REVOLVING CREDIT AGREEMENT

Exhibit 10.1

 

Published CUSIP Number: 853758AC4

 

 

$925,000,000

 

REVOLVING CREDIT AGREEMENT

 

Dated as of August 31, 2005

 

among

 

STANDARD PACIFIC CORP.,

as Borrower,

 

THE LENDERS NAMED HEREIN,

as Lenders,

 

and

 

BANK OF AMERICA, N.A.,

as Administrative Agent,

 

JPMORGAN CHASE BANK,

as Syndication Agent,

 

THE ROYAL BANK OF SCOTLAND, PLC,

WACHOVIA BANK, NATIONAL ASSOCIATION,

 

and

 

SUNTRUST BANK,

as Co-Documentation Agents,

 

GUARANTY BANK,

PNC BANK, NATIONAL ASSOCIATION,

 

and

 

CREDIT SUISSE,

as Co-Managing Agents,

 

 

BANC OF AMERICA SECURITIES LLC,

as Sole Lead Arranger and Sole Book Manager

TABLE OF CONTENTS

 

 

-i-

 

-ii-

 

-iii-

 

-iv-

LIST OF EXHIBITS

 

 

LIST OF SCHEDULES

 

 

-v-

REVOLVING CREDIT AGREEMENT

 

This Revolving Credit Agreement (“ Agreement ”) is dated as of August 31, 2005, by and among STANDARD PACIFIC CORP. , a Delaware corporation (“ Borrower ”), the several financial institutions from time to time party to this Agreement (collectively, “ Lenders ” and individually, a “ Lender ”), and BANK OF AMERICA, N.A. , a national banking association (“ Bank of America ”), as administrative agent for Lenders (in such capacity, “ Administrative Agent ”), and is made with reference to the facts set forth below.

 

AGREEMENT

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by and among the parties hereto 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 respectively after each:

 

“ Account ” means Borrower’s general account maintained with Bank of America, and any future similar account with Administrative Agent.

 

“ Act ” has the meaning set forth in Section 11.20 .

 

“ Adjusted Consolidated Tangible Net Worth ” means, as of any date, without duplication, (a) Consolidated Tangible Net Worth, minus (b) the amount of Borrower’s and its Subsidiaries’ Investments in Excluded Subsidiaries and their respective Subsidiaries determined in accordance with GAAP, minus (c) any non-cash gain (or plus any non-cash loss, as applicable) resulting from any mark-to-market adjustments made directly to Consolidated Tangible Net Worth as a result of fluctuations in the value of financial instruments owned by Borrower or any of its Subsidiaries as mandated under FAS 133 (or any successor thereto), all in accordance with GAAP.

 

“ Administrative Agent ” means Bank of America when acting in its capacity as Administrative Agent under any of the Loan Documents and any successor administrative agent.

 

“ Affiliate ” of a Person means any Person (a) which directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such Person, or (b) which directly, or indirectly through one or more intermediaries, owns beneficially or of record twenty percent (20%) or more of the Voting Stock of such Person. The term “ control ” means the possession, directly or indirectly, of the power to cause the direction of the management and policies of a Person, whether through the ownership of voting securities or partnership interests, by contract, family relationship, or otherwise.

 

“ Agent-Related Persons ” means Administrative Agent and any successor agent (pursuant to the terms of Section 10.9 ) together with their respective Affiliates (including, in the case of Bank of America in its capacity as Administrative Agent, Arranger) and the directors, officers, agents, employees, and attorneys-in-fact of such Persons and Affiliates.

 

-1-

“ Agreement ” means this Revolving Credit Agreement, either as originally executed or as it may from time to time be supplemented, modified, or amended.

 

“ Applicable Margin ” means, as of any date of determination, a percentage per annum determined by the Pricing Level in effect on such date as shown below:

 

 

Any increase or decrease in the Applicable Margin resulting from a change in the Total Leverage Ratio shall become effective as of the first (1 ^st ) Business Day immediately following the date a compliance certificate is delivered pursuant to Section 8.1(e) ; provided, however , that if a compliance certificate is not delivered when due in accordance with Section 8.1(e) , then Pricing Level VI shall apply as of the first (1 ^st ) Business Day after the date on which such compliance certificate was required to have been delivered and shall continue to apply until the first (1 ^st ) Business Day after the date such compliance certificate is delivered. The Applicable Margin in effect from the Closing Date until the next adjustment date shall be determined based upon Pricing Level II. In order for Pricing Level I to be in effect at any time, Borrower must have an Investment Grade Rating (and at any time when Pricing Level I is not so available for such reason, Pricing Level II through Pricing Level VI, as applicable, shall be in effect).

