proceeds of any Loan made in reliance on this proviso are
actually used to cure such Curable KBMC Default; and
(d) the Administrative Agent shall have received such other
information relating to any matters which are the subject of Section
8.2(b) or the compliance by Borrower with this Agreement as may
reasonably be requested by the Administrative Agent on behalf of a Bank.
8.3 Any Letter of Credit. The obligation of any Issuing Bank to issue
any Letter of Credit, and the obligation of the other Banks to participate
therein, are subject to the conditions precedent that (a) the conditions set
forth in Section 8.2 have been satisfied and (b) Borrower shall have
certified that, giving effect to the issuance of the requested Letter of Credit,
the Letter of Credit Usage shall not exceed any limitations set forth in this
Agreement.
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ARTICLE 9
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:
(a) failure to pay any installment of principal on any of the Notes
on the date, or any payment in respect of a Letter of Credit pursuant to
Section 2.5(e), 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 five Banking Days after the date when due; or
(c) any failure to comply with Sections 5.8, 5.9, 6.1, 6.2, 6.3,
6.4, 6.7, 6.8, 6.9, 6.12, 6.13, 6.14, 6.18, 6.19, 6.20 or 7.1(f); or
(d) any failure to comply with Section 6.11 which shall remain
unremedied for a period of three Banking Days after notice by the
Administrative Agent of such Default; 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 thirty (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 delivered, on
or after the Amendment Effective 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 the Borrower to duly and punctually perform all of the
Obligations; or
(g) Any failure to pay any principal when due (including upon
acceleration thereof) under the Mortgage Warehousing Agreement; or
(h) Borrower or any of its Significant Subsidiaries (i) fails to pay
the principal, or any principal installment, of any present or future
Indebtedness (other than Non-Recourse Indebtedness, and in the case
of the Mortgage Company, arising under the Mortgage Warehousing Agreement),
or any guaranty of present or future Indebtedness
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(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
$10,000,000 individually or $25,000,000 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, and in the case of the Mortgage Company, arising under the
Mortgage Warehousing Agreement) or any guaranty of present or future
Indebtedness (other than Non-Recourse Indebtedness), in excess of $10,000,000
individually or $25,000,000 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
(i) 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
Majority Banks, materially adverse to the interest of the Banks;
(j) a final judgment (or judgments) against Borrower or any of its
Significant Subsidiaries is entered for the payment of money in excess of
$10,000,000 individually or $25,000,000 in the aggregate, and remains
unsatisfied without procurement of a stay of execution within thirty (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 five (5) calendar days prior to the sale of any assets
pursuant to such legal process; or
(k) Borrower or any Significant Subsidiary of Borrower 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 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 sixty (60) calendar days; or
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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 sixty (60) calendar days;
or
(l) 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 $10,000,000; 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 $10,000,000; or
(m) 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(k) with respect to Borrower
or a Guarantor Subsidiary):
(i) all commitments to make Advances or issue Letters of
Credit, and all other obligations of the Administrative Agent, the
Issuing Bank or the Banks shall be suspended without notice to or
demand upon Borrower, which are expressly waived by Borrower, except
that the Line A Majority Banks may waive the Event of Default or,
without waiving, determine, upon terms and conditions satisfactory
to the Line A Majority Banks, to reinstate the Line A Commitment and
make further Advances or issue Letters of Credit, which waiver or
determination shall apply equally to, and shall be binding upon, all
the Line A Banks and except that the Line B/C Majority Banks may
waive the Event of Default or, without waiving, determine, upon
terms and conditions satisfactory to the Line B/C Majority Banks, to
reinstate the Line B Commitment and the Line C Commitment and make
further Advances or issue Letters of Credit, which waiver or
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determination shall apply equally to, and shall be binding upon, all
the Line B/C Banks;
(ii) the Line A Majority Banks may request the Administrative
Agent to, and the Administrative Agent thereupon shall, declare the
unpaid principal of all Line A Obligations due to the Line A Banks
hereunder and under the Line A Notes, an amount equal to the Line A
Letter of Credit Usage, all interest accrued and unpaid thereon, and
all other amounts payable to the Line A 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) and the Line B/C Majority Banks
may request the Administrative Agent to, and the Administrative
Agent thereupon shall, declare the unpaid principal of all Line B/C
Obligations due to the Line B/C Banks hereunder and under the Line B
Notes and the Line C Notes, an amount equal to the Line C Letter of
Credit Usage, all interest accrued and unpaid thereon, and all other
amounts payable to the Line B/C 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).
(b) Upon the occurrence of any Event of Default described in
Section 9.1(k) with respect to Borrower or a Guarantor Subsidiary:
(i) all commitments to make Advances or issue Letters of
Credit, and all other obligations of the Administrative Agent, the
Issuing Bank(s) or the Banks under the Loan Documents shall
terminate without notice to or demand upon Borrower, which are
expressly waived by Borrower, except that all the Line A
Banks may waive the Event of Default or, without waiving, determine,
upon terms and conditions
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satisfactory to all the Line A Banks, to reinstate the Line A
Commitment and make further Advances and except that all the Line
B/C Banks may waive the Event of Default or, without waiving,
determine, upon terms and conditions satisfactory to all the Line
B/C Banks, to reinstate the Line B Commitment and the Line C
Commitment and make further Advances;
(ii) the unpaid principal of all Obligations due to the Banks
hereunder and under the Notes, an amount equal to the Letter of
Credit Usage 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) So long as any Letter of Credit shall remain outstanding, any
amounts received by the Administrative Agent in respect of the Letter of
Credit Usage pursuant to Section 9.2.(a)(ii) or 9.2(b)(ii)
may be held as cash collateral for the obligation of Borrower to reimburse
the Issuing Bank in event of any drawing under any Letter of Credit (and
Borrower hereby grants to the Administrative Agent a security interest in
such cash collateral). In the event any Letter of Credit in respect of which
Borrower has deposited cash collateral with the Administrative Agent is
cancelled or expires, the cash collateral shall be applied first to
the reimbursement of the Issuing Bank (or all of the Banks, as the case may
be) for any drawings thereunder, and second to the payment of any
outstanding Obligations of Borrower hereunder or under any other Loan
Document.
(d) 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
Majority Banks.
(e) All payments received by the Administrative Agent and the Banks,
or any of them, after the acceleration of the maturity of the Loans shall be
applied first to the costs and expenses (including attorneys' fees and
disbursements) of the Administrative Agent, acting as
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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 10
THE ADMINISTRATIVE AGENT
10.1 Appointment and Authorization. Subject to Section 10.7, each Bank hereby
irrevocably appoints and authorizes the Administrative Agent to take such action
as agent on its behalf and to exercise such powers under the Loan Documents as
are delegated to the Administrative Agent by the terms thereof or are reasonably
incidental, as determined by the Administrative Agent, thereto. This appointment
and authorization does not constitute appointment of the Administrative Agent as
trustee for any Bank and, except as specifically set forth herein to the
contrary, the Administrative Agent shall take such action and exercise such
powers only in an administrative and ministerial capacity.
10.2 Administrative Agent and Affiliates. Bank of America (and each
successor Administrative Agent) has the same rights and powers under the Loan
Documents as any other Bank and may exercise the same as though it were not the
Administrative Agent; and the term "Bank" or "Banks" includes Bank of America in
its individual capacity. Bank of America (and each successor Administrative
Agent) and its respective
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Affiliates may accept deposits from, lend money to, and generally engage in any
kind of banking, trust or other business with Borrower and any Affiliate of
Borrower, as if it were not the Administrative Agent and without any duty to
account therefor to the Banks. Bank of America (and each successor
Administrative Agent) need not account to any other Bank for any monies received
by it for reimbursement of its costs and expenses as Administrative Agent
hereunder, or for any monies received by it in its capacity as a Bank hereunder,
except as otherwise provided herein.
10.3 Banks' Credit Decisions. Each Bank agrees that it has,
independently and without reliance upon the Administrative Agent, any other
Bank, or the directors, officers, agents, or employees of the Administrative
Agent or of any other Bank, and instead in reliance upon information supplied to
it by or on behalf of Borrower and its Subsidiaries and upon such other
information as it has deemed appropriate, made its own independent credit
analysis and decision to enter into this Agreement. Each Bank also agrees that
it shall, independently and without reliance upon the Administrative Agent, any
other Bank, or the directors, officers, agents, or employees of the
Administrative Agent or of any other Bank, continue to make its own independent
credit analyses and decisions in acting or not acting under the Loan Documents.
10.4 Action by Administrative Agent.
(a) The Administrative Agent may assume that no Default or Event of
Default has occurred and is continuing, unless the Administrative Agent has
actual knowledge of the Default or Event of Default, has received notice from
Borrower stating the nature of the Default or Event of Default, or has received
notice from a Bank stating the nature of the Default or Event of Default and
that Bank considers the Default or Event of Default to have occurred and to be
continuing.
(b) The Administrative Agent has only those obligations under the
Loan Documents that are expressly set forth therein. Without limitation on the
foregoing, the Administrative Agent shall have no duty to inspect any property
of Borrower or any of its Subsidiaries, although the Administrative Agent may in
its discretion periodically inspect any property from time to time.
(c) Except for any obligation expressly set forth in the Loan
Documents and as long as the Administrative Agent may assume that no Event of
Default has occurred and is continuing, the Administrative Agent may, but shall
not be required to, exercise its discretion to act or not act, except
that the Administrative Agent shall be required to act or not act upon the
instructions of the Line A Majority Banks (or of all the
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Line A Banks, to the extent required by Section 11.2) with respect to the Line A
Obligations or the instructions of the Line B/C Majority Banks (or of all the
Line B/C Banks, to the extent required by Section 11.2) with respect to the Line
B/C Obligations and those instructions shall be binding upon the Administrative
Agent and all the Line A Banks or Line B/C Banks, as the case may be, provided
that the Administrative Agent shall not be required to act or not act if to do
so would, in the reasonable judgment of the Administrative Agent, expose the
Administrative Agent to significant liability or would be contrary to any Loan
Document or to applicable law.
(d) If the Administrative Agent has received a notice specified in
clause (a), the Administrative Agent shall give notice thereof to the
Banks and shall act or not act upon the instructions of the Line A Majority
Banks (or of all the Line A Banks, to the extent required by Section
11.2) with respect to the Line A Obligations or the instructions of the
Line B/C Majority Banks (or of all the Line B/C Banks to the extent required by
Section 11.2) with respect to the Line A Obligations or the instructions of the
Line B/C Majority Banks (or of all the Line B/C Banks, to the extent required by
Section 11.2) with respect to the Line A Obligations or the instructions of the
Line B/C Banks to the extent required by Section 11.2) with respect to the Line
B/C Obligations fail, for three (3) Banking Days after the receipt of notice
from the Administrative Agent, to instruct the Administrative Agent, then the
Administrative Agent, in its sole discretion, may act or not act as it deems
advisable for the protection of the interests of the Banks.
(e) The Administrative Agent shall have no liability to any Bank for
acting, or not acting, as instructed by the Line A Majority Banks (or all the
Line A Banks, if required under Section 11.2) with respect to the Line A
Obligations or the instructions of the Line B/C Majority Banks (or of all the
Line B/C Banks to the extent required by Section 11.2) with respect to the Line
B/C Obligations, notwithstanding any other provision hereof.
10.5 Liability of Administrative Agent. Neither the Administrative
Agent nor any of its respective directors, officers, agents, or employees shall
be liable for any action taken or not taken by them under or in connection with
the Loan Documents, except for their own gross negligence or willful
misconduct. Without limitation on the foregoing, the Administrative Agent and
its respective directors, officers, agents, and employees:
(a) may treat the payee of any Note as the holder thereof until the
Administrative Agent receives notice of the assignment or transfer thereof in
form satisfactory to the
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Administrative Agent, signed by the payee and may treat each Bank as the owner
of that Bank's interest in the obligations due to Banks for all purposes of this
Agreement until the Administrative Agent receives notice of the assignment or
transfer thereof, in form satisfactory to the Administrative Agent, signed by
that Bank;
(b) may consult with legal counsel, in-house legal counsel,
independent public accountants, in-house accountants and other professionals, or
other experts selected by it, or with legal counsel, independent public
accountants, or other experts for Borrower, and shall not be liable for any
action taken or not taken by it or them in good faith in accordance with the
advice of such legal counsel, independent public accountants, or experts;
(c) will not be responsible to any Bank for any statement, warranty,
or representation made in any of the Loan Documents or in any notice,
certificate, report, request, or other statement (written or oral) in connection
with any of the Loan Documents;
(d) except to the extent expressly set forth in the Loan Documents,
will have no duty to ascertain or inquire as to the performance or observance by
Borrower or any other Person of any of the terms, conditions, or covenants of
any of the Loan Documents or to inspect the property, books, or records of
Borrower or any of its Subsidiaries or other Person;
(e) will not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, effectiveness, sufficiency, or
value of any Loan Document, any other instrument or writing furnished pursuant
thereto or in connection therewith;
(f) will not incur any liability by acting or not acting in reliance
upon any Loan Document, notice, consent, certificate, statement, or other
instrument or writing believed by it or them to be genuine and signed or sent by
the proper party or parties; and
(g) will not incur any liability for any arithmetical error in
computing any amount payable to or receivable from any Bank hereunder, including
without limitation payment of principal and interest on the Notes, payment of
commitment fees, Loans, and other amounts; provided that promptly upon
discovery of such an error in computation, the Administrative Agent, the Banks,
and (to the extent applicable) Borrower shall make such adjustments as are
necessary to correct such error and to restore the parties to the position that
they would have occupied had the error not occurred.
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10.6 Indemnification. Each Line A Bank shall, ratably in accordance
with the respective principal amount of its Line A Commitment, indemnify and
hold the Administrative Agent and its directors, officers, agents, and employees
harmless against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, or disbursements of any
kind or nature whatsoever (including, without limitation, attorney's fees and
disbursements) that may be imposed on, incurred by, or asserted against it or
them in any way relating to or arising out of the Line A Provisions (other than
losses incurred by reason of the failure by Borrower to pay the obligations due
to the Line A Banks hereunder or under the Line A Notes) or any action taken or
not taken by it as Administrative Agent thereunder, except for the
Administrative Agent's gross negligence or willful misconduct. Each Line B/C
Bank shall likewise so indemnify the Administrative Agent and its directors,
officers, agents and employees in accordance with the preceding sentence except
that references to the Line A Commitment, Line A Note, Line A Provisions and
Line A Banks shall instead be references to the Line B Commitment, Line C
Commitment, Line B Notes, Line C Notes, Line B/C Provisions and Line B/C Banks.
Without limitation on the foregoing, each Bank shall reimburse the
Administrative Agent upon demand for that Bank's ratable share of any cost or
expense incurred by the Administrative Agent in connection with the negotiation,
preparation, execution, delivery, administration, amendment, waiver,
refinancing, restructuring, reorganization (including a bankruptcy
reorganization), or enforcement of the Loan Documents, to the extent that
Borrower is required by Section 11.3 to pay that cost or expense but
fails to do so upon demand. Any such reimbursement shall not relieve Borrower of
its obligations under Section 11.3.
10.7 Successor Administrative Agent. The Administrative Agent may
resign as such at any time by written notice to Borrower and the Banks, to be
effective upon a successor's acceptance of appointment as Administrative Agent.
Both Majority Banks may at any time remove the Administrative Agent by written
notice to that effect to be effective on such date as Both Majority Banks
designate. In either event, Both Majority Banks shall appoint a successor
Administrative Agent or Agents, who must be from among the Banks;
provided, that the Administrative Agent shall be entitled to appoint a
successor Administrative Agent from among the Banks, subject to acceptance of
appointment by that successor Administrative Agent, if Both Majority Banks have
not appointed a successor Administrative Agent within thirty (30) days after the
date the Administrative Agent gave notice of resignation or was removed. Upon a
successor's acceptance of appointment as Administrative Agent, the successor
will thereupon succeed to and become vested with all the rights, powers,
privileges, and duties of the Administrative Agent under the Loan Documents, and
the
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resigning or removed Administrative Agent will thereupon be discharged from
its duties and obligations thereafter arising under the Loan Documents. After
any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article 10 and Sections
11.3 and 11.10 shall inure to its benefit as to any action taken
or omitted to be taken by it while it was Administrative Agent under this
Agreement.
10.8 No Obligations of Borrower. Nothing contained in this
Article 10 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.
ARTICLE 11
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 Sections 8.1,
8.2, 8.3 and 8.4 hereof are inserted for the sole benefit of the Banks and the
Administrative Agent may (with the approval of the Line A Majority Banks with
respect to their application to the Line A Obligations and with the approval
of the Line B/C Majority Banks with respect to their application to the Line
B/C Obligations) waive them in whole or in part with or without terms or
conditions in respect of any Loan, without prejudicing the Banks' rights to
assert them in whole or in part in respect of any other Loans.
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11.2 Amendments; Consents. No amendment, modification, supplement,
termination, 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 Line A Majority Banks (if with
respect to any Line A Provision) or the approval of the Line B/C Majority Banks
(if with respect to any Line B/C Provision) and Borrower, and then only in the
specific instance and for the specific purpose given; and without the approval
in writing of all the Line A Banks (or in the case of Section 11.2(d),
Banks holding at least 66 2/3% of the Line A Commitment), no amendment,
modification, supplement, termination, 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 Line A Obligation or the amount of
the Line A Commitment or to decrease the rate of any interest or fee payable
to any Bank;
(b) to postpone any date fixed for any payment of principal of,
prepayment of principal of, or any installment of interest on, any Line A
Obligation or any installment of any fee or to extend the term of the
Commitment;
(c) to amend or modify the provisions of the definitions in Section
1.1 of "Majority Banks" or of Sections 11.2, 11.9, 11.10, or 11.11;
(d) release any Guarantor Subsidiary from liability under any
Subsidiary Guaranty with respect to the Line A Obligations; 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.
Without the approval in writing of all of the Line B/C Banks, no
amendment, modification, supplement, termination, waiver, or consent may be
effective with respect to any of the matters set forth in clauses (a)
and (b) above insofar as the same apply to the Line B/C Obligations or in
clauses (c) or (e) above. Without the approval in writing of Banks holding at
least 66 2/3% of the Line B Commitment and Line C Commitment, no amendment,
modification, supplement, termination, waiver, or consent may be effective
with respect to the matter referred to in clause (d) above with respect to the
Line B/C Obligations. Any amendment, modification, supplement, termination,
waiver, or consent pursuant to this
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Section 11.2 shall apply equally to, and shall be binding upon, all the Banks
and the Agents.