 

“ Arranger ” means Banc of America Securities LLC, in its capacity as sole lead arranger and sole book manager.

 

“ Assignment and Assumption ” means an Assignment and Assumption substantially in the form of Exhibit A .

 

“ Attorney Costs ” means and includes all reasonable fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services, and all disbursements of internal legal counsel.

 

“ Bank of America ” has the meaning set forth in the introductory paragraph hereto.

 

-2-

“ Borrower ” has the meaning set forth in the introductory paragraph hereto.

 

“ Borrowing ” means each of the Loans to be made by Lenders to Borrower as provided in Article 3 .

 

“ Borrowing Base ” has the meaning set forth in Section 3.5(b) .

 

“ Borrowing Base Certificate ” means a written calculation of the Borrowing Base, substantially in the form of Exhibit B , signed by a Responsible Official of Borrower, and properly completed to provide all information required to be included thereon.

 

“ Business Day ” means any day other than a Saturday, Sunday, or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where Administrative Agent’s Lending Office is located and, if such day relates to any Eurodollar Borrowing, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

 

“ Capital Adequacy Regulation ” means any guideline, request, or directive of any central bank or other Governmental Authority, or any other Law, whether or not having the force of law, in each case, regarding capital adequacy of any bank or other financial institution or of any corporation controlling a bank or other financial institution.

 

“ Capitalized Lease Obligations ” means any obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

 

“ Cash Account ” has the meaning set forth in Section 9.2 .

 

“ Cash Collateralize ” means to pledge and deposit with or deliver to Administrative Agent, for the benefit of each Issuing Bank and the Lenders, as collateral for the undrawn amount of all outstanding Letters of Credit, at the option of Borrower, cash, deposit account balances, or back-up letters of credit, in each case pursuant to documentation in form and substance reasonably satisfactory to Administrative Agent and each Issuing Bank (which documents are hereby consented to by the Lenders) and, in the case of back-up letters of credit, issued by entities reasonably acceptable to Administrative Agent and each Issuing Bank. All cash pledged and deposited with or delivered to Administrative Agent shall be deposited into the Cash Account.

 

“ Change of Control ” means the occurrence of any of the following: (a) any Person becomes the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the total voting power of the Voting Stock of Borrower; or (b) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the board of directors of Borrower (together with any new directors whose election by such board of directors, or whose nomination for election by the shareholders of Borrower, was approved by a majority vote of the directors of Borrower then still in office who are either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute the majority of the board of directors of Borrower then in office; or (c) for any reason a “ change in control ” or similar event shall occur as provided in any agreement governing any Subordinated Debt or any indebtedness of Borrower or its Subsidiaries issued pursuant to the terms of an indenture.

 

-3-

“ Closing Date ” means August 31, 2005.

 

“ Code ” means the Internal Revenue Code of 1986 .

 

“ Combined Senior Home Building Debt ” means, as of any date, Combined Total Home Building Debt less Subordinated Debt.

 

“ Combined Total Home Building Debt ” means, as of any date, without duplication, (a) all funded debt of Borrower and its Subsidiaries determined on a consolidated basis (excluding funded debt of Excluded Subsidiaries), plus (b) all funded debt with recourse to any limited or general partnership in which Borrower or a Subsidiary (other than an Excluded Subsidiary) is a general partner, plus (c) the sum of (i) all reimbursement obligations with respect to drawn Financial Letters of Credit and drawn Performance Letters of Credit, and (ii) the maximum amount available to be drawn under all undrawn Financial Letters of Credit, in each case issued for the account of, or guaranteed by, Borrower or any of its Subsidiaries (other than Excluded Subsidiaries), plus (d) all guaranties or other funding obligations of Borrower or a Subsidiary (other than an Excluded Subsidiary) of funded debt of third parties (including Excluded Subsidiaries), provided, however , that in the case of any loan to value maintenance agreements (or similar agreements) by which Borrower or a Subsidiary agrees to maintain for a joint venture a minimum ratio of indebtedness outstanding to value of collateral property, only amounts owing by Borrower or a Subsidiary at the time of determination will be included in the calculation of Combined Total Home Building Debt, plus (e) all Rate Hedging Obligations of Borrower and its Subsidiaries (other than an Excluded Subsidiary), minus (f) cash and Temporary Cash Investments of Borrower and its Subsidiaries (other than Excluded Subsidiaries) not subject to any lien, encumbrance, or restriction in excess of $5,000,000.