11.3 Costs, Expenses and Taxes. Borrower shall pay within 15 days
after demand the reasonable actual out-of-pocket costs and expenses of the
Managing Agents and the Administrative Agent in connection with (a) the
negotiation, preparation, execution, delivery, arrangement, syndication and
closing of the Loan Documents, provided that such costs and expenses do
not exceed the amounts referred to in a letter agreement between Borrower and
the Managing Agents, (b) administration of the Loan Documents, provided
that such costs and expenses do not exceed the amounts set forth in a letter
agreement between Borrower and the Administrative Agent and (c) any amendment,
waiver or modification of the Loan Documents. Borrower shall pay within 15 days
after demand the reasonable out-of-pocket costs and expenses of the
Administrative Agent and each of the Banks in connection with the enforcement of
any Loan Documents, 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 (in the case of the Managing
Agents and Administrative Agent only) and the second sentence above (in the case
of the Administrative Agent and the Banks) shall include filing fees, recording
fees, title insurance fees, appraisal fees, search fees, and other out-of-pocket
expenses and the reasonable fees and out-of-pocket expenses of any legal counsel
retained by the Managing Agents and Administrative Agent or any of the Banks
(including the allocated costs of in-house counsel), as the case may be, or
independent public accountants and other outside experts retained by the
Managing Agents and Administrative Agent (provided that 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). 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 Commitment. Borrower shall pay
any and all documentary and transfer taxes, assessments or charges made by any
Governmental Agency and all costs, expenses, fees, and charges 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 and each Bank 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
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any of its Obligations. Any amount payable to the Administrative Agent or any
Bank under this Section shall bear interest from the date of receipt of demand
for payment at the rate then in effect for Alternate Base Rate Loans.
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. Each Bank's obligation
to make any Advance pursuant hereto is several and not joint or joint and
several, and is not conditioned upon the performance by any other Bank of its
obligation to make Advances. A default by any Bank will not increase the
Commitment of any other Bank. Any Bank not in default may, if it desires, assume
in such proportion as the nondefaulting Banks agree the obligations of any Bank
in default, but is not obligated to do so.
11.5 Representations and Warranties. All representations and warranties of
Borrower and any other Party contained herein or in any other Loan Document
(including, for this purpose, all representations and warranties contained in
any certificate or other writing required to be delivered by or on behalf of
Borrower or such Party pursuant to any Loan Document) will survive the making of
the loans hereunder and the execution and delivery of the Notes, and, in the
absence of actual knowledge by the Administrative Agent or a Bank of the untruth
of any representation or warranty, have been or will be relied upon by the
Administrative Agent and that Bank, notwithstanding any investigation made by
the Administrative Agent or that Bank or on their behalf.
11.6 Notices. Except as otherwise provided in any Loan Document, all
notices, requests, demands, directions, and other communications provided for
hereunder and under any other Loan Document must be in writing and must be
mailed (provided that communications related to any Default or Event of
Default or proposed action under Section 11.2 shall not be sent solely
by mail), telegraphed, delivered, or sent by telex, telecopier or cable to the
appropriate party at the address set forth on the signature pages of this
Agreement or, as to any Party, at any other address as may be designated by it
in the applicable Loan Document or in a written notice sent to the
Administrative Agent and Borrower in accordance with this Section. Except as
otherwise provided in any Loan Document if any notice, request, demand,
direction, or other communication is given by mail it will be effective on the
earlier of actual receipt or the third Banking Day after deposited in the United
States mails with first class or airmail postage prepaid; if given by telegraph
or cable, when delivered to the telegraph company with charges
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prepaid; if given by telecopier, when sent; if given by telex, when confirmed by
answerback; or if given by personal delivery, when delivered.
11.7 Execution in Counterparts. 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 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.
11.8 Binding Effect; Assignment.
(a) This Agreement and the other Loan Documents to which Borrower is
a Party will be binding upon and inure to the benefit of Borrower, the
Agents, each of the Banks, and their respective successors and assigns,
except that except as permitted in Section 6.3, Borrower may
not assign its rights hereunder or thereunder or any interest
herein or therein without the prior written consent of all the Banks.
(b) From time to time subsequent to the Amendment Effective Date,
each Line A Bank may assign or grant a participation in a portion of its Pro
Rata Share of the Line A Commitment, its Advances under the Line A Commitment
and its participation in Line A Letters of Credit, subject to all of the
terms and conditions set forth in Sections 5.1 and 5.2 of the
Override Agreement.
(c) From time to time subsequent to the Amendment Effective Date,
each Line B/C Bank may assign or grant a participation in a portion of its
Pro Rata Share of the Line B Commitment and Line C Commitment, its Advances
under the Line B Commitment and the Line C Commitment and its participation
in Line C Letters of Credit pursuant to a Line B/C Commitment Assignment and
Acceptance Agreement and subject to all of the terms and conditions set forth
in Sections 5.1 and 5.2 of the Override Agreement except that (i) all
references therein to "Overall Commitment" or the "Override Agreement"
shall instead be deemed to be references to the "Line B Commitment and the
Line C Commitment" and "this Agreement"; (ii) the Applicable
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Minimum Hold Requirement hereunder shall be, for each Bank,
$5,000,000 and (iii) the minimum amount of any assignment hereunder or
participation herein shall be $5,000,000.
11.9 Sharing of Setoffs. Each Line A 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 Line A Obligations due it
hereunder and under the Line A Notes that is ratably more than any other Line A
Bank, through any means, receives in payment of the Line A Obligations held by
that Line A Bank, then: (a) the Line A 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
Line A Bank a participation in the Line A Obligations held by the other Line A
Bank and shall pay to the other Line A Bank a purchase price in an amount so
that the share of the Line A Obligations held by each Line A 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 Line A Banks share
any payment obtained in respect of the Line A Obligations ratably in accordance
with each Line A Bank's share of the Line A Obligations immediately
prior to, and without taking into account, the payment, 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 Line A 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 Line A Bank
that purchases a participation in the Line A 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 Line A Obligations purchased to the same extent as
though the purchasing Bank were the original owner of the Line A Obligations
purchased. Each Line B/C Bank severally agrees to the same provisions as are set
forth in the preceding two sentences, with all references to Line A Banks
changed to Line B/C Banks and all references to Line A Obligations and the Line
A Notes changed to Line B/C Obligations and the Line B Notes and Line C Notes.
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
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lien or counterclaim with respect to the participation as fully as if the Bank
were the original owner of the Obligation purchased.
11.10 Indemnity by Borrower. Borrower agrees to indemnify, save, and
hold harmless the Agents and each Bank and their directors, officers, agents,
attorneys, and employees (collectively, the "indemnitees") from and against: (i)
any and all claims, demands, actions or causes of action that are asserted
against any indemnitee (other than by Borrower or by any other indemnitee) if
the claim, demand, action or cause of action arises out of or relates to the
Commitment, 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; (ii) any administrative or
investigative proceeding by any Governmental Agency arising out of or related to
a claim, demand, action or cause of action described in clause (i)
above; and (iii) any and all liabilities, losses, costs, or expenses (including
reasonable attorneys' fees and disbursements (including the allocated cost of
in-house counsel)) that any indemnitee suffers or incurs as a result of any of
the foregoing; provided, that Borrower shall have no obligation under
this Section to any indemnitee with respect to any of the foregoing arising out
of the gross negligence or willful misconduct of that indemnitee or the breach
by the indemnitee of this Agreement or from the transfer or disposition of any
Note by any Bank. If any claim, demand, action or cause of action is
asserted against any indemnitee, such indemnitee shall promptly notify Borrower,
but the failure to so promptly notify Borrower shall not affect Borrower's
obligations under this Section unless such failure materially prejudices
Borrower's right to participate in the contest of such claim, demand, action or
cause of action, as hereinafter provided. If requested by Borrower in writing
and so long as no Default or Event of Default shall have occurred and be
continuing, such indemnitee shall in good faith contest the validity,
applicability and amount of such claim, demand, action or cause of action, shall
permit Borrower to participate in such contest and shall cooperate with Borrower
to the extent their interests are aligned. Any indemnitee that proposes to
settle or compromise any claim or proceeding for which Borrower may be liable
for payment of indemnity hereunder shall give Borrower written notice of the
terms of such proposed settlement or compromise reasonably in advance of
settling or compromising such claim or proceeding and shall not so settle or
compromise without Borrower's written approval thereof, which approval may be
withheld in Borrower's sole discretion. Any voluntary settlement by an
indemnitee of such a claim or proceeding without Borrower's written approval
shall relieve Borrower of its obligation to indemnify that indemnitee with
respect to such claim or proceeding. In any legal action involving more than
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one indemnitee, all indemnitees shall be represented by a single legal counsel
unless such legal counsel determines that a defense or counterclaim is available
to an indemnitee that is not available to all indemnitees and that to assert
such a defense or counterclaim would create a conflict of interest, or a
potential conflict of interest, in which case such indemnitee shall be entitled
to separate legal counsel. Any obligation or liability of Borrower to any
indemnitee under this Section shall survive the expiration or termination of
this Agreement and the repayment of all Loans and all other Obligations owed to
the Banks.
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 Agents 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 or the Agents in connection with any such matter is for
the protection of the Banks and the Agents, and neither Borrower nor any third
party is entitled to rely thereon.
11.12 Confidentiality. Each Bank agrees to use any confidential
information that it may receive, directly or indirectly, from Borrower pursuant
to this Agreement only for the purposes of this Agreement and to hold such
confidential information in confidence, except for disclosure: (a) To
Affiliates of the Bank; (b) To other Banks; (c) To legal counsel, accountants
and other professional advisors to that Bank; (d) To regulatory officials having
jurisdiction over that Bank; (e) As required by Law or legal process
(provided that the Bank shall, to the extent possible give sufficient
notice to Borrower of such legal process to enable Borrower to oppose such legal
process, and in any event, give written notice to Borrower of such legal process
as soon as practicable) or in connection with any legal proceeding to which that
Bank and Borrower are adverse parties; and (f) To another financial institution
in connection with a disposition or proposed disposition to that financial
institution of all or part of that Bank's interests hereunder or a participation
interest in its Note, provided that such disclosure is made subject to an
appropriate confidentiality agreement by such institution on terms substantially
similar to this Section. For purposes of the foregoing, "confidential
information" shall mean any information respecting Borrower or its Subsidiaries
reasonably considered by Borrower to be confidential, other than (i)
information previously filed with any Governmental Agency and
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available to the public, (ii) information previously published in any public
medium from a source other than, directly or indirectly, the Agents or any Bank,
and (iii) information previously disclosed by Borrower to any Person not
associated with Borrower without any reasonable expectation of confidentiality.
Nothing in this Section shall be construed to create or give rise to any
fiduciary duty on the part of the Agents or the Banks to Borrower.
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 Agents and the Banks in connection with the Commitment, and is
made for the sole benefit of Borrower, the Agents and the Banks, and the Agents'
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.
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 Both Majority Banks.
11.16 Further Assurances. Borrower shall, at its expense and without
expense to the Banks or the Agents, do, execute, and deliver such further acts
and documents as any Bank or the Agents from time to time reasonably requires
for the assuring and confirming unto the Banks or the Agents 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.
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11.17 Integration. This Agreement, together with the other Loan
Documents and the Mortgage Warehousing Agreement, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof except as
expressly provided herein to the contrary; provided that the foregoing is
subject to Section 4.18 hereof. 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. The Loan Documents shall be governed by, and
construed and enforced in accordance with, the Laws of California.
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 (other than the Override Agreement), the provisions of
this Agreement shall prevail. To the extent there is any actual irreconcilable
conflict between the provisions of this Agreement and the Override Agreement,
the provisions of the Override Agreement shall prevail.
11.22 Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE NOTES, ANY OTHER LOAN
DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING OR
OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY
OTHER LOAN DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY. ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.
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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 Hazardous Materials Indemnity. Without limiting any other
indemnity provided for in the Loan Documents, Borrower agrees to indemnify the
Agents and each Bank and their directors, officers, agents, attorneys, and
employees (collectively, the "indemnities") from any claim, liability, loss,
cost or expense (including reasonable attorneys' fees (including
the allocated cost of in-house counsel)) 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 the Commitment, the use of proceeds of any Loans, any
transaction contemplated pursuant to this Agreement, or any
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relationship or alleged relationship of any indemnitee to Borrower related to
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
KAUFMAN AND BROAD HOME CORPORATION
By /s/ Michael F. Henn
-----------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ Dennis Welsch
-----------------------------------
Dennis Welsch
Vice President and Treasurer
10990 Wilshire Boulevard
Los Angeles, California 90071
Attn.: Dennis Welsch
Vice President
Phone: (310) 231-4000
Fax: (310) 231-4295
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative
Agent, Co-Syndication Agent and a
Managing Agent
By /s/ Charles Graber
-----------------------------------
Charles Graber
Vice President
Agency Management Services #5596
1455 Market Street
San Francisco, California 94103
Attn.: Charles Graber
Vice President
Phone: (415) 436-3495
Fax: (415) 436-2700
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BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Line A Bank
and a Line B/C Bank
By /s/ Craig A. Moyer
-----------------------------------
Craig A. Moyer
Vice President
Domestic Lending Office
Bank of America NT&SA
CRESG - National Accounts #1357
555 South Flower Street
Los Angeles, California 90071
Attn.: Craig A. Moyer
Vice President
Phone: (213) 228-5238
Fax: (213) 228-5389
LIBOR Lending Office
Bank of America NT&SA
CRESG National Accounts #1357
555 South Flower Street
Los Angeles, California 90071
Attn.: Catherine Wagenhoffer or
Mary Gamboa
Phone: (213) 228-6192 (Wagenhoffer)
(213) 228-4582 (Gamboa)
Fax: (213) 228-5389
- 114 -
<PAGE> 120
THE FIRST NATIONAL BANK OF CHICAGO, as
Documentation Agent, Co-Syndication
Agent, a Managing Agent, as a Line A
Bank and Line B/C Bank
By /s/ Mark D. Zeisloft
-----------------------------------
Mark D. Zeisloft
Vice President
Domestic and LIBOR Lending Office
The First National Bank of Chicago
One First National Plaza, Suite 0318
Chicago, Illinois 60670
Attn.: Michael Dowling
Assistant Vice President
Phone: (312) 732-2517
Fax: (312) 732-1582
CREDIT LYONNAIS LOS ANGELES BRANCH, as
a Managing Agent, a Line A Bank and
Line B/C Bank
By /s/ Thierry F. Vincent
-----------------------------------
Thierry F. Vincent
Vice President
- 115 -
<PAGE> 121
CREDIT LYONNAIS CAYMAN ISLAND BRANCH,
as a Managing Agent, a Line A Bank and
Line B/C Bank
By /s/ Thierry F. Vincent
-----------------------------------
Thierry F. Vincent
Authorized Signatory
Domestic Lending Office
Credit Lyonnais Los Angeles Branch
515 South Flower Street
Los Angeles, California 90071
Attn.: David L. Miller
Vice President
Phone: (213) 362-5956
Fax: (213) 623-3437
LIBOR Lending Office
Credit Lyonnais Cayman Island Branch
c/o Credit Lyonnais
515 South Flower Street
Los Angeles, California 90071
Attn.: David L. Miller
Vice President
Phone: (213) 627-3200
Fax: (213) 623-3437
- 116 -
<PAGE> 122
NATIONSBANK OF TEXAS, N.A., as a
Managing Agent, a Line A Bank and a
Line B/C Bank
By /s/ Michele Shafroth
-----------------------------------
Michele Shafroth
Senior Vice President
Domestic and LIBOR Lending Office
NationsBank of Texas, N.A.
901 Main Street
TX1-492-14-06
Dallas, Texas 75202
Attn.: Kay Hibbs
Administrative Officer
Phone: (214) 508-3089
Fax: (214) 508-0944
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
Los Angeles Agency, as a Line A Bank
By /s/ Toshinari Iyoda
-----------------------------------
Toshinari Iyoda
Senior Vice President
Domestic and LIBOR Lending Office
The Industrial Bank of Japan, Ltd.,
Los Angeles Agency
350 South Grand Avenue, Suite 1500
Los Angeles, California 90071
Attn.: Lori Roth Schnadig
Assistant Vice President
Phone: (213) 893-6444
Fax: (213) 488-9840
- 117 -
<PAGE> 123
SOCIETE GENERALE, as a Line A Bank
By /s/ Maureen Kelly
-----------------------------------
Maureen Kelly
Vice President
Domestic and LIBOR Lending Office
Societe Generale
2029 Century Park East, Suite 2900
Los Angeles, California 90067
Attn.: Maureen Kelly
Vice President
Phone: (310) 788-7110
Fax: (310) 551-1537
SUNTRUST BANK, ATLANTA, as a Line A
Bank
By /s/ Kristina L. Anderson
-----------------------------------
Kristina L. Anderson
Assistant Vice President
By /s/ Susan O. Graham
-----------------------------------
Susan O. Graham
Vice President
Domestic and LIBOR Lending Office
Suntrust Bank, Atlanta
25 Park Place
24th Floor, Mail Code 124
Atlanta, Georgia 30303
Attn.: Ginny Dulaney
Corporate Banking Assistant
Phone: (404) 588-8481
Fax: (404) 827-6270
- 118 -
<PAGE> 124
BANK ONE ARIZONA, NA, as a Line A Bank
By /s/ Rhonda R. Williams
-----------------------------------
Rhonda R. Williams
Assistant Vice President
Domestic and LIBOR Lending Office
Bank One Arizona, NA
241 North Central, 20th Floor
Phoenix, Arizona 85004
Attn.: Rhonda R. Williams
Assistant Vice President
Phone: (602) 221-1783
Fax: (602) 221-1372
THE FIRST NATIONAL BANK OF BOSTON, as
a Line A Bank
By /s/ Paul F. DiVito
-----------------------------------
Paul F. DiVito
Vice President
Domestic and LIBOR Lending Office
Bank of Boston
400 Perimiter Center Terrace
Suite 745
Atlanta, Georgia 30346
Attn.: Cheryl Geoffrion
Administrative Assistant
Phone: (404) 390-6577
(404) 390-6581
Fax: (404) 391-9811
- 119 -
<PAGE> 125
BANQUE INDOSUEZ, as a Line A Bank
By /s/ Jerome S. Sanzo
-----------------------------------
Jerome S. Sanzo
First Vice President
By /s/ Anita Chung
-----------------------------------
Anita Chung
Assistant Treasurer
Domestic and LIBOR Lending Office
Banque Indosuez
1211 Avenue of the Americas
New York, New York 10036-8701
Attn.: Anita Chung
Assistant Treasurer
Phone: (212) 278-2754
Fax: (212) 278-2759
CHEMICAL BANK, as a Line A Bank
By /s/ Wanda Chin
-----------------------------------
Wanda Chin
Vice President
Domestic and LIBOR Lending Office
Chemical Bank
380 Madison Avenue, 10th Floor
New York, New York 10017
Attn.: Ellen Goodlander
Loan Administrator
Phone: (212) 622-3825
Fax: (212) 622-3397
- 120 -
<PAGE> 126
THE FUJI BANK, LIMITED, Los Angeles
Agency, as a Line A Bank
By /s/ Nobuhiro Umemura
-----------------------------------
Nobuhiro Umemura
Joint General Manager
Domestic and LIBOR Lending Office
The Fuji Bank, Limited, Los Angeles
333 South Grand Avenue, 25th Floor
Los Angeles, California 90071
Attn.: Patrick Reilly
Vice President - Manager
Phone: (213) 253-4158
Fax: (213) 253-4198
- 121 -
<PAGE> 127
SCEDHULE 1
PRO RATA SHARES
<TABLE>
<CAPTION>
Line B
Line B Pro Rata Share
Bank Commitment Percentage
---- ---------- ----------
<S> <C> <C>
Bank of America National
Trust and Savings Association $ 27,500,000 25.0000%
The First National Bank
of Chicago $ 27,500,000 25.0000%
Credit Lyonnais 27,500,000 25.0000%
NationsBank of Texas, N.A. 27,500,000 25.0000%
------------
Total $110,000,000 100.0000%
</TABLE>
PRO RATA SHARES
<TABLE>
<CAPTION>
Line C
Line C Pro Rata Share
Bank Commitment Percentage
---- ---------- ----------
<S> <C> <C>
Bank of America National
Trust and Savings Association $ 5,000,000 25.0000%
The First National Bank
of Chicago $ 5,000,000 25.0000%
Credit Lyonnais 5,000,000 25.0000%
NationsBank of Texas, N.A. 5,000,000 25.0000%
------------
Total $ 20,000,000 100.0000%
</TABLE>
[Schedule 1]
<PAGE> 128
EXHIBIT A
---------
COMPLIANCE CERTIFICATE AS REQUIRED BY ARTICLE 7, SECTION 2
- --------------------------------------------------------------------------------
COMPUTATIONS OF SELECTED NEGATIVE COVENANTS UNDER ARTICLE 6
FIGURES FOR THE REPORTING PERIOD ENDING:
6.4 (f)(i) INVESTMENTS AND ACQUISITIONS:
COVENANT -
Limitation on investments in or acquisitions of Persons engaged in
businesses which are considered "different" from Borrower's current
operations.
- --------------------------------------------------------------------------------
LIMITATION ON INVESTMENT IN OR ACQUISITION OF THE FOLLOWING:
(f)(ii) Persons engaged in commercial construction business in
European Countries other than France
- --------------------------------------------------------------------------------
AMOUNT PERMITTED EQUALS THE FOLLOWING FIXED AMOUNT = $25,000,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT OF SUCH INVESTMENTS AND ACQUISITIONS = $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $25,000,000
(f)(iii) Persons engaged in commercial construction the United States.
- --------------------------------------------------------------------------------
AMOUNT PERMITTED EQUALS THE FOLLOWING FIXED AMOUNT = $15,000,000
- --------------------------------------------------------------------------------
AGGREGATE COST OF INVESTMENTS IN SUCH PERSONS $0
AGGREGATE COST OF INVESTMENTS IN SUCH INVENTORY $0
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT OF SUCH INVESTMENTS AND ACQUISITIONS = $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $15,000,000
(j) The amount of investments made in businesses other than
those provided for by this covenant.
- --------------------------------------------------------------------------------
AMOUNT PERMITTED EQUALS THE FOLLOWING FIXED AMOUNT = $5,000,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT OF SUCH INVESTMENTS AND ACQUISITIONS = $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $5,000,000
- --------------------------------------------------------------------------------
<PAGE> 129
COMPLIANCE CERTIFICATE AS REQUIRED BY ARTICLE 7, SECTION 2
COMPUTATIONS OF SELECTED NEGATIVE COVENANTS UNDER ARTICLE 6
FIGURES FOR THE REPORTING PERIOD ENDING:
6.8 NON-RECOURSE INDEBTEDNESS
COVENANT
Limitation on non-recourse debt of Joint Ventures and Domestic
Subsidiaries.
- --------------------------------------------------------------------------------
Amount of non-recourse debt permitted $100,000,000
- --------------------------------------------------------------------------------
Aggregate amount of domestic subsidiary secured debt $0
- --------------------------------------------------------------------------------
LESS: Indebtedness associate with properties in which such
Indebtedness is supported by an LC $0
Plus: Borrower's share of Non-Recourse Indebtedness associated
with Joint Ventures = $0
- --------------------------------------------------------------------------------
Aggregate amount of non-recourse debt $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $100,000,000
- --------------------------------------------------------------------------------
6.9 SUBSIDIARY INDEBTEDNESS AND CONTINGENT GUARANTY OBLIGATIONS
COVENANT -
Limitation on total Indebtedness and Contingent Guaranty
Obligations of Domestic Subsidiaries.
6.9(e). RECOURSE INDEBTEDNESS
- --------------------------------------------------------------------------------
AMOUNT OF SUBSIDIARY INDEBTEDNESS WHICH MAY BE RECOURSE $5,000,000
- --------------------------------------------------------------------------------
AMOUNT OF SUBSIDIARY INDEBTEDNESS WHICH IS RECOURSE $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $5,000,000
- --------------------------------------------------------------------------------
6.9(f). TOTAL INDEBTEDNESS
- --------------------------------------------------------------------------------
AMOUNT OF TOTAL SUBSIDIARY INDEBTEDNESS PERMITTED IS
FIXED AT= $100,000,000
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT OF DOMESTIC SUBSIDIARY SECURED INDEBTEDNESS= $0
PLUS: Recourse Indebtedness $0
PLUS: Borrower's share of Non-Recourse Indebtedness associated
with Joint Ventures= $0
PLUS: Borrower's share of Recourse Indebtedness associated with
Unimproved Land IV= $0
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT OF NON-RECOURSE INDEBTEDNESS
LIMITED BY SECTION 6.10(f) $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $100,000,000
- --------------------------------------------------------------------------------
6.9(h). INDEBTEDNESS INCURRED BY UnIMPROVED LAND JOINT VENTURES*
- --------------------------------------------------------------------------------
AMOUNT OF PERMITTED INDEBTEDNESS INCURRED BY UNIMPROVED LAND
JVS* IS FIXED AT= $35,000,000
- --------------------------------------------------------------------------------
Amount of Indebtedness incurred by Unimproved Land JVs* is $0
- --------------------------------------------------------------------------------
AMOUNT OF INDEBTEDNESS INCURRED BY UNIMPROVED LAND
JVs* IS $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $35,000,000
* Unimproved Land Joint Ventures are JVs formed by a subsidiary which does not
qualify as a Significant Subsidiary and to which such Subsidiary has
contributed Domestic Unimproved Land.
- --------------------------------------------------------------------------------
<PAGE> 130
COMPLIANCE CERTIFICATE AS REQUIRED BY ARTICLE 7, SECTION 2
- -------------------------------------------------------------------------------
COMPUTATIONS OF SELECTED NEGATIVE COVENANTS UNDER ARTICLE 6
- -------------------------------------------------------------------------------
FIGURES FOR THE REPORTING PERIOD ENDING:
6.10 MONEY MARKET INDEBTEDNESS
COVENANT -
Limitation such that the aggregate amount of money market Indebtedness
(less than 1 year) and revolving credit outstanding balances do not
exceed the total commitment under the Loan Agreement
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AGGREGATE AMOUNT PERMITTED EQUALS THE LINE A AND LINE C COMMITMENTS $630,000
UNDER THE LOAN AGREEMENT
- -------------------------------------------------------------------------------
Total Line A outstandings at period end = $0
Total Line C outstandings at period end = $0
Total Line A Letter of Credit Usage = $0
Total Line C Letter of Credit Usage = $0
Money Market outstandings at period end = $0
- -------------------------------------------------------------------------------
AGGREGATE AMOUNT OUTSTANDING UNDER SHORT TERM MONEY MARKET LINES $0
AND REVOLVER =
- -------------------------------------------------------------------------------
CUSHION (VIOLATION) $630,000
- -------------------------------------------------------------------------------
<PAGE> 131
COMPLIANCE CERTIFICATE AS REQUIRED BY ARTICLE 7, SECTION 2
- -------------------------------------------------------------------------------
COMPUTATIONS OF SELECTED NEGATIVE COVENANTS UNDER ARTICLE 6
- -------------------------------------------------------------------------------
6.12 MINIMUM CONSOLIDATED TANGIBLE NET WORTH
COVENANT --
Requirement that the Borrower maintain a minimum level of Tangible Net
Worth on a consolidated basis
- -------------------------------------------------------------------------------
THE MINIMUM LEVEL OF TANGIBLE NET WORTH IS BASED ON THE FOLLOWING
FORMULA:
6.12(a) Base Amount= $355,000,000
PLUS: 6.12(b)(i) Cum. amount of Consolidated Adjusted Net Income
earned from Dec. 1, 1995 to Nov. 10, 1996
3 months ending: 29-Feb-96 $0
3 months ending: 30-May-96 $0
3 months ending: 31-Aug-96 $0
3 months ending: 30-Nov-96 $0
-------
0
-------
6.12(b)(ii) The after tax effect of the Contemplated Charge for the
fiscal year ending Nov. 30, 1996
3 months ending: 29-Feb-96 0
3 months ending: 30-May-96 0
3 months ending: 31-Aug-96 0
3 months ending: 30-Nov-96 0
-------
0
-------
Sum of 6.12(b)(i) and 6.12(b)(ii) 0
Multiplied by: 60%
(provided that there shall be no reduction hereunder in the event that
the sum of items 6.12(b)(i) and 6.12(b)(ii) above is a negative)
PLUS: 6.12(c) Amount of Consolidated Adjusted Net Income earned (if positive)
from Dec. 1 1996 to Expiration of Loan including any recapture gain (but
excluding recapture loss).
3 months ending: 28-Feb-97 0
3 months ending: 30-May-97 0
3 months ending: 31-Aug-97 0
-------
0
-------
Multiplied by: 60%
PLUS: 6.12(d) Recapture gain (but including recapture loss) Dec. 1, 1996 to
Expiration of Loan
3 months ending: 28-Feb-97 0
3 months ending: 30-May-97 0
3 months ending: 31-Aug-97 0
-------
0
-------
Multiplied by: 100%
(provided that there shall be no reduction hereunder in the event that the
items in 6.12(c) and (d) are negative)
- -------------------------------------------------------------------------------
<PAGE> 132
COMPLIANCE CERTIFICATE AS REQUIRED BY ARTICLE 7, SECTION 2
COMPUTATIONS OF SELECTED NEGATIVE COVENANTS UNDER ARTICLE 6
FIGURES FOR THE REPORTING PERIOD ENDING:
- -------------------------------------------------------------------------------
6.12 MINIMUM CONSOLIDATED TANGIBLE NET WORTH (CONTINUED)
PLUS: 6.12(e) Cumulative amount of cash proceeds from
the issuance of shares (net of proceeds used
to repurchase outstanding capital stock),
conversion of debt or options and the aggregate
value of capital stock issued in connection with
Acquisitions (net of any intangible assets created)
occurring subsequent to the Amendment Effective Date
3 months ending: 29-Feb-96 $0
3 months ending: 30-May-96 $0
3 months ending: 31-Aug-96 $0
3 months ending: 30-Nov-96 $0
------
0
Multiplied by: 60% $0
LESS: 6.12(f) Cash proceeds from stock issuances since the
Amendment Effective Date used to repurchase
stock:
3 months ending: 29-Feb-96 $0
3 months ending: 30-May-97 $0
3 months ending: 31-Aug-96 $0
3 months ending: 30-Nov-96 $0
------
0
Multiplied by: 100% $0
- -------------------------------------------------------------------------------
CONSOLIDATED TANGIBLE NET WORTH MUST BE AT LEAST $355,000,000
- -------------------------------------------------------------------------------
CONSOLIDATED TANGIBLE NET WORTH AT THE END OF THE
REPORTING PERIOD = $0
Cumulative Changes in Foreign Currency Adjustment:
Balance as of November 30, 1994 $2,243,000
LESS: Balance at the end of the reporting period 2,243,000
----------
ADJUSTED FOR CUM. CHANGES IN FOREIGN CURRENCY
ADJUSTMENT SINCE THE AMENDMENT DATE $0
- -------------------------------------------------------------------------------
CONSOLIDATED TANGIBLE NET WORTH ADJUSTED FOR CUM.
FOREIGN CURRENCY ADJUSTMENT $0
- -------------------------------------------------------------------------------
CUSHION (VIOLATION) ($355,000,000)
- -------------------------------------------------------------------------------
<PAGE> 133
COMPLIANCE CERTIFICATE AS REQUIRED BY ARTICLE 7, SECTION 2
- --------------------------------------------------------------------------------
COMPUTATIONS OF SELECTED NEGATIVE COVENANTS UNDER ARTICLE 6
- --------------------------------------------------------------------------------
FIGURES FOR THE REPORTING PERIOD ENDING:
6.13 DOMESTIC LEVERAGE RATIO
COVENANT -
Limitation on Domestic Indebtedness to Domestic Adjusted Tangible
Net Worth
- --------------------------------------------------------------------------------
OUTSTANDING DOMESTIC INDEBTEDNESS
Domestic secured debt $0
Less: Domestic secured debt backed by Financial Letters
of Credit $0
Domestic secured debt, net of debt supported by Financial
Letters of Credit $0
Plus: Financial Letters of Credit outstanding (inc. Letters of Credit
backing secured debt) $0
Plus: Domestic senior notes outstanding $0
Plus: Domestic outstandings under the Loan Agreement $0
Plus: Domestic outstandings under money market lines $0
Plus: Outstandings under Senior Subordinated Notes $0
- --------------------------------------------------------------------------------
TOTAL DOMESTIC INDEBTEDNESS $0
- --------------------------------------------------------------------------------
The calculation for determining permitted Indebtedness requires the
calculation of Domestic Adjusted Tangible Net Worth:
a) Consolidated Tangible Net Worth $0
Less: b) Tangible Net Worth of Foreign Subsidiaries $0
-----
c) Consolidated TNW Net of Foreign TNW (a+b) $0
Less: d) Amount by which Investments in Domestic Joint Ventures
exceeds 10% of (c) above $0
Less: e) Amount of intercompany receivables owed to Borrower
by Foreign Subsidiaries $0
Plus: f) Lesser of the tax-effect of the Contemplated Charge
or $70,000,000 $0
-----
DOMESTIC ADJUSTED TANGIBLE NET WORTH = $0
The Domestic Leverage Ratio shall not be greater than:
3.00 to 1.00 at Fiscal Quarter Ending February 29, 1996
2.80 to 1.00 at Fiscal Quarter Ending May 31, 1996
2.50 to 1.00 at Fiscal Quarter Ending August 31, 1996
2.10 to 1.00 at Fiscal Quarter Ending November 30, 1996
2.40 to 1.00 at Fiscal Quarter Ending February 28, 1997
2.20 to 1.00 at Fiscal Quarter Ending May 31, 1997
2.10 to 1.00 at Fiscal Quarter Ending August 31, 1997
1.80 to 1.00 at Fiscal Quarter Ending November 30, 1997
and thereafer
---
Times 3.0
---
- --------------------------------------------------------------------------------
PERMITTED DOMESTIC INDEBTEDNESS ($0)
- --------------------------------------------------------------------------------
Cushion (Violation) ($0)
- --------------------------------------------------------------------------------
<PAGE> 134
COMPLIANCE CERTIFICATE AS REQUIRED BY ARTICLE 7, SECTION 2
- -------------------------------------------------------------------------------
COMPUTATIONS OF SELECTED NEGATIVE COVENANTS UNDER ARTICLE 6
FIGURES FOR THE REPORTING PERIOD ENDING:
6.18 DOMESTIC INVENTORY
COVENANT -
Limitation of the Borrower and Domestic Subsidiaries to hold land
in various categories.
- -------------------------------------------------------------------------------
6.18(a) LIMITATION ON LAND IN PRODUCTION
Land in which less than 50% of the costs have been incurred
in order to bring parcel to finished lot status.
- -------------------------------------------------------------------------------
AGGREGATE AMOUNT PERMITTED EQUALS DOMESTIC ADJUSTED ($0)
TANGIBLE NET WORTH =
- -------------------------------------------------------------------------------
Book value of Domestic Land in Production $0
Real property owned by Land Fund for more than 4 years $0
PLUS: Any reduction in the book value attributable to the $0
Contemplated Charge
- -------------------------------------------------------------------------------
BOOK VALUE OF TOTAL DOMESTIC LAND IN PRODUCTION $0
- -------------------------------------------------------------------------------
CUSHION (VIOLATION) ($0)
6.18(b) LIMITATION ON LAND IN PRODUCTION NOT COVERED BY A MAP OR
OTHERWISE EQUIVALENTLY ENTITLED
- -------------------------------------------------------------------------------
AGGREGATE AMOUNT PERMITTED EQUALS 50% OF DOMESTIC ADJUSTED ($0)
TANGIBLE NET WORTH =
- -------------------------------------------------------------------------------
Book value of Domestic Land in Production not covered by $0
a Map or otherwise entitled
Real property owned by Land Fund for more than 4 years $0
PLUS: Any reduction in the book value attributable to the $0
Contemplated Charge
- -------------------------------------------------------------------------------
BOOK VALUE OF DOMESTIC LAND IN PRODUCTION NOT COVERED BY A $0
MAP OR OTHERWISE ENTITLED
- -------------------------------------------------------------------------------
CUSHION (VIOLATION) ($0)
SO LONG AS BORROWER IS IN VIOLATION OF EITHER
SECTIONS 6.17(a) OR (b),
-----------------------------------------------------------------------
If a violation of Section 6.17(a) exists, then the Borrower and its
subsidiaries will not be permitted to acquire any additional Domestic
Land in Production. Similarly, if a violation of Section 6.17(b)
exists, then the Borrower and its subsidiaries will not be permitted
to acquire any additional Domestic Land Not Covered by Tentative or
Final Maps. If either violation persists for two consecutive quarters,
then an event of default will have occurred.
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
6.19 DOMESTIC STANDING INVENTORY
COVENANT -
Limitation on unsold units in which 90% or greater of construction costs
have been incurred or 10 months has elapsed from the time when slab
was poured.
- -------------------------------------------------------------------------------
THE AMOUNT PERMITTED IS EQUAL TO:
The number of domestic Net Orders received during 7,575
the preceding 12 months -------
Multiplied by: 15.00% 0
- -------------------------------------------------------------------------------
TOTAL PERMITTED NUMBER OF UNITS IN DOMESTIC STANDING INVENTORY = 0
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NUMBER OF UNITS IN DOMESTIC STANDING INVENTORY = 0
- -------------------------------------------------------------------------------
CUSHION (VIOLATION) 0
- -------------------------------------------------------------------------------
<PAGE> 135
COMPLIANCE CERTIFICATE AS REQUIRED BY ARTICLE 7, SECTION 2
- --------------------------------------------------------------------------------
COMPUTATIONS OF SELECTED NEGATIVE COVENANTS UNDER ARTICLE 6
FIGURES FOR THE REPORTING PERIOD ENDING:
6.20 INVESTMENTS IN CERTAIN SUBSIDIARIES
COVENANT -
Limitation on Borrower's ability to invest money in certain
Subsidiaries.
6.20(a), FOREIGN SUBSIDIARIES
- --------------------------------------------------------------------------------
THE AMOUNT PERMITTED FOR FOREIGN SUBSIDIARIES IS BASED
ON THE FOLLOWING FORMULA:
Base Amount $30,000,000
PLUS: Aggregate amount of Distributions paid by Foreign
Subsidiaries since Amendment Date $0
PLUS: Aggregate amount of capital of Foreign Subsidiaries returned
to Borrower since Amendment Date $0
- --------------------------------------------------------------------------------
TOTAL PERMITTED INCREMENTAL INVESTMENTS IN FOREIGN
SUBIDIARIES SINCE AMENDMENT DATE $30,000,000
- --------------------------------------------------------------------------------
AGGREGATE INCREMENTAL INVESTMENTS IN FOREIGN SUBSIDIARIES
SINCE THE AMENDMENT DATE $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $30,000,000
- --------------------------------------------------------------------------------
6.20(b), FINANCIAL SUBSIDIARIES
- --------------------------------------------------------------------------------
THE AMOUNT PERMITTED FOR FINANCIAL SUBSIDIARIES IS BASED
ON THE FOLLOWING FORMULA:
Base Amount $40,000,000
PLUS: Aggregate amount of Distributions paid by Financial
Subsidiaries since Amendment Date $0
PLUS: Aggregate amount of capital of Financial Subsidiaries returned
to Borrower since Amendment Date $0
- --------------------------------------------------------------------------------
TOTAL PERMITTED INCREMENTAL INVESTMENTS IN FINANCIAL
SUBIDIARIES SINCE AMENDMENT DATE $40,000,000
- --------------------------------------------------------------------------------
AGGREGATE INCREMENTAL INVESTMENTS IN FINANCIAL SUBSIDIARIES
SINCE THE AMENDMENT DATE $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $40,000,000
- --------------------------------------------------------------------------------
*In calculating compliance with this section, the amount of the
Borrower's Contingent Guaranty Obligations under the Mortgage Warehouse
Guaranty shall be excluded from Investments.
- --------------------------------------------------------------------------------
6.20(c), LAND FUND JOINT VENTURE
- --------------------------------------------------------------------------------
THE AMOUNT PERMITTED IS BASED ON THE FOLLOWING FORMULA:
Base Amount $6,000,000
PLUS: Aggregate amount of Distributions paid by the Land Fund
Joint Venture since the Amendment Date $0
- --------------------------------------------------------------------------------
TOTAL PERMITTED INCREMENTAL INVESTMENTS IN LAND FUND JOINT
VENTURE SINCE AMENDMENT DATE $6,000,000
- --------------------------------------------------------------------------------
AGGREGATE INCREMENTAL INVESTMENTS IN LAND FUND JOINT VENTURE
SINCE THE AMENDMENT DATE $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $6,000,000
- --------------------------------------------------------------------------------
6.20(d), MULTI HOUSING GROUP
- --------------------------------------------------------------------------------
THE AMOUNT PERMITTED IS BASED ON THE FOLLOWING FORMULA:
Base Amount $22,500,000
PLUS: Aggregate amount of Distributions paid by the Multi Housing
Group since the Amendment Date $0
PLUS: Aggregate amount of capital of the Multi Housing Group
returned to Borrower since Amendment Date $0
- --------------------------------------------------------------------------------
TOTAL PERMITTED INCREMENTAL INVESTMENTS IN THE MULTI HOUSING
GROUP SINCE AMENDMENT DATE $22,500,000
- --------------------------------------------------------------------------------
AGGREGATE INCREMENTAL INVESTMENTS IN THE MULTI HOUSING GROUP
SINCE THE AMENDMENT DATE $0
- --------------------------------------------------------------------------------
CUSHION (VIOLATION) $22,500,000
- --------------------------------------------------------------------------------
<PAGE> 136
EXHIBIT B
LINE A NOTE
$80,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("the Bank") the principal
amount of EIGHTY MILLION AND NO/100 DOLLARS ($80,000,000), or such lesser
aggregate amount of Line A Loans as may be made pursuant to the Bank's Pro Rata
Share of the Line A Commitment under the Fourth Amended and Restated Loan
Agreement hereinafter described, payable as hereinafter set forth. The
undersigned promises to pay interest on the principal amount of each Line A
Loan made hereunder and remaining unpaid from time to time from the date of
each such Line A Loan until the date of payment in full, payable as hereinafter
set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line A Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 137
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
-------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
-------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 138
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 139
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 140
LINE A NOTE
$132,500,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
FIRST NATIONAL BANK OF CHICAGO ("the Bank") the principal amount of ONE HUNDRED
THIRTY-TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($132,500,000), or
such lesser aggregate amount of Line A Loans as may be made pursuant to the
Bank's Pro Rata Share of the Line A Commitment under the Fourth Amended and
Restated Loan Agreement hereinafter described, payable as hereinafter set
forth. The undersigned promises to pay interest on the principal amount of
each Line A Loan made hereunder and remaining unpaid from time to time from the
date of each such Line A Loan until the date of payment in full, payable as
hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line A Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 141
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 142
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 143
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 144
EXHIBIT B
LINE A NOTE
$65,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of CREDIT
LYONNAIS LOS ANGELES AND CAYMAN ISLAND BRANCHES ("the Bank") the principal
amount of SIXTY-FIVE MILLION AND NO/100 DOLLARS ($65,000,000), or such lesser
aggregate amount of Line A Loans as may be made pursuant to the Bank's Pro Rata
Share of the Line A Commitment under the Fourth Amended and Restated Loan
Agreement hereinafter described, payable as hereinafter set forth. The
undersigned promises to pay interest on the principal amount of each Line A
Loan made hereunder and remaining unpaid from time to time from the date of
each such Line A Loan until the date of payment in full, payable as hereinafter
set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line A Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 145
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 146
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 147
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 148
LINE A NOTE
$40,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. ("the Bank") the principal amount of FORTY MILLION
AND NO/100 DOLLARS ($40,000,000), or such lesser aggregate amount of Line A
Loans as may be made pursuant to the Bank's Pro Rata Share of the Line A
Commitment under the Fourth Amended and Restated Loan Agreement hereinafter
described, payable as hereinafter set forth. The undersigned promises to pay
interest on the principal amount of each Line A Loan made hereunder and
remaining unpaid from time to time from the date of each such Line A Loan until
the date of payment in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line A Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 149
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 150
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 151
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 152
LINE A NOTE
$32,500,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY ("the Bank") the
principal amount of THIRTY-TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($32,500,000), or such lesser aggregate amount of Line A Loans as may be made
pursuant to the Bank's Pro Rata Share of the Line A Commitment under the Fourth
Amended and Restated Loan Agreement hereinafter described, payable as
hereinafter set forth. The undersigned promises to pay interest on the
principal amount of each Line A Loan made hereunder and remaining unpaid from
time to time from the date of each such Line A Loan until the date of payment
in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line A Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 153
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 154
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 155
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 156
LINE A NOTE
$32,500,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
SOCIETE GENERALE ("the Bank") the principal amount of THIRTY-TWO MILLION FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS ($32,500,000), or such lesser aggregate
amount of Line A Loans as may be made pursuant to the Bank's Pro Rata Share of
the Line A Commitment under the Fourth Amended and Restated Loan Agreement
hereinafter described, payable as hereinafter set forth. The undersigned
promises to pay interest on the principal amount of each Line A Loan made
hereunder and remaining unpaid from time to time from the date of each such
Line A Loan until the date of payment in full, payable as hereinafter set
forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line A Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 157
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on over
due interest to bear interest at the rate set forth in Section 3.9 of the Loan
Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 158
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 159
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 160
LINE A NOTE
$32,500,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
SUNTRUST BANK, ATLANTA (formerly known as TRUST COMPANY BANK) ("the Bank") the
principal amount of THIRTY-TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($32,500,000), or such lesser aggregate amount of Line A Loans as may be made
pursuant to the Bank's Pro Rata Share of the Line A Commitment under the Fourth
Amended and Restated Loan Agreement hereinafter described, payable as
hereinafter set forth. The undersigned promises to pay interest on the
principal amount of each Line A Loan made hereunder and remaining unpaid from
time to time from the date of each such Line A Loan until the date of payment
in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line A Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 161
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 162
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 163
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 164
LINE A NOTE
$20,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of BANK
ONE ARIZONA, NA ("the Bank") the principal amount of TWENTY MILLION AND NO/100
DOLLARS ($20,000,000), or such lesser aggregate amount of Line A Loans as may
be made pursuant to the Bank's Pro Rata Share of the Line A Commitment under
the Fourth Amended and Restated Loan Agreement hereinafter described, payable
as hereinafter set forth. The undersigned promises to pay interest on the
principal amount of each Line A Loan made hereunder and remaining unpaid from
time to time from the date of each such Line A Loan until the date of payment
in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line A Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
Agreement to the fullest extent permitted by applicable Law,
- 1 -
<PAGE> 165
both before and after default and before and after maturity and judgment, with
interest on overdue interest to bear interest at the rate set forth in Section
3.9 of the Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
' By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 166
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 167
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 168
LINE A NOTE
$20,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
FIRST NATIONAL BANK OF BOSTON ("the Bank") the principal amount of TWENTY
MILLION AND NO/100 DOLLARS ($20,000,000), or such lesser aggregate amount of
Line A Loans as may be made pursuant to the Bank's Pro Rata Share of the Line
A Commitment under the Fourth Amended and Restated Loan Agreement hereinafter
described, payable as hereinafter set forth. The undersigned promises to pay
interest on the principal amount of each Line A Loan made hereunder and
remaining unpaid from time to time from the date of each such Line A Loan
until the date of payment in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement
dated as of February 28, 1996, among the undersigned, as Borrower, the Banks
that are parties thereto, Bank of America National Trust and Savings
Association, as Administrative Agent for the Banks, First National Bank of
Chicago, as Documentation Agent, Bank of America National Trust and Savings
Association and The First National Bank of Chicago, as Co-Syndication Agents,
and Bank of America National Trust and Savings Association, The First National
Bank of Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas,
N.A., as Managing Agents (as further amended from time to time, the "Loan
Agreement"). Terms defined in the Loan Agreement and not otherwise defined
herein are used herein with the meanings defined for those terms in the Loan
Agreement. This is one of the Notes referred to in the Loan Agreement, and
any holder hereof is entitled to all of the rights, remedies, benefits and
privileges provided for in the Loan Agreement as originally executed or as it
may from time to time be supplemented, modified, amended, renewed, extended or
supplanted. The Loan Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated
events upon the terms and conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity
Date.
Interest shall be payable on the outstanding daily unpaid principal
amount of each Line A Loan hereunder from the date thereof until payment in
full and shall accrue and be payable at the rates and on the dates set forth
in the Loan
- 1 -
<PAGE> 169
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 170
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 171
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 172
LINE A NOTE
$15,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of BANQUE
INDOSUEZ ("the Bank") the principal amount of FIFTEEN MILLION AND NO/100
DOLLARS ($15,000,000), or such lesser aggregate amount of Line A Loans as may
be made pursuant to the Bank's Pro Rata Share of the Line A Commitment under
the Fourth Amended and Restated Loan Agreement hereinafter described, payable
as hereinafter set forth. The undersigned promises to pay interest on the
principal amount of each Line A Loan made hereunder and remaining unpaid from
time to time from the date of each such Line A Loan until the date of payment
in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line A Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
Agreement to the fullest extent permitted by applicable Law,
- 1 -
<PAGE> 173
both before and after default and before and after maturity and judgment, with
interest on overdue interest to bear interest at the rate set forth in Section
3.9 of the Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest, extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 174
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 175
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 176
LINE A NOTE
$15,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
CHEMICAL BANK ("the Bank") the principal amount of FIFTEEN MILLION AND NO/100
DOLLARS ($15,000,000), or such lesser aggregate amount of Line A Loans as may
be made pursuant to the Bank's Pro Rata Share of the Line A Commitment under
the Fourth Amended and Restated Loan Agreement hereinafter described, payable
as hereinafter set forth. The undersigned promises to pay interest on the
principal amount of each Line A Loan made hereunder and remaining unpaid from
time to time from the date of each such Line A Loan until the date of payment
in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that
are parties thereto, Bank of America National Trust and Savings Association,
as Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association
and The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A.,
as Managing Agents (as further amended from time to time, the "Loan
Agreement"). Terms defined in the Loan Agreement and not otherwise defined
herein are used herein with the meanings defined for those terms in the Loan
Agreement. This is one of the Notes referred to in the Loan Agreement, and
any holder hereof is entitled to all of the rights, remedies, benefits and
privileges provided for in the Loan Agreement as originally executed or as it
may from time to time be supplemented, modified, amended, renewed, extended or
supplanted. The Loan Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated
events upon the terms and conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity
Date.
Interest shall be payable on the outstanding daily unpaid principal
amount of each Line A Loan hereunder from the date thereof until payment in
full and shall accrue and be payable at the rates and on the dates set forth
in the Loan Agreement to the fullest extent permitted by applicable Law,
- 1 -
<PAGE> 177
both before and after default and before and after maturity and judgment, with
interest on overdue interest to bear interest at the rate set forth in Section
3.9 of the Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 178
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 179
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 180
LINE A NOTE
$15,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
FUJI BANK, LIMITED, LOS ANGELES AGENCY ("the Bank") the principal amount of
FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000), or such lesser aggregate
amount of Line A Loans as may be made pursuant to the Bank's Pro Rata Share of
the Line A Commitment under the Fourth Amended and Restated Loan Agreement
hereinafter described, payable as hereinafter set forth. The undersigned
promises to pay interest on the principal amount of each Line A Loan made
hereunder and remaining unpaid from time to time from the date of each such
Line A Loan until the date of payment in full, payable as hereinafter set
forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line A Note shall be payable
as provided in the Loan Agreement and in any event on the Line A Maturity Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line A Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 181
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line A Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line A Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line A Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 182
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 183
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 184
EXHIBIT C
LINE B NOTE
$27,500,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("the Bank") the principal
amount of TWENTY-SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($27,500,000), or such lesser aggregate amount of Line B Loans as may be made
pursuant to the Bank's Pro Rata Share of the Line B Commitment under the Fourth
Amended and Restated Loan Agreement hereinafter described, payable as
hereinafter set forth. The undersigned promises to pay interest on the
principal amount of each Line B Loan made hereunder and remaining unpaid from
time to time from the date of each such Line B Loan until the date of payment
in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line B Note shall be payable
as provided in the Loan Agreement and in any event on the Line B/C Maturity
Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line B Loan hereunder from the date thereof until payment in full and
shall accrue and be
- 1 -
<PAGE> 185
payable at the rates and on the dates set forth in the Loan Agreement to the
fullest extent permitted by applicable Law, both before and after default and
before and after maturity and judgment, with interest on overdue interest to
bear interest at the rate set forth in Section 3.9 of the Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line B Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line B Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line B Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed
- 2 -
<PAGE> 186
by, and construed and enforced in accordance with, the local
Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 3 -
<PAGE> 187
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 188
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 5 -
<PAGE> 189
LINE B NOTE
$27,500,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
FIRST NATIONAL BANK OF CHICAGO ("the Bank") the principal amount of
TWENTY-SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($27,500,000), or
such lesser aggregate amount of Line B Loans as may be made pursuant to the
Bank's Pro Rata Share of the Line B Commitment under the Fourth Amended and
Restated Loan Agreement hereinafter described, payable as hereinafter set
forth. The undersigned promises to pay interest on the principal amount of
each Line B Loan made hereunder and remaining unpaid from time to time from the
date of each such Line B Loan until the date of payment in full, payable as
hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof
is entitled to all of the rights, remedies, benefits and privileges provided
for in the Loan Agreement as originally executed or as it may from time to time
be supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line B Note shall be payable
as provided in the Loan Agreement and in any event on the Line B/C Maturity
Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line B Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 190
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line B Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line B Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line B Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 191
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 192
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 193
LINE B NOTE
$27,500,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of CREDIT
LYONNAIS LOS ANGELES BRANCH ("the Bank") the principal amount of TWENTY-SEVEN
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($27,500,000), or such lesser
aggregate amount of Line B Loans as may be made pursuant to the Bank's Pro Rata
Share of the Line B Commitment under the Fourth Amended and Restated Loan
Agreement hereinafter described, payable as hereinafter set forth. The
undersigned promises to pay interest on the principal amount of each Line B
Loan made hereunder and remaining unpaid from time to time from the date of
each such Line B Loan until the date of payment in full, payable as hereinafter
set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line B Note shall be payable
as provided in the Loan Agreement and in any event on the Line B/C Maturity
Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line B Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 194
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line B Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line B Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line B Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 195
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 196
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 197
LINE B NOTE
$27,500,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. ("the Bank") the principal amount of TWENTY-SEVEN
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($27,500,000), or such lesser
aggregate amount of Line B Loans as may be made pursuant to the Bank's Pro Rata
Share of the Line B Commitment under the Fourth Amended and Restated Loan
Agreement hereinafter described, payable as hereinafter set forth. The
undersigned promises to pay interest on the principal amount of each Line B
Loan made hereunder and remaining unpaid from time to time from the date of
each such Line B Loan until the date of payment in full, payable as hereinafter
set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line B Note shall be payable
as provided in the Loan Agreement and in any event on the Line B/C Maturity
Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line B Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 198
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line B Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line B Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line B Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 199
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 200
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 201
EXHIBIT D
LINE C NOTE
$5,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("the Bank") the principal
amount of FIVE MILLION AND NO/100 DOLLARS ($5,000,000), or such lesser
aggregate amount of Line C Loans as may be made pursuant to the Bank's Pro Rata
Share of the Line C Commitment under the Fourth Amended and Restated Loan
Agreement hereinafter described, payable as hereinafter set forth. The
undersigned promises to pay interest on the principal amount of each Line C
Loan made hereunder and remaining unpaid from time to time from the date of
each such Line C Loan until the date of payment in full, payable as hereinafter
set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line C Note shall be payable
as provided in the Loan Agreement and in any event on the Line B/C Maturity
Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line C Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 202
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line C Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line C Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line C Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 203
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 204
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 205
LINE C NOTE
$5,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
FIRST NATIONAL BANK OF CHICAGO ("the Bank") the principal amount of FIVE
MILLION AND NO/100 DOLLARS ($5,000,000), or such lesser aggregate amount of
Line C Loans as may be made pursuant to the Bank's Pro Rata Share of the Line C
Commitment under the Fourth Amended and Restated Loan Agreement hereinafter
described, payable as hereinafter set forth. The undersigned promises to pay
interest on the principal amount of each Line C Loan made hereunder and
remaining unpaid from time to time from the date of each such Line C Loan until
the date of payment in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line C Note shall be payable
as provided in the Loan Agreement and in any event on the Line B/C Maturity
Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line C Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 206
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line C Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line C Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line C Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 207
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 208
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 209
LINE C NOTE
$5,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of CREDIT
LYONNAIS LOS ANGELES BRANCH ("the Bank") the principal amount of FIVE MILLION
AND NO/100 DOLLARS($5,000,000), or such lesser aggregate amount of Line C
Loans as may be made pursuant to the Bank's Pro Rata Share of the Line C
Commitment under the Fourth Amended and Restated Loan Agreement hereinafter
described, payable as hereinafter set forth. The undersigned promises to pay
interest on the principal amount of each Line C Loan made hereunder and
remaining unpaid from time to time from the date of each such Line C Loan
until the date of payment in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line C Note shall be payable
as provided in the Loan Agreement and in any event on the Line B/C Maturity
Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line C Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 210
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line C Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line C Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line C Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 211
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 212
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 213
LINE C NOTE
$5,000,000 February 28, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. ("the Bank") the principal amount of FIVE MILLION
AND NO/100 DOLLARS ($5,000,000), or such lesser aggregate amount of Line C
Loans as may be made pursuant to the Bank's Pro Rata Share of the Line C
Commitment under the Fourth Amended and Restated Loan Agreement hereinafter
described, payable as hereinafter set forth. The undersigned promises to pay
interest on the principal amount of each Line C Loan made hereunder and
remaining unpaid from time to time from the date of each such Line C Loan until
the date of payment in full, payable as hereinafter set forth.
Reference is made to the Fourth Amended and Restated Loan Agreement dated
as of February 28, 1996, among the undersigned, as Borrower, the Banks that are
parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks, First National Bank of Chicago, as
Documentation Agent, Bank of America National Trust and Savings Association and
The First National Bank of Chicago, as Co-Syndication Agents, and Bank of
America National Trust and Savings Association, The First National Bank of
Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as
Managing Agents (as further amended from time to time, the "Loan Agreement").
Terms defined in the Loan Agreement and not otherwise defined herein are used
herein with the meanings defined for those terms in the Loan Agreement. This
is one of the Notes referred to in the Loan Agreement, and any holder hereof is
entitled to all of the rights, remedies, benefits and privileges provided for
in the Loan Agreement as originally executed or as it may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events upon the terms and
conditions therein specified.
The principal indebtedness evidenced by this Line C Note shall be payable
as provided in the Loan Agreement and in any event on the Line B/C Maturity
Date.
Interest shall be payable on the outstanding daily unpaid principal amount
of each Line C Loan hereunder from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
- 1 -
<PAGE> 214
Agreement to the fullest extent permitted by applicable Law, both before and
after default and before and after maturity and judgment, with interest on
overdue interest to bear interest at the rate set forth in Section 3.9 of the
Loan Agreement.
The amount of each payment hereunder shall be made to the Administrative
Agent at the Administrative Agent's Office, for the account of the Bank, in
lawful money of the United States of America and in immediately available funds
on the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., San Francisco time, on any Banking Day, shall be
deemed received on the next succeeding Banking Day for purposes of calculating
interest thereon. The Bank shall use its best efforts to keep a record of
Loans made by it and payments of principal with respect to this Line C Note,
and such record shall be presumptive evidence of the principal amount owing
under this Line C Note.
The undersigned hereby promises to pay, within fifteen (15) days after
demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or
attempting to enforce any of any holder's rights hereunder, including
attorneys' fees and disbursements, whether or not an action is filed in
connection therewith, in accordance with Section 11.3 of the Loan Agreement.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
This Line C Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By /s/ MICHAEL F. HENN
------------------------------------------
Michael F. Henn
Senior Vice President
and Chief Financial Officer
By /s/ ALBERT PRAW
------------------------------------------
Albert Praw
Senior Vice President
- 2 -
<PAGE> 215
ADVANCES AND PAYMENTS OF PRINCIPAL
(Alternate Base Rate Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE> 216
ADVANCES AND PAYMENTS OF PRINCIPAL
(LIBOR Loans)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Amount of
Amount of Principal
Loan or of Paid or
Redesigna- Redesig-
tion from nated into
another another Unpaid
type of type of Principal Notation
Date Loan Loan Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE> 217
EXHIBIT E
LINE B/C COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT ("Agreement")
dated as of _______, 199_ is made with reference to that certain Fourth Amended
and Restated Loan Agreement dated as of February __, 1996 among Kaufman and
Broad Home Corporation, Bank of America NT&SA, as Administrative Agent, and the
Banks party thereto (the "KBHC Loan Agreement"), and is entered into between the
"Assignor" described below, in its capacity as a Bank under the Loan Agreement,
and the "Assignee" described below. Assignor and Assignee hereby represent,
warrant and agree as follows:
1. Definitions. Capitalized terms defined in the KBHC Loan Agreement
are used herein with the meanings set forth for such terms in the KBHC Loan
Agreement. As used in this Agreement, the following capitalized terms shall
have the meanings set forth below:
"Agent" means the KBHC Agent.
"Assignee" means __________________________________.
"Assigned Pro-Rata Share" means _______% of the Line B
Commitment and the Line C Commitment of the Line B/C Banks under the KBHC Loan
Agreement, being equal to the following dollar amount: $____________________.
"Assignor" means __________________________________.
"Borrower" means KBHC.
"Effective Date" means ___________ 199_, the effective date
of this Agreement determined in accordance with the KBHC Loan Agreement.
"KBHC" means Kaufman and Broad Home Corporation, a Delaware
corporation, and its successors.
"KBHC Agent" means Bank of America National Trust and
Savings Association, in its capacity as Administrative Agent under the KBHC Loan
Agreement, and any successor agent thereunder.
"KBHC Loan Agreement" means that certain Fourth Amended and
Restated Loan Agreement dated as of February 28, 1996 among KBHC, the KBHC
Agent, and the Banks party thereto, as the same may be amended from time to
time.
"Line B/C Banks" means the Banks designated as Line B/C Banks on the
signature pages of the KBHC Loan
-1-
<PAGE> 218
Agreement, together with any other Bank that may become a Line B/C Bank pursuant
to the KBHC Loan Agreement.
"Line B Commitment" shall have the meaning given such term
in the KBHC Loan Agreement.
"Line C Commitment" shall have the meaning given such term
in the KBHC Loan Agreement.
"Loan Documents" means, collectively, the "Loan Documents"
under the KBHC Loan Agreement.
"Managing Agents" means, collectively, Bank of America
National Trust and Savings Association, The First National Bank of Chicago,
Credit Lyonnais Los Angeles Branch and NationsBank of Texas, N.A.
"Notes" means promissory notes evidencing Line B Loans and
Line C Loans made in favor of any Assignor or Assignee by KBHC under the KBHC
Loan Agreement.
2. Representations and Warranties of the Assignor. The Assignor
represents and warrants as follows:
(a) As of the date hereof, the Line B/C Pro-Rata Share of the
Assignor is _____% of the Line B Commitment and the Line C Commitment (without
giving effect to assignments thereof which have not yet become effective). The
Assignor is the legal and beneficial owner of the Assigned Pro-Rata Share and
the Assigned Pro-Rata Share is free and clear of any adverse claim.
(b) The outstanding principal balance of Advances made by Assignor
under Section 2.1(b) of the KBHC Loan Agreement is $______________. The
outstanding principal balance of Advances made by Assignor under Section
2.1(c) of the KBHC Loan Agreement is $___________, and the Assignor's
Pro Rata Share of all Line C Letters of Credit issued under Section
2.5(b) of the KBHC Loan Agreement is $_______________.
(c) The Assignor has full power and authority, and has taken all
action necessary to execute and deliver this Agreement and any and all other
documents required or permitted to be executed or delivered by it in connection
with this Agreement and to fulfill its obligations under, and to consummate the
transactions contemplated by, this Agreement, and no governmental authorizations
or other authorizations are required in connection therewith.
(d) This Agreement constitutes the legal, valid and binding
obligation of the Assignor.
Assignor makes no representation or warranty and assumes no responsibility
with respect to the financial condition of KBHC
-2-
<PAGE> 219
or the performance by KBHC of its obligations under the Override Agreement and
the KBHC Loan Agreement, and assumes no responsibility with respect to any
statements, warranties or representations made or in connection with the
Override Agreement and the KBHC Loan Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the KBHC Loan
Agreement or any Loan Document other than as expressly set forth above.
3. Representations and Warranties of the Assignee. The Assignee hereby
represents and warrants to the Assignor as follows:
(a) The Assignee is an Eligible Assignee;
(b) The Assignee has full power and authority, and has taken all
action necessary to execute and deliver this Agreement, and any and all other
documents required or permitted to be executed or delivered by it in connection
with this Agreement and to fulfill its obligations under, and to consummate the
transactions contemplated by, this Agreement, and no governmental authorizations
or other authorizations are required in connection therewith;
(c) This Agreement constitutes the legal, valid and binding
obligation of the Assignee;
(d) The Assignee has independently and without reliance upon the
Assignor and based on such information as the Assignee has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Assignee
will, independently and without reliance upon the Agents or any Bank, and based
upon such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the KBHC Loan Agreement;
(e) The Assignee has received copies of the KBHC Loan Agreement and
such of the Loan Documents as it has requested, together with copies of the most
recent financial statements delivered pursuant to the KBHC Loan Agreement; and
(f) If Assignee is organized under the Laws of a jurisdiction
outside the United States of America, attached hereto are the forms prescribed
by the Code and the KBHC Loan Agreement certifying Assignee's exemption from
United States withholding taxes with respect to all payments to be made to
Assignee under the KBHC Loan Agreement.
4. Assignment. On the terms set forth herein, Assignor, as of Effective
Date, hereby irrevocably sells, assigns and transfers to the Assignee all of
the rights and obligations of the Assignor as a Line B/C Bank under the KBHC
Loan Agreement and the other Loan Documents, in each case to the extent of the
-3-
<PAGE> 220
Assigned Pro-Rata Share, and the Assignee irrevocably accepts such assignment of
rights and assumes such obligations from the Assignor on such terms and as of
the Effective Date. As of the Effective Date, Assignee shall have the rights and
obligations of a "Bank" and a "Line B/C Bank" under the Loan Documents, except
to the extent of any arrangements with respect to payments referred to in
Section 5 hereof. Assignee hereby appoints and authorizes the Managing
Agents and the KBHC Agent to take such action and to exercise such powers as are
delegated to the Managing Agents and the KBHC Agent by this Agreement and the
KBHC Loan Agreement, respectively.
5. Payment. On the Effective Date, Assignee shall pay to the
Assignor, in immediately available funds, an amount equal to the purchase price,
as agreed between the Assignor and the Assignee, of the Assigned Pro-Rata Share.
The Assignor and the Assignee have entered into a letter agreement, of even date
herewith, which sets forth their agreement with respect to the amount of
interest, fees, and other payments with respect to the Assigned Pro-Rata Share
which are to be retained by the Assignor.
The Assignor and the Assignee hereby agree that if either receives
any payment of interest, principal, fees or any other amount under the KBHC Loan
Agreement, their respective Notes and other Loan Documents which is for the
account of the other, it shall hold the same in trust for such party to the
extent of such party's interest therein and shall promptly pay the same to such
party.
6. Principal, Interest, Fees, etc.. Any principal that would be
payable and any interest, fees and other amounts that would accrue from and
after the Effective Date to or for the account of the Assignor pursuant to the
KBHC Loan Agreement and the Notes shall be payable to or for the account of the
Assignor and the Assignee, in accordance with their respective interests as
adjusted pursuant to this Agreement.
7. Notes. The Assignor and Assignee shall make appropriate
arrangements with the Borrower concurrently with the execution and delivery
hereof so that replacement Notes are issued to the Assignor and new Notes are
issued to the Assignee in principal amounts reflecting their Line B/C Pro Rata
Share of the Line B Commitment and the Line C Commitment or their outstanding
Advances (as adjusted pursuant to this Agreement) thereunder.
8. Further Assurances. Concurrently with the execution of this
Agreement, Assignor shall execute four counterpart original Requests for
Registration, in the form of Exhibit A to this Agreement, to be forwarded to the
Agent. The Assignor and the Assignee further agree to execute and deliver such
other instruments, and take such other action, as either party may reasonably
request in connection with the transactions con-
-4-
<PAGE> 221
templated by this Agreement, and Assignor specifically agrees to cause the
delivery of (i) four original counterparts of this Agreement and (ii) the
Requests for Registration, to the Agent for the purpose of registration of
Assignee as a "Bank" and a "Line B/C Bank" pursuant to the KBHC Loan Agreement.
9. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL
OBLIGATION UNDER, AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
10. Notices. All communications among the parties or notices in
connection herewith shall be in writing, hand delivered or sent by registered
airmail, postage prepaid, or by telex, telegram or cable, addressed to the
appropriate party at its address set forth on the signature pages hereof. All
such communications and notices shall be effective upon receipt.
11. Binding Effect. This Agreement shall become effective upon the
execution of the Request for Registration in the form of Exhibit A to this
Agreement by KBHC and the execution of the Consent in the form of Exhibit B to
this Agreement by the Agent, and shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns; provided, however,
that Assignee shall not assign its rights or obligations without the prior
written consent of the Assignor and any purported assignment, absent such
consent, shall be void.
12. Interpretation. The headings of the various sections hereof are for
convenience of reference only and shall not affect the meaning or construction
of any provision hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officials, officers or agents
thereunto duly authorized as of the date first above written.
"Assignor"
________________________________________
By:_____________________________________
Title:__________________________________
Address: ____________________________
____________________________
____________________________
Attn: _____________________
-5-
<PAGE> 222
"Assignee"
______________________________________
By: __________________________________
Title:________________________________
Address: ____________________________
____________________________
Attn: ______________________
-6-
<PAGE> 223
Exhibit A to Commitment Assignment and Acceptance
REQUEST FOR REGISTRATION
TO: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as KBHC Agent.
THIS REQUEST FOR REGISTRATION OF ASSIGNEE is made as of the date of
the enclosed Commitment Assignment and Acceptance Agreement with reference to
that certain Amended and Restated Loan Agreement dated as of February 28, 1996
among KBHC and the Banks who are parties thereto.
Assignor and Assignee hereby request that the Agent approve of
Assignee as a Bank and as a Line B/C Bank, and that the Agent register Assignee
as a Bank and as a Line B/C Bank pursuant to the KBHC Loan Agreement effective
as of the Effective Date described in the enclosed Commitment Assignment and
Acceptance and, in connection with this request certify to the Agent that the
enclosed Commitment Assignment and Acceptance Agreement sets forth the correct
Line B Commitment and Line C Commitment and the Assigned Pro-Rata Share of the
Assignee.
Enclosed with this Request are four counterpart originals of the
Commitment Assignment and Acceptance as well as the original Line B Note and
Line C Note issued to Assignor.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Request for
Registration by their duly authorized officers as of this _____________________,
199_.
"Assignor"
____________________________________
By:_________________________________
_________________________________
(Printed/Typed Name of Officer)
-7-
<PAGE> 224
"Assignee"
______________________________________
By:___________________________________
___________________________________
(Printed/Typed Name of Officer)
THE UNDERSIGNED HEREBY CONSENTS
TO THE ABOVE ASSIGNMENT:
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By: ___________________________
Its: ___________________________
Printed Name and Title
-8-
<PAGE> 225
Exhibit B to Commitment Assignment and Acceptance
CONSENT
TO:The Assignor and Assignee referred to in the above Request for Registration
When countersigned by the Managing Agents below, this document shall certify
that:
1. The Agent has consented, pursuant to the terms of the Loan Documents, to
the assignment by Assignor to Assignee of the Assigned Pro-Rata Share.
2. The Agent has registered Assignee as a Bank and as a Line B/C Bank under
the KBHC Loan Agreement, effective as of the Effective Date described above,
with a Pro-Rata Share of the Line B Commitment and the Line C Commitment
corresponding to the Assigned Pro-Rata Share and has adjusted the registered
Pro-Rata Share of the Line B Commitment and the Line C Commitment of Assignor to
reflect the assignment of the Assigned Pro-Rata Share.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:___________________________________
___________________________________
(Printed/Typed Name of Officer)
-9-
<PAGE> 226
EXHIBIT F-1
[DAVIS POLK & WARDWELL LETTERHEAD]
February 28, 1996
Bank of America National Trust
and Savings Association,
The First National Bank of Chicago,
Credit Lyonnais Los Angeles Branch and
NationsBank of Texas, N.A.,
as Managing Agents
c/o Bank of America National Trust
and Savings Association
315 Montgomery Street
San Francisco, California 94104
Ladies and Gentlemen:
We have acted as special counsel for Kaufman and Broad Home
Corporation, a Delaware corporation ("KBHC"), and Kaufman and Broad Home
Mortgage Corporation, an Illinois corporation ("KBMC" and, together with KBHC,
the "Borrowers"), in connection with (i) the Fourth Amended and Restated Loan
Agreement dated as of February 28, 1996 (the "Loan Agreement") among KBHC, the
banks listed on the signature pages thereof (the "Banks"), Bank of America
National Trust and Savings Association, as Administrative Agent, The First
National Bank of Chicago, as Documentation Agent, Bank of America National
Trust and Savings Association and The First National Bank of Chicago, as
Co-Syndication Agents, and Bank of America National Trust and Savings
Association, The First National Bank of Chicago, Credit Lyonnais Los Angeles
Branch and NationsBank of Texas, N.A., as Managing Agents, and (ii) the Amended
and Restated Override Agreement dated as of February 28, 1996 (the "Override
Agreement") among the Borrowers, Bank of America National Trust and Savings
Association, as the KBHC Agent, Credit Lyonnais Los Angeles Branch, as the KBMC
Agent, The First National Bank of Chicago, as Documentation Agent, Bank of
America National Trust and Savings Association and The First National Bank of
Chicago, as Override Agents, Bank of America National Trust and Savings
Association, First National Bank of Chicago, Credit Lyonnais Los Angeles Branch
<PAGE> 227
Bank of America National 2 February 28, 1996
Trust and Savings Association
and NationsBank of Texas, N.A., as the Managing Agents, and the banks listed on
the signature pages thereof. Terms defined in the Loan Agreement are used
herein as therein defined unless otherwise defined herein. The Loan Agreement,
the Override Agreement and the Notes are collectively referred to herein as the
"KBHC Documents"; the Third Amendment dated as of February 28, 1996 to the
Mortgage Warehousing Agreement and the Third Amendment dated as of February 28,
1996 to the Collateral Agency Agreement (as defined in the Mortgage Warehousing
Agreement) are collectively referred to herein as the "KBMC Documents"; and the
KBMC Documents, together with the KBHC Documents and the Amended and Restated
Continuing Guaranty dated as of February 28, 1996 (the "Guaranty") executed by
each Guarantor Subsidiary on the date hereof, are collectively referred to
herein as the "Loan Documents".
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion. For purposes of this opinion we have assumed (i)
that each of KBMC and the Guarantor Subsidiaries is a corporation validly
existing and in good standing under the laws of the state of its incorporation
and has all requisite corporate power and authority to execute, deliver and
perform all of its obligations under each of the Loan Documents to which it is
a party, (ii) that the execution, delivery and performance by each of KBMC and
the Guarantor Subsidiaries of the Loan Documents to which it is a party have
been duly authorized by all necessary corporate action, and (iii) that each of
the Borrowers and the Guarantor Subsidiaries has executed and delivered each of
the Loan Documents to which it is a party.
Based upon the foregoing, and subject to the qualifications set forth
below, we are of the opinion that:
1. KBHC is a corporation validly existing and in good standing
under the General Corporation Law of the State of Delaware, and its certificate
of incorporation does not limit the term of its existence.
<PAGE> 228
Bank of America National 3 February 28, 1996
Trust and Savings Association
2. KBHC has all requisite corporate power and authority to
execute, deliver and perform all of its obligations under the KBHC Documents.
3. The execution, delivery and performance by KBHC of the KBHC
Documents have been duly authorized by all necessary corporate action.
4. The execution, delivery and performance by each of the
Borrowers and the Guarantor Subsidiaries of the Loan Documents to which it is a
party do not violate, contravene or constitute a default under (i) the
Indenture between KBHC and the First National Bank of Boston, as trustee, dated
as of May 1, 1993, relating to the issuance of $175,000,000 of 9 3/8% Senior
Subordinated Notes due 2003, (ii) the Indenture between KBHC and NBD Bank,
N.A., as trustee, dated as of September 1, 1992, and the Officers' Certificate
pursuant thereto dated as of August 31, 1992, relating to the issuance of
$100,000,000 of 10 3/8% Senior Notes due 1999, or (iii) any United States
federal or New York State law or regulation that in our experience is normally
applicable to general business corporations in relation to transactions of the
type contemplated by the Loan Documents.
5. No authorization, consent, approval, order, license or permit
from, or filing, registration, or qualification with, or exemption from any of
the foregoing from, any New York State or United States governmental agency or
body is required to authorize or permit the execution, delivery and performance
by any Borrower or Guarantor Subsidiary of the Loan Documents to which it is a
party.
6. Each of the KBMC Documents will, and, if the Loan Documents
other than the KBMC Documents were stated to be governed by and construed in
accordance with the laws of the State of New York (without regard to principles
of conflicts of laws), each of such Loan Documents would, when executed and
delivered by each of the Borrowers and the Guarantor Subsidiaries party
thereto, constitute the valid and binding obligation of such Borrower or such
Guarantor Subsidiary, as the case may be, enforceable against such Borrower or
such Guarantor Subsidiary, as the case may be, in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency or similar laws
affecting
<PAGE> 229
Bank of America National 4 February 28, 1996
Trust and Savings Association
creditors' rights generally and equitable principles of general applicability.
The foregoing opinion is subject to the following qualifications:
(a) We express no opinion as to the effect (if any) of
any law of any jurisdiction (except the State of New York) in which
any Bank is located which may limit the rate of interest that such
Bank may charge or collect.
(b) We express no opinion as to provisions in the Loan
Documents which purport to indemnify any person for its own gross
negligence or willful misconduct.
(c) We express no opinion as to the enforceability of the
last sentence of Section 11.22 of the Loan Agreement.
(d) Certain waivers contained in the Guaranty may not be
enforceable in accordance with their terms.
(e) We express no opinion as to the enforceability of (i)
the provision in Section 4 of the Guaranty purporting to provide that
the obligations of the Guarantor Subsidiaries are independent of the
obligations of KBHC or (ii) Section 5 of the Guaranty (insofar as
changes in the terms of the underlying obligations may create new
obligations for purposes of the guaranty and certain actions in
respect of collateral may affect a related guaranty).
(f) We express no opinion as to the effect, if any, of
the application of Section 548 of the federal Bankruptcy Code and
similar provisions of state law to the Loan Documents or the
transactions contemplated thereby.
We are members of the bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of
the United States of America and the General Corporation Law of the State of
Delaware.
<PAGE> 230
Bank of America National 5 February 28, 1996
Trust and Savings Association
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent, except that
any person that becomes a Bank in accordance with the provisions of the Loan
Documents may rely upon this opinion as if it were specifically addressed and
delivered to such person on the date hereof.
Very truly yours,
DAVIS POLK & WARDWELL
<PAGE> 231
EXHIBIT F-2
[KAUFMAN & BROAD LETTERHEAD]
February 28, 1996
To: Bank of America National Trust and
Savings Association, The First National
Bank of Chicago, NationsBank of Texas, N.A.,
and Credit Lyonnais - Los Angeles Branch,
as Managing Agents
c/o Bank of America National Trust and
Savings Association
315 Montgomery Street
San Francisco, California 94104
Ladies and Gentlemen:
I am the General Counsel of Kaufman and Broad Home Corporation, a
Delaware corporation ("KBHC") and, in that capacity, I also have oversight
responsibility for the legal affairs of Kaufman and Broad Mortgage Company, an
Illinois corporation ("KBMC") (KBHC, together with KBMC, shall be referred to
herein as the "Borrowers") and have acted as such in connection with (i) the
Fourth Amended and Restated Credit Agreement (the "Amended KBHC Loan
Agreement") dated as of February 28, 1996, by and among KBHC, the Banks which
are parties thereto, the Administrative Agent, the Documentation Agent, the
co-Syndication Agents and the Managing Agents and (ii) the Amended and Restated
Override Agreement (the "Amended Override Agreement") dated as of February 28,
1996, by and among the Borrowers, the Banks which are the parties thereto, the
Managing Agents, the KBHC Agent, the KBMC Agent, and the Documentation Agent
named therein.
This opinion is furnished to you pursuant to Section 8.1(a)(7) of the
Fourth Amended Loan Agreement and Section 3.1(a)(3) of the Amended Override
Agreement. Terms not otherwise defined herein shall have the meanings defined
for such terms in the Amended Override Agreement or the Amended KBHC Loan
Agreement, as the case may be. The term "Loan Documents", as used herein,
means those Loan Documents (as defined in the Amended Override Agreement) in
existence as of the Closing Date, including without limitation those referenced
in paragraphs (a) through (g) below. The term "KBHC Loan Documents" is
sometimes used herein to describe the documents referenced in paragraphs (b)
through (d)
<PAGE> 232
Bank of America National Trust and Savings
Association
February 28, 1996
Page 2
below. The term "KBMC Loan Documents" is sometimes used herein to describe the
agreements referred to in (e) through (g) below.
This opinion is rendered to you as a supplement to the legal opinion
of Davis Polk & Wardwell of even date herewith in connection with the Amended
Override Agreement but expressly does not incorporate the terms of said Davis
Polk & Wardwell opinion.
For purposes of this opinion, I have examined originals, or copies
identified to my satisfaction as being true copies, of the following documents:
a. the Amended Override Agreement;
b. the Amended KBHC Loan Agreement;
c. the Notes under the Amended KBHC Loan Agreement;
d. the Subsidiary Guaranty;
e. the Amended KBMC Loan Agreement, including the Third Amendment
dated as of February 28, 1996;
f. the Third Amendment dated as of February 28, 1996 to the
Collateral Agency Agreement under the Amended KBMC Loan
Agreement; and
g. the Notes under Amended KBMC Loan Agreement.
I have also made such investigations of fact and law; obtained such
certificates of Responsible Officials of Borrowers and their Subsidiaries, and
of public officials; reviewed incorporation documentation, resolutions,
secretary certificates, good standing certificates and other documents as
appropriate of and for the Borrowers and the Guarantor Subsidiaries as
applicable; and done such other things as I have deemed necessary for the
purpose of this opinion.
I have assumed (a) all natural persons have legal capacity, (b) the
genuineness of all signatures of all parties other than Borrowers and the
"Guarantor Subsidiaries" listed in Schedule 4.4 to the Amended KBHC Loan
Agreement, (c) the conformity to authentic original documents of all documents
submitted to me as copies and the authenticity of all documents submitted to me
as originals, (d) as to all parties other than Borrowers and the Guarantor
Subsidiaries, the due authorization,
<PAGE> 233
Bank of America National Trust and Savings
Association
February 28, 1996
Page 3
execution and delivery of all documents and the validity and enforceability
thereof against all parties thereto other than Borrower and the Guarantor
Subsidiaries, (e) that each Person (other than Borrower and the Guarantor
Subsidiaries) which is a party to the Loan Documents has full power, authority
and legal right, under its charter and other governing documents and laws
applicable to it to perform its respective obligations thereunder, (f) all
parties to any Loan Documents have filed all required franchise tax returns, if
any, and paid all required taxes, if any, under the California Revenue &
Taxation Code and under the laws of the States of Delaware, Illinois and the
states of incorporation of the Guarantor Subsidiaries and (g) that the Loan
Documents have not been modified, amended, terminated or revoked in any
respect, and remain in full force and effect as of the date hereof.
With respect to those opinions expressed below to be to "knowledge" or
"to the knowledge of the undersigned," or similar such wording, I am referring
solely to my individual, actual knowledge. Except as expressly set forth
herein, I did not undertake a review or examination of the activities or
business records of Borrower specifically for the purpose of rendering this
opinion or to determine the existence or absence of such facts. As General
Counsel to KBHC and in my oversight capacity with respect to the legal affairs
of KBMC, however, material information respecting the matters covered by such
opinions is brought to my attention on a regular basis as a matter of internal
policy and I intend the phrase "to the knowledge of the undersigned" to mean
that, in reviewing such information, nothing has come to my attention which
caused or should have caused me not to render such opinions.
Based upon the foregoing and in reliance thereon, I am of the opinion
that:
1. KBHC 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. KBHC is duly qualified or registered to
transact business and is in good standing as a foreign corporation in
the State of California, and each other jurisdiction in which the
conduct of its business or the ownership of its Properties makes such
qualifications or registration necessary, except where the failure so
to qualify or register and to be in good standing would not constitute
a Material Adverse Effect.
2. KBMC is a corporation duly organized, validly
<PAGE> 234
Bank of America National Trust and Savings
Association
February 28, 1996
Page 4
existing and in good standing under the Laws of the State of Illinois,
and its certificate of incorporation does not provide for the
termination of its existence. KBMC is duly qualified or registered to
transact business and is in good standing as a foreign corporation in
the State of California, and each other jurisdiction in which the
conduct of its business or the ownership of its Properties makes such
qualifications or registration necessary, except where the failure so
to qualify or register and to be in good standing would not constitute
a Material Adverse Effect.
3. Each 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 to which it is a Party.
4. To the knowledge of the undersigned, each Borrower is
in substantial compliance with all Laws and other legal requirements
applicable to its business, has obtained all authorizations, consents,
approvals, orders, licenses and permits from, and has accomplished all
filings, registrations and qualifications with, or obtained exemptions
from any of the foregoing from, any Government Agency that are
necessary for the transaction of its business, except where the
failure so to comply, file, register, qualify or obtain exemptions
would not constitute a Material Adverse Effect.
5. The execution, delivery and performance by each
Borrower and by each Guarantor Subsidiary of KBHC, of each of the Loan
Documents to which it is a Party have been duly authorized by all
necessary corporate action, and do not:
a. require under the charter documents of such
Borrower or Guarantor Subsidiary any consent or approval not
heretofore obtained of any partner, director, stockholder,
security holder or creditor of such Party;
b. violate or conflict with such Party's
charter, certificate or articles of incorporation or bylaws;
c. to the knowledge of the undersigned, result
in or require the creation or imposition of any Lien or Right
of Others (other than as provided under the Loan Documents)
upon or with respect to any Property
<PAGE> 235
Bank of America National Trust and Savings
Association
February 28, 1996
Page 5
now owned or leased by such Party;
d. violate any Requirement of Law known to the
undersigned applicable to such Party; or
e. 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 known to
the undersigned or any other Contractual Obligation known to
the undersigned to which such Party is a party or by which
such Party or any of its Property is bound or affected;
and, to the knowledge of the undersigned, neither Borrower nor any
Subsidiary of either Borrower is in violation of, or default under,
any Requirement of Law, or contractual obligation, or any indenture,
loan or credit agreement described in subparagraph (e) above in any
respect that would constitute a Material Adverse Effect.
6. Each of the Loan Documents to which either Borrower
or any Guarantor Subsidiary is a party will, when executed and
delivered by such Borrower or such Guarantor Subsidiary, as the case
may be, constitute the legal, valid and binding obligation of such
Borrower or such Guarantor Subsidiary, as the case may be, enforceable
against such Borrower or such Guarantor Subsidiary, as the case may
be, in accordance with its terms.
7. Except 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 under any Requirement of
Law imposed on either Borrower or any Guarantor Subsidiary by the laws
of the United States of America, the State of California or the State
of New York, in each case as the same exists on the date hereof, is or
will be required to authorize or permit the execution, delivery and
performance by either Borrower or any Significant Subsidiary of KBHC
of the Loan Documents to which it is a Party.
8. Each Significant Subsidiary which is a Domestic
Subsidiary is a legal entity of the form described for that Subsidiary
in Schedule 4.4 to the Amended KBHC Agreement, duly organized, validly
existing and in good standing under the Laws of its jurisdiction of
formation, is duly qualified or registered to do business as a foreign
<PAGE> 236
Bank of America National Trust and Savings
Association
February 28, 1996
Page 6
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 qualifications or registration necessary (except
where the failure to be so qualified or registered and in good
standing does not constitute a Material Adverse Effect) and has all
requisite power and authority to conduct its business and to own and
lease its Properties and to execute, deliver and perform the
obligations under the Loan Documents to which it is a Party.
9. To the knowledge of the undersigned, each Significant
Subsidiary is in substantial compliance with all Laws and other
requirements applicable to its business has obtained all
authorizations, consents, approvals, orders, licenses and permits
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 comply, file,
register, qualify or obtain exemptions does not constitute a Material
Adverse Effect.
10. Neither Borrower nor any of their Subsidiaries is
subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940.
11. To the knowledge of the undersigned, there are no
actions, suits or proceedings pending or, to the knowledge of the
undersigned, threatened against or affecting either Borrower or any of
their Subsidiaries or any Property of any of them in any court of Law
or before any Governmental Agency in which there is a reasonable
probability of a decision which would constitute a Material Adverse
Effect.
12. Neither Borrower nor any of their Subsidiaries is
engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of "purchasing" or
"carrying" any "margin stock" or "margin security" within the meanings
of Regulation U of the Board of Governors of the Federal Reserve
System and no Loan under the Agreement will be used to purchase or
carry any such margin stock in violation of Regulation U.
13. To the knowledge of the undersigned, Borrowers and
their Subsidiaries are in substantial compliance with all applicable
Laws relating to environmental protection where
<PAGE> 237
Bank of America National Trust and Savings
Association
February 28, 1996
Page 7
the failure to comply would constitute a Material Adverse Effect, and
have not received any notice from any Governmental Agency respecting
the alleged violation by any Borrower or any Subsidiary of such Laws
which would constitute a Material Adverse Effect which has not been or
is not being corrected.
14. Texas is a state in which perfection of a security
interest in a note together with an unrecorded assignment of a related
mortgage is sufficient to obtain all rights as a secured party in such
mortgage superior as against third parties.
In addition to any assumptions, qualifications and other matters set
forth elsewhere herein, the opinions set forth above are subject to the
following:
(a) My opinion with respect to the legality, validity,
binding effect and enforceability of any Loan Document, agreement or
provision is subject to the effect of any applicable bankruptcy,
insolvency, fraudulent conveyance, fraudulent transfer and equitable
subordination, reorganization, moratorium or similar law affecting
creditors' rights generally and to the effect of general principles of
equity, including (without limitation) concepts of materiality,
reasonableness, estoppel, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law). I express no
opinion as to the availability of equitable remedies. In applying
such equitable principles, a court, among other things, might not
allow a creditor to accelerate maturity of a debt upon the occurrence
of a default deemed immaterial or for non-credit reasons or might
decline to order a debtor to perform covenants. Such principles
applied by a court might also include a requirement that a creditor
act with reasonableness and in good faith.
(b) Certain remedial provisions of the Loan Documents may
be unenforceable in whole or in part, but the inclusion of such
provisions does not affect the validity of the Loan Documents taken as
a whole and, except as set forth in subparagraph (a) above, the Loan
Documents taken as a whole contain adequate provisions for enforcing
payment of the "Obligations" (as defined in the Amended KBHC
Agreement) and the "Obligations" (as defined in the Amended KBMC Loan
Agreement).
<PAGE> 238
Bank of America National Trust and Savings
Association
February 28, 1996
Page 8
(c) I express no opinion as to whether a New York court
would enforce or otherwise give legal effect to the choice of
California law provisions contained in the Override agreement and the
KBHC Loan Documents, or the effect on the opinions given herein if a
court applied New York law to determine the rights of the parties
under the Amended Override Agreement and the KBHC Loan Documents. I
express no opinion to whether a California court would enforce or
otherwise give legal effect to the choice of New York law provisions
contained in the KBMC Loan Documents, or the effect on the opinion
given herein if a court applied California law to determine the rights
of the parties under the KBMC Loan Documents.
(d) I call your attention to the following matters as to
which I express no opinion:
(i) the Borrowers' agreements in the Loan
Documents to indemnify you against costs or expenses or
liability notwithstanding your acts of negligence or willful
misconduct;
(ii) the Borrowers' agreements in the Loan
Documents for payment or reimbursement of costs, fees and
expenses or indemnification for claims, losses or liabilities
to the extent any such provision may be determined by a court
or other tribunal to be in an unreasonable amount, to
constitute a penalty or to be contrary to public policy;
(iii) the Borrowers' agreements in the Loan
Documents to the jurisdiction or venue of a particular court,
to the waiver of the right to jury trial or to be served with
process by service upon a designated third party;
(iv) any of the waivers or remedies contained in
the Loan Documents, whether or not any Loan Document deems any
such waiver or remedy commercially reasonable, if such waivers
or remedies are determined (1) not to be commercially
reasonable under applicable law, (2) to conflict with
mandatory provisions of applicable law, (3) be taken in a
manner determined to be unreasonable or not performed in good
faith or with fair dealing or with honesty in fact or (4) to
be broadly or vaguely stated or not to describe the
<PAGE> 239
Bank of America National Trust and Savings
Association
February 28, 1996
Page 9
right or duty purportedly waived with reasonable specificity;
(v) provisions in the Loan Documents which may be
construed as imposing penalties or forfeitures, late payment
charges or an increase in interest rate, upon delinquency in
payment or the occurrence of a default;
(vi) any power of attorney granted under the Loan
Documents;
(vii) provisions in the Loan Documents to the
effect that rights or remedies are not exclusive, that every
right or remedy is cumulative and may be exercised in addition
to any other right or remedy, that the election of some
particular remedy does not preclude recourse to one or more
others or that failure to exercise or delay in exercising
rights or remedies will not operate as a waiver of any such
right or remedy; or
(viii) provisions in the Loan Documents which
expressly or by implication waive or limit the benefits of
statutory, regulatory or constitutional rights, unless and to
the extent the statute, regulation or constitution explicitly
allow such waiver or other limitation.
My opinion expressed herein is limited to the laws of the State of
California, the General Corporation Law of the State of Delaware, the Illinois
Business Corporation Act and the federal laws of the United States, and I do
not express any opinion herein concerning any other law.
This opinion is being rendered to you in connection with the
transaction referred to above and may not be relied upon by any person (other
than the Bank Parties, an Eligible Assignee or holder of a participation
interest from any Bank or any successor in interest of any Bank) or by you or
the other Bank Parties in any other context. Copies hereof may be furnished
(a) to your independent auditors and attorneys, (b) to any governmental agency
or authority having regulatory jurisdiction of any governmental agency or
authority having regulatory jurisdiction over you, (c) pursuant to order of
legal process of any court or of any governmental agency or authority, or (d)
in connection with any
<PAGE> 240
Bank of America National Trust and Savings
Association
February 28, 1996
Page 10
legal action to which you are a party arising out of the transaction referred
to above. This opinion is rendered as of the date hereof and I hereby disclaim
any obligation to advise any person entitled to rely hereon of any change in
the matters stated herein.
Respectfully submitted,
BARTON P. PACHINO
-------------------------------------
Barton P. Pachino
Senior Vice President and
General Counsel of KBHC
<PAGE> 241
EXHIBIT G
REQUEST FOR LETTER OF CREDIT
1. This Request for Letter of Credit is executed and delivered by a
Responsible Official of Kaufman and Broad Home Corporation ("Borrower") to the
Issuing Bank named below, pursuant to that certain Fourth Amended and Restated
Loan Agreement (the "Agreement") dated as of February 28, 1996, entered into by
and among Borrower, the Banks that are parties thereto, the Administrative
Agent, Bank of America National Trust and Savings Association, The First
National Bank of Chicago, Credit Lyonnais Los Angeles Branch, and NationsBank of
Texas, N.A., as Managing Agents. Terms defined in the Agreement and not
otherwise defined herein are used herein as defined in the Agreement.
2. Borrower hereby requests that the Issuing Bank named below issue
a Letter of Credit for the account of Borrower pursuant to the Agreement, as
follows:
(a) Issuing Bank: ______________________________.
(b) Amount of Letter of Credit: $______________.
(c) Expiration Date: __________________, 19___.
(d) Purpose of Letter of Credit:
____________________________________________
(e) Type of Letter of Credit:
/ / Financial Letter of Credit
/ / Performance Letter of Credit
(f) Commitment Under Which Letter of Credit Will Be Issued:
/ / Line A Commitment
/ / Line C Commitment
Page 1 of 3
<PAGE> 242
3. The requested Letter of Credit is (check one box only):
/ / a new Letter of Credit.
/ / a supplement, modification, amendment,
renewal, or extension to or of the following
outstanding Letter(s) of Credit: [Identify]
4. In connection with the issuance of the Letter of Credit requested
herein, Borrower hereby represents, warrants, and certifies to the Bank that as
of the date of the issuance of the Letter of Credit requested herein:
(a) Each representation and warranty made by Borrower in
Article 4 of the Agreement (other than the representations and warranties
contained in Sections 4.4(a), 4.5, 4.6, 4.7, 4.9, 4.12, 4.14, 4.18 and 4.19)
will be true and correct in all material respects, both immediately before
such Letter of Credit is issued and after giving effect to such Letter of
Credit, as though such representations and warranties were made on and as of
the date of the issuance of the Letter of Credit, and no event or
circumstance that constitutes a Material Adverse Effect shall have occurred
since the Amendment Effective Date;
(b) No Event of Default presently exists or will have
occurred and be continuing as a result of the Letter of Credit; and no
Material KMBC Default or Material KMBC Event of Default then exists under the
Mortgage Warehousing Agreement; provided that this condition shall not apply
in respect of a Curable KMBC Default so long as the proceeds of any Loan made
in reliance on this proviso are actually used to cure such Curable KMBC
Default.
(c) Giving effect to the issuance of the Letter of Credit
requested hereby, the aggregate outstanding principal of the Line A Loans and
the Line C Loans plus the Line A Letter of Credit Usage plus the Line C
Letter of Credit Usage plus the short term Indebtedness of Borrower and its
Subsidiaries under the domestic money market lines described in Section 6.10
of the Loan Agreement does not exceed the sum of the Line A Commitment plus
the Line C Commitment.
(If any of the foregoing statements is not true and correct, attach
a statement specifying in detail the circum-
Page 2 of 3
<PAGE> 243
stances thereof and the actions Borrower is taking or proposes to take with
respect thereto.)
5. This Request for Letter of Credit is executed on __________,
19___, by a Responsible Official of Borrower, on behalf of Borrower. The
undersigned, in such capacity, hereby certifies each and every matter contained
herein to be true and correct.
BORROWER:
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By:___________________________________
Title:________________________________
Page 3 of 3
<PAGE> 244
EXHIBIT H
REQUEST FOR LOAN
1. THIS REQUEST FOR LOAN IS EXECUTED AND DELIVERED BY KAUFMAN AND
BROAD HOME CORPORATION ("BORROWER") TO BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS ADMINISTRATIVE AGENT, PURSUANT TO THE FOURTH AMENDED AND
RESTATED LOAN AGREEMENT (THE "AGREEMENT") DATED AS OF FEBRUARY 28, 1996, ENTERED
INTO BY BORROWER, THE BANKS THAT ARE PARTIES THERETO, THE ADMINISTRATIVE AGENT,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, THE FIRST NATIONAL BANK
OF CHICAGO, CREDIT LYONNAIS LOS ANGELES BRANCH AND NATIONSBANK OF TEXAS, N.A.,
AS MANAGING AGENTS. ANY TERMS USED HEREIN AND NOT DEFINED HEREIN SHALL HAVE THE
MEANINGS DEFINED IN THE AGREEMENT.
2. BORROWER HEREBY REQUESTS THAT BANKS MAKE A LOAN FOR THE ACCOUNT
OF BORROWER PURSUANT TO THE AGREEMENT, AS FOLLOWS:
(A) AMOUNT OF LOAN: $____________________.
(B) DATE OF LOAN: ________________, 19___.
(C) TYPE OF LOAN (CHECK ONE BOX ONLY):
--
/ / ALTERNATE BASE RATE LOAN.
--
/ / LIBOR LOAN WITH A ___-WEEK/___-MONTH (SELECT ONE)
INTEREST PERIOD.
(D) APPLICABLE COMMITMENT (CHECK ONE BOX ONLY):
--
/ / LINE A COMMITMENT
--
/ / LINE B COMMITMENT
/ / LINE C COMMITMENT
3. IN CONNECTION WITH THE LOAN REQUESTED HEREIN, BORROWER HEREBY
REPRESENTS, WARRANTS AND CERTIFIES TO THE BANKS THAT, AS OF THE DATE OF THE LOAN
REQUESTED HEREIN:
(A) EACH REPRESENTATION AND WARRANTY MADE BY BORROWER IN
ARTICLE 4 OF THE AGREEMENT (OTHER THAN THE REPRESENTATIONS AND WARRANTIES
-1-
<PAGE> 245
CONTAINED IN SECTIONS 4.4(A), 4.5, 4.6, 4.7, 4.9, 4.12, 4.14, 4.18 AND 4.19)
WILL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS, BOTH IMMEDIATELY BEFORE
SUCH LOAN IS MADE AND AFTER GIVING EFFECT TO SUCH LOAN, AS THOUGH SUCH
REPRESENTATIONS AND WARRANTIES WERE MADE ON AND AS OF THE DATE OF SUCH LOAN,
AND NO EVENT OR CIRCUMSTANCE THAT CONSTITUTES A MATERIAL ADVERSE EFFECT SHALL
HAVE OCCURRED SINCE THE AMENDMENT EFFECTIVE DATE;
(B) THE AMOUNT OF SHORT TERM INDEBTEDNESS EXISTING UNDER THE
DOMESTIC MONEY MARKET CREDIT LINES DESCRIBED IN SECTION 6.10 OF THE LOAN
AGREEMENT IS $____________ (WHICH AMOUNT MAY OR MAY NOT BE APPLICABLE TO
DETERMINE COMPLIANCE WITH CLAUSE (E) BELOW).
(C) NO EVENT OF DEFAULT PRESENTLY EXISTS OR WILL HAVE
OCCURRED AND BE CONTINUING AS A RESULT OF THE LOAN, AND NO MATERIAL KMBC
DEFAULT OR MATERIAL KMBC EVENT OF DEFAULT THEN EXISTS UNDER THE MORTGAGE
WAREHOUSING AGREEMENT; PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN
RESPECT OF A CURABLE KMBC DEFAULT SO LONG AS THE PROCEEDS OF ANY LOAN MADE IN
RELIANCE ON THIS PROVISO ARE ACTUALLY USED TO CURE SUCH CURABLE KMBC DEFAULT.
(D) GIVING EFFECT TO THE LOAN REQUESTED HEREBY, AND
APPLICATION OF THE PROCEEDS OF THE LOAN, THE AGGREGATE OUTSTANDING PRINCIPAL
OF THE LINE A LOANS AND THE LINE C LOANS PLUS THE LINE A LETTER OF
CREDIT USAGE PLUS THE LINE C LETTER OF CREDIT USAGE PLUS THE
SHORT TERM INDEBTEDNESS OF BORROWER AND ITS SUBSIDIARIES UNDER THE DOMESTIC
MONEY MARKET LINES DESCRIBED IN SECTION 6.10 OF THE LOAN AGREEMENT DOES NOT
EXCEED THE SUM OF THE LINE A COMMITMENT PLUS THE LINE C COMMITMENT.
(IF ANY OF THE FOREGOING STATEMENTS IS NOT TRUE AND CORRECT, ATTACH
A STATEMENT SPECIFYING IN DETAIL THE CIRCUMSTANCES THEREOF AND THE ACTIONS
BORROWER IS TAKING OR PROPOSES TO TAKE WITH RESPECT THERETO.)
-2-
<PAGE> 246
4. THIS REQUEST FOR LOAN IS EXECUTED ON __________, 19__, BY A
RESPONSIBLE OFFICIAL OF BORROWER, ON BEHALF OF BORROWER. THE UNDERSIGNED, IN
SUCH CAPACITY, HEREBY CERTIFIES EACH AND EVERY MATTER CONTAINED HEREIN TO BE
TRUE AND CORRECT.
BORROWER:
KAUFMAN AND BROAD HOME CORPORATION,
A DELAWARE CORPORATION
BY:___________________________________
TITLE:________________________________
-3-
<PAGE> 247
EXHIBIT I
REQUEST FOR REDESIGNATION OF LOANS
1. This Request For Redesignation of Loans is executed and delivered
by a Responsible Official of the undersigned Kaufman and Broad Home Corporation
("Borrower") to Bank of America National Trust and Savings Association, as
Administrative Agent, pursuant to the Fourth Amended and Restated Loan Agreement
(the "Agreement") dated as of February 28, 1996, entered into by Borrower, the
Banks that are parties thereto, the Administrative Agent, Bank of America
National Trust and Savings Association, The First National Bank of Chicago,
Credit Lyonnais Los Angeles Branch, and NationsBank of Texas, N.A., as Managing
Agents. Any terms used herein and not defined herein shall have the meanings
defined in the Agreement.
2. Borrower requests that the applicable Banks redesignate certain
outstanding Loans heretofore made or redesignated for the account of Borrowers
pursuant to the Loan Agreement, as set forth below:
(a) Alternate Base Rate Loans to be redesignated as LIBOR Loans:
(i) Applicable Commitment:
/ / Line A Commitment
/ / Line B Commitment
/ / Line C Commitment
(ii) Total Amount of Loans to be redesignated:
$----------------.
(iii) Date of redesignation: _____________,
19__.
(iv) LIBOR Loan with a ______-week/month (select one)
Interest Period.
(b) LIBOR Loans to be redesignated as Alternate Base Rate Loans or
LIBOR Loans with a different Interest Period:
(i) Applicable Commitment:
<PAGE> 248
/ / Line A Commitment
/ / Line B Commitment
/ / Line C Commitment
(ii) Total Amount of Loans to be redesignated:
$----------------.
(iii) Date of redesignation: _____________,
19__.
(iv) Type of Loan as so redesignated
(check one box only):
/ / Alternate Base Rate Loan.
/ / LIBOR Loan with a
______-week/month (select one)
Interest Period.
3. In connection with the redesignation of Loans requested herein,
Borrower represents, warrants and certifies to the Administrative Agent and the
Banks that, as of the date of the redesignation of Loans requested herein, each
representation and warranty made by Borrower in Article 4 of the Agreement
(other than the representations and warranties contained in Sections 4.4(a),
4.5, 4.6, 4.7, 4.9, 4.12, 4.14, 4.18 and 4.19) will be true and correct in all
material respects as though such representations and warranties were made on and
as of the date of such Loan, and no event or circumstance that constitutes a
Material Adverse Effect shall have occurred since the Amendment Effective Date.
4. This Request for Redesignation of Loans is executed on
_____________, 19__, by a Responsible Official of
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<PAGE> 249
Borrower. The undersigned, in such capacity, hereby certifies each and every
matter contained herein to be true and correct.
KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation
By:___________________________________
___________________________________
Name and Title
-3-
<PAGE> 250
EXHIBIT J
BORROWER: KAUFMAN AND BROAD
HOME CORPORATION,
a Delaware corporation
GUARANTORS: See Schedule 1
hereto
TO: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
for itself and as Administrative Agent
AMENDED AND RESTATED
CONTINUING GUARANTY
THIS AMENDED AND RESTATED CONTINUING GUARANTY ("Guaranty") dated as
of February 28, 1996, is made by each of the parties listed on Schedule
1 hereto, together with each other person who may become a party hereto
pursuant to Section 10 of this Guaranty (each, a Guarantor and
collectively, "Guarantors"), jointly and severally, in favor of Bank of America
National Trust and Savings Association, as Administrative Agent, Bank of America
National Trust and Savings Association and The First National Bank of Chicago,
Credit Lyonnais Los Angeles Branch and NationsBank of Texas, N.A., as Managing
Agents and the Banks (as that term is defined in the below-referenced Loan
Agreement), with reference to the following facts:
RECITALS
A. Pursuant to the Fourth Amended and Restated Loan Agreement of
even date herewith entered into by and among Kaufman and Broad Home Corporation,
a Delaware corporation ("Borrower"), the Banks and Bank of America National
Trust and Savings Association, as Administrative Agent, Bank of America National
Trust and Savings Association, The First National Bank of Chicago, NationsBank
of Texas, N.A, and Credit Lyonnais Los Angeles Branch, as Managing Agents (as
the same may be amended from time to time, the "Loan Agreement"), the Banks are
making a credit facility available to Borrower.
B. As a condition of the availability of such credit facility,
Guarantors are required to enter into this Guaranty.
C. Guarantors expect to realize direct and indirect benefits as the
result of the availability of the aforementioned credit facility, and as the
result of the execution of this Guaranty.
<PAGE> 251
AGREEMENT
NOW, THEREFORE, in order to induce the Banks to extend the
aforementioned credit facility, and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, each Guarantor hereby
represents, warrants, covenants, agrees and guaranties as follows:
(1) Terms used in this Guaranty but not defined herein shall have
the meanings defined for them in the Loan Agreement.
(2) Guarantors unconditionally guarantee and promise to pay to Bank
of America National Trust and Savings Association, as the Administrative Agent
for the Banks, on demand, in lawful money of the United States, any and all
Indebtedness of Borrower then due to the Banks. The word "Indebtedness" means
any and all advances, debts, obligations and liabilities of Borrower heretofore,
now, or hereafter made, incurred or created under the Loan Agreement and under
the Loan Documents, and whether Borrower may be liable individually or jointly
with others, or whether such Indebtedness may be or hereafter becomes otherwise
unenforceable; provided, however, the Indebtedness of Borrower guarantied
hereunder shall not include the obligations or indebtedness of Mortgage Company
under the Mortgage Warehousing Agreement.
(3) This Guaranty is irrevocable and continuing in nature, is a
guaranty of prompt and punctual payment and performance of all Indebtedness of
Borrower, and is not merely a guaranty of collection. The Indebtedness
guaranteed hereunder includes that arising under successive transactions which
shall either continue the Indebtedness or from time to time or renew it after it
has been satisfied. This Guaranty shall not apply to any Indebtedness created
after actual receipt by all Banks and the Agent of written notice of its
revocation as to future transactions. Anything in this Guaranty to the contrary
notwithstanding, the maximum liability of any Guarantor hereunder shall be
limited to the extent required for the obligation of such Guarantor to be valid,
binding and enforceable and not otherwise voidable or avoidable.
(4) The obligations hereunder are joint and several, and independent
of the obligations of Borrower and or any of its other Subsidiaries. Separate
action or actions may be brought and prosecuted against any Guarantor whether
action is brought against any Borrower or any of its other Subsidiaries,
including any other Guarantor, or whether Borrower or any of its other
Subsidiaries, including any other Guarantor, may be joined in any such action or
actions.
-2-
<PAGE> 252
(5) Each Guarantor authorizes the Banks, without notice or demand
and without affecting its liability hereunder, from time to time to (a) renew,
compromise, extend, accelerate or otherwise change the time for payment of, or
otherwise change the terms of the Indebtedness or any part thereof, including
increase or decrease of the rate of interest thereon; (b) take and hold security
for the payment of this Guaranty or the Indebtedness guaranteed, and exchange,
enforce, waive and release any such security; (c) apply such security and direct
the order or manner of sale thereof as the Agent or any Bank in its discretion
may determine; and (d) release or substitute any one or more of the endorsers or
guarantors.
(6) Each Guarantor waives, to the fullest extent permitted by
applicable law, any right to require any Bank to (a) proceed against Borrower or
any of its other Subsidiaries, including any other Guarantor; (b) proceed
against or exhaust any security held from Borrower or any of its Subsidiaries;
or (c) pursue any other remedy in the Banks' power whatsoever. Each Guarantor
waives any defense arising by reason of any disability or other defense of
Borrower or by reason of the cessation from any cause whatsoever of the
liability of Borrower, other than payment in full of the Indebtedness. Until all
Indebtedness of Borrower to the Banks shall have been paid in full, each
Guarantor waives any right to enforce any remedy which the Banks now have or may
hereafter have against Borrower or any of its other Subsidiaries, and waives any
benefit of, and any right to participate in, any security now or hereafter held
by the Banks. Guarantors waive all rights and defenses arising out of an
election of remedies by the creditor, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed the guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the Code
of Civil Procedure or otherwise. Guarantors expressly waive to the fullest
extent permitted by applicable Law all other suretyship defenses they otherwise
might or would have under any Law. Each Guarantor waives any right of
subrogation that it may have in respect to the obligations of Borrower to the
Banks. Each Guarantor waives all presentments, demands for performance, notices
of nonperformance, protests, notices of protest, notices of dishonor, and
notices of acceptance of this Guaranty and of the existence, creation, or
incurring of new or additional Indebtedness.
(7) After demand upon the Guarantors for payment under the Guaranty
each Guarantor hereby specifically authorizes each Bank (subject to the approval
of Both Majority 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 Obligations owed to
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<PAGE> 253
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
paragraph 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 Both Majority
Banks.
(8) Each Guarantor represents and warrants to the Banks that it has
established adequate means of obtaining from Borrower and its Subsidiaries, on a
consolidated basis, on a continuing basis, financial and other information
pertaining to the businesses, operations and condition (financial and otherwise)
of Borrower and its Subsidiaries, on a consolidated basis, and that Guarantor
now is and hereafter will be completely familiar with the businesses, operations
and condition (financial and otherwise) of Borrower and its Subsidiaries, on a
consolidated basis. Each Guarantor hereby expressly waives and relinquishes any
duty on the part of the Banks (should any such duty exist) to disclose to any
Guarantor any matter, fact or thing related to the businesses, operations or
condition (financial or otherwise) of Borrower or its Subsidiaries, whether now
known or hereafter known by the Banks during the life of this Guaranty.
(9) Guarantors agree to pay the reasonable out-of-pocket costs and
expenses of the Administrative Agent and each of the Banks in connection with
the enforcement of this Guaranty, including without limitation the reasonable
fees and out-of-pocket expenses of any legal counsel retained by the
Administrative Agent or any of the Banks.
(10) Any other Person may become a Guarantor under, 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, accompanied by such documentation as the
Administrative Agent may require to establish the due organization, valid
existence and good standing of such Person, its qualification to engage in
business in each material jurisdiction in which it is required to be so
qualified, its authority to execute, deliver and perform this Guaranty, and the
identity, authority and capacity of each Responsible Official thereof authorized
to act on its behalf.
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<PAGE> 254
(11) This Guaranty shall be governed by and construed according to
the laws of the State of California, to the jurisdiction of which the parties
hereto submit.
"GUARANTORS"
KAUFMAN AND BROAD OF NORTHERN
CALIFORNIA, INC., a California
corporation
By /s/ Dennis Welsch
-------------------------------------
Its Vice President and Treasurer
KAUFMAN AND BROAD OF SAN DIEGO, INC.,
a California corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
KAUFMAN AND BROAD - SOUTH BAY, INC.,
a California corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
KAUFMAN AND BROAD OF SOUTHERN CALIFORNIA,
a California corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
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<PAGE> 255
KAUFMAN AND BROAD - CENTRAL VALLEY, INC.,
a California corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
KAUFMAN AND BROAD COASTAL, INC., a
California corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
KAUFMAN AND BROAD OF NEVADA, INC., a
California corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
KAUFMAN AND BROAD OF ARIZONA, INC., a
California corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
KAUFMAN AND BROAD OF COLORADO, INC., a
Colorado corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
-6-
<PAGE> 256
KAUFMAN AND BROAD OF UTAH, INC., a
California corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
OPPEL JENKINS OF ALBUQUERQUE, INC., a New
Mexico corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
MESA VISTA HOMES, INC., a New Mexico
corporation
By /s/ Dennis Welsch
--------------------------------------
Its Vice President and Treasurer
-7-
<PAGE> 257
Schedule 1
to
Continuing Guaranty
List of Guarantors
Kaufman and Broad of Northern California, Inc.
Kaufman and Broad of San Diego, Inc.
Kaufman and Broad - South Bay, Inc.
Kaufman and Broad of Southern California
Kaufman and Broad - Central Valley, Inc.
Kaufman and Broad Coastal, Inc.
Kaufman and Broad of Nevada, Inc.
Kaufman and Broad of Arizona, Inc.
Kaufman and Broad of Colorado, Inc.
Kaufman and Broad of Utah, Inc.
Oppel Jenkins of Albuquerque, Inc.
Mesa Vista Homes, Inc.
-8-
<PAGE> 258
INSTRUMENT OF JOINDER
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of
________________, 19___, by ________________________________
_______________________________________, a ____________________ ("Joining
Party"), and delivered to the Administrative Agent pursuant to the Amended And
Restated Continuing Guaranty dated as of January 28, 1996 (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 Fourth Amended and Restated Loan Agreement
dated as of February 28, 1996 (the "Loan Agreement") among Kaufman and Broad
Home Corporation, as Borrower, the Banks, Bank of America National Trust and
Savings Association, as Administrative Agent, Bank of America National Trust and
Savings Association, The First National Bank of Chicago, Credit Lyonnais Los
Angeles Branch and NationsBank of Texas, N.A., as Managing Agents.
B. Joining Party has become a Significant 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 availability to Borrower of a credit facility 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 10 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.
-1-
<PAGE> 259
2. The effective date of this Joinder is _______________.
"Joining Party"
_________________________________
a _____________________________
By ___________________________________
Its _______________________________
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By _______________________________
Its ___________________________
KAUFMAN AND BROAD HOME CORPORATION
By _______________________________
Its ___________________________
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<PAGE> 260
SCHEDULE 1.1
PRO RATA SHARES
<TABLE>
<CAPTION>
Line B
Line B Pro Rata Share
Bank Commitment Percentage
---- ---------- ----------
<S> <C> <C>
Bank of America National
Trust and Savings Association $ 27,500,000 25.0000%
The First National Bank
of Chicago $ 27,500,000 25.0000%
Credit Lyonnais 27,500,000 25.0000%
NationsBank of Texas, N.A. 27,500,000 25.0000%
------------
Total $110,000,000 100.0000%
</TABLE>
PRO RATA SHARES
<TABLE>
<CAPTION>
Line C
Line C Pro Rata Share
Bank Commitment Percentage
---- ---------- ----------
<S> <C> <C>
Bank of America National
Trust and Savings Association $ 5,000,000 25.0000%
The First National Bank
of Chicago $ 5,000,000 25.0000%
Credit Lyonnais 5,000,000 25.0000%
NationsBank of Texas, N.A. 5,000,000 25.0000%
-----------
Total $ 20,000,000 100.0000%
</TABLE>
(Schedule 1]
<PAGE> 261
Schedule 4.4
Kaufman and Broad Home Corporation and
Consolidated Subsidiaries
Key to "Types"
S = Significant Subsidiary
G = Guarantor Subsidiary
Fo = Foreign Subsidiary
Fi = Financial Subsidiary
(Note: All Guarantor Subsidiaries are also
Significant Subsidiaries)
<TABLE>
<CAPTION>
Arizona Corporations % Type(s)
- -------------------- - -------
<S> <C> <C>
Kaufman and Broad of Arizona, Inc. 100 S/G
Kaufman and Broad Home Sales of Arizona, Inc. 100
California Corporations
- -----------------------
Affordable Multi-Family, Inc. 100
BKJ Construction Company, Inc. 100
Cable Associates, Inc. 100
Custom Decor, Inc. 100
First Northern Builders Servicing, Inc. 100
Fullerton Affordable Housing, Inc. 100
KBASW Mortgage Acceptance Corporation 100 Fi
KBI/Mortgage Acceptance Corporation 100 Fi
KBMH Property Management, Inc. 100
KBMH Capital, Inc. 100
KBRAC IV Mortgage Acceptance Corporation 100 Fi
K&B Multi-Housing Advisors, Inc. 100
KBMH Construction, Inc. 100
Kaufman and Broad - Central Valley, Inc. 100 S/G
Kaufman and Broad Coastal, Inc. 100 S/G
Kaufman and Broad Communities, Inc. 100
Kaufman and Broad Development Group 100
Kaufman and Broad Embarcadero, Inc. 100
Kaufman and Broad of Fresno, Inc. 100 S/G
Kaufman and Broad Home Sales, Inc. 100
Kaufman and Broad Insurance Agency, Inc.(1) 100
Kaufman and Broad International, Inc. 100
Kaufman and Broad Land Company 100
Kaufman and Broad Land Development Venture, Inc. 100
</TABLE>
- ----------------------
1 Formerly Pacific Sun Insurance Agency, Inc.
<PAGE> 262
<TABLE>
<S> <C> <C>
Kaufman and Broad of Monterey Bay, Inc. 100 S/G
Kaufman and Broad - Moreno/Perris Valleys, Inc. 100
Kaufman and Broad Multi-Family, Inc. 100
Kaufman and Broad Multi-Housing Group, Inc. 100
Kaufman and Broad of Northern California, Inc. 100 S/G
Kaufman and Broad North Stockton, Inc. 100
Kaufman and Broad Properties 100
Kaufman and Broad of Sacramento, Inc. 100 S/G
Kaufman and Broad of San Diego, Inc. 100 S/G
Kaufman and Broad - South Bay, Inc. 100 S/G
Kaufman and Broad of Southern California, Inc. 100 S/G
Kaufman and Broad of Texas, Inc. 100
Kaufman and Broad of Utah, Inc. 100
Kent Land Company 100
Kingsbay Escrow Company 100
Multi-Housing Investments, Inc. 100
COLORADO CORPORATION
- --------------------
Kaufman and Broad of Colorado, Inc. 100 S/G
DELAWARE CORPORATIONS
- ---------------------
International Mortgage Acceptance Corporation 100
Kaufman and Broad Development Company 100
Kaufman and Broad Limited 100
ILLINOIS CORPORATIONS
- ---------------------
Kaufman and Broad of Illinois, Inc. 100
Kaufman and Broad Mortgage Company 100 Fi
MASSACHUSETTS CORPORATION
- -------------------------
Kaufman and Broad Homes, Inc 100
MEXICAN CORPORATIONS
- --------------------
Kaufman y Broad de Mexico 100 Fo
Kaufman y Broad Asesoria Administrativa 100 Fo
MICHIGAN CORPORATION
- --------------------
Keywick, Inc. 100
MINNESOTA CORPORATION
- ---------------------
Kaufman and Broad Custom Homes, Inc. 100
</TABLE>
<PAGE> 263
<TABLE>
<S> <C> <C>
NEVADA CORPORATION
- ------------------
Kaufman and Broad of Nevada, Inc. 100 S/G
NEW MEXICO
- ----------
Mesa Vista Homes, Inc. 100
Oppel Jenkins of Albuquerque, Inc. 100 S/G
NEW YORK CORPORATION
- --------------------
Kaufman and Broad Homes of Long Island, Inc. 100
TEXAS CORPORATION
- -----------------
Oppel-Jenkins Development, Inc. 100
Oppel Jenkins of El Paso, Inc. 100
CANADIAN CORPORATIONS
- ---------------------
806628 Ontario, Inc. 100 Fo
Barchester Investments Limited 50 Fo
Davisville Investment Co., Ltd. 100 Fo
Heatherwoods Development Corporation 100 Fo
Hillside Village Limited 100 Fo
Margreen Investments, Inc. 100 Fo
Meadowstream Development Limited 100 Fo
Mississauga Management Ltd. 100 Fo
Victoria Wood Development Corporation (Milton), Inc. 100 Fo
Victoria Wood Development Corporation (Ontario), Inc. 100 Fo/S
Victoria Wood Development Corporation (Pickering), Inc. 100 Fo
Victoria Wood Development Corporation (York), Inc. 100 Fo
Victoria Wood Limited 100 Fo
FRENCH CORPORATIONS
- -------------------
Bati Service Development S.A.R.L. 100 Fo
Bati Service Promotion S.A. 100 Fo
Kaufman and Broad Developpement S.A. 99.4 Fo/S
Kaufman & Broad France S.A. 100 Fo/S
Kaufman and Broad Investissements S.A.R.L. 100 Fo
Kaufman and Broad Maisons Individuelles S.A. 99.94 Fo/S
Kaufman and Broad Rehabilitation S.A.R.L. 99.94 Fo
Kaufman and Broad Renovation S.A. 99.4 Fo
Kaufman and Broad Residences S.A.R.L. 100 Fo
GERMAN CORPORATIONS
- -------------------
Kaufman and Broad GmbH 100 Fo
</TABLE>
<PAGE> 264
SCHEDULE 4.7
Existing Liens and Rights of Others
As of November 30, 1995
NONE
<PAGE> 265
SCHEDULE 4.9
Existing Indebtedness and Contingent Guaranty Obligations
As of November 30, 1995
<TABLE>
<CAPTION>
AMOUNT TOTAL
------------ -----------
<S> <C> <C>
SECURED DEBT
DOMESTIC DEBT:
Coastal Valleys $0
Antelope Valley 7,191,000
Inland Empire 0
Pacific Inland 0
South Coast 15,395,000
San Diego 0
North Bay 0
Sacramento 0
Central Valley 0
Fresno 846,000
South Bay 0
Monterey Bay 727,000
Nevada 694,000
Arizona 0
New Mexico 2,000,000
Colorado 0
Utah 0
------------
TOTAL DOMESTIC SECURED $26,853,000
FRENCH DEBT 11,214,000
CANADIAN DEBT 870,000
MEXICAN DEBT 4,778,000
-----------
TOTAL SECURED DEBT $43,715,000
-----------
UNSECURED DEBT
DOMESTIC DEBT KBHC:
Revolver $250,000,000
Money Market 13,000,000
10 3/8% Senior Notes due 1999 100,000,000
9 3/8% Subordinated Notes due 2003 173,849,000
------------
TOTAL DOMESTIC DEBT KBHC 536,849,000
DOMESTIC DEBT KBMC:
Commercial Paper 111,000,000
Revolving Warehouse Facility 40,000,000
------------
TOTAL DOMESTIC DEBT KBMC 151,000,000
FINANCIAL SUBSIDIARIES OTHER THAN KBMC (COLLATERALIZED
MORTGAGE OBLIGATIONS) 84,764,000
FRENCH DEBT 59,011,000
------------
TOTAL UNSECURED DEBT $831,624,000
------------
TOTAL DEBT $875,339,000
============
CONTINGENT GUARANTY OBLIGATIONS
KBHC $6,120,000
KBMC 0
KBMHG 0
----------
TOTAL CONTINGENT GUARANTY OBLIGATIONS 6,120,000
Less: Financial Letters of Credit Supporting Secured Debt (956,000)
------------
TOTAL CONTINGENT GUARANTY OBLIGATIONS 5,164,000
TOTAL DEBT AND CONTINGENT GUARANTY OBLIGATIONS $880,503,000
============
</TABLE>
<PAGE> 266
SCHEDULE 6.4
Investments
As of November 30, 1995
<TABLE>
<CAPTION>
INVESTMENT: AMOUNT
- ----------- ------
<S> <C>
Computer Equipment Leveraged Leases $2,175,000
==========
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion of our report dated January 30, 1996
with respect to the balance sheets of Rayco, Ltd. as of December 31, 1995 and
1994, and the related statements of income, partners' equity, and cash flows
for each of the years in the three-year period ended December 31, 1995, which
report appears in the Form 8-K of Kaufman and Broad Home Corporation dated
March 12, 1996.
We also consent to the incorporation by reference in the Registration
Statements on Form S-8 pertaining to the 1986 Stock Option Plan (No. 33-11692)
and the 1988 Employee Stock Plan (No. 33-28624) of Kaufman and Broad Home
Corporation of our report referenced above.
ERNST & YOUNG LLP
San Antonio, Texas
March 12, 1996