 

“ Commitment ” means, with respect to the Loans of each Lender, the Dollar amount and percentage obligation set forth on Schedule 1.1 or in the Assignment and Assumption pursuant to which such Lender became a party hereto, in each case as such Dollar amounts may increase or decrease as provided in this Agreement including changes as a result of assignments made in accordance with Section 11.6 and increases in the Total Aggregate Commitment in accordance with Section 3.10 .

 

“ Completed Unit ” means a Unit as to which either (or both) of the following has occurred: (a) a notice of completion has been filed or recorded in the appropriate real estate records; or (b) all necessary construction has been completed in order to obtain a certificate of occupancy (whether or not such certificate of occupancy has actually been obtained).

 

“ Consolidated Home Building Interest Expense ” means, for any period, without duplication, the aggregate amount of interest which, in conformity with GAAP, would be opposite the caption “ interest expense ” or any like caption on an income statement for Borrower and its Subsidiaries (excluding the Excluded Subsidiaries), whether expensed directly, or included as a component of cost of goods sold, or allocated to joint ventures, or otherwise (including, without limitation, imputed interest included on Capitalized Lease Obligations and zero coupon bonds, all commissions, discounts, and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, the net costs associated with Rate Hedging Obligations, amortization of other financing fees and expenses, the interest portion of any deferred payment obligation, amortization of discount or premium, if any,

 

-4-

and all non-cash interest expense), excluding interest expense related to mortgage banking operations or any other financial services related Subsidiary, plus the product of (i) cash dividends paid on any preferred stock of Borrower, times (ii) a fraction, the numerator of which is one (1) and the denominator of which is one (1) minus the then current effective aggregate federal, state, and local tax rate of Borrower, expressed as a decimal.

 

“ Consolidated Home Building Interest Incurred ” means, for any period, without duplication, the aggregate amount of interest which, in conformity with GAAP, would be opposite the caption “ interest expense ” or any like caption on an income statement for Borrower and its Subsidiaries (excluding the Excluded Subsidiaries) or allocated to joint ventures, or otherwise (including, without limitation, imputed interest included on Capitalized Lease Obligations and zero coupon bonds, all commissions, discounts, and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, the net costs associated with Rate Hedging Obligations, amortization of other financing fees and expenses, the interest portion of any deferred payment obligation, amortization of discount or premium, if any, and all non-cash interest expense) and, without duplication, all capitalized interest for such period and all interest attributable to discontinued operations for such period (excluding the Excluded Subsidiaries) to the extent not set forth on the income statement under the caption “ interest expense ” or any like caption, excluding interest expense related to mortgage banking operations or any other financial services related Subsidiary and excluding interest as a component of cost of goods sold, plus the product of (i) cash dividends paid on any preferred stock of Borrower, times (ii) a fraction, the numerator of which is one (1) and the denominator of which is one (1) minus the then current effective aggregate federal, state, and local tax rate of Borrower, expressed as a decimal.

 

“ Consolidated Home Building Net Income ” means, for any period, without duplication, the net income (or loss) of Borrower and its Subsidiaries (excluding the Excluded Subsidiaries), determined in accordance with GAAP and excluding the share thereof attributable to holders of ownership interests of any Subsidiary (other than Borrower or a Subsidiary of Borrower).

 

“ Consolidated Tangible Net Worth ” means, as of any date, without duplication, the sum of the following with respect to Borrower and its Subsidiaries determined and consolidated in conformity with GAAP:

 

(a) the amount of stated capital (excluding the cost of treasury shares), additional paid-in capital, and retained earnings (or, in the case of a deficit in additional paid-in capital or retained earnings, minus the amount of the deficit); minus

 

(b) the carrying value of intangible assets, such as deferred costs associated with goodwill, patents, franchises, organizational expenses, and the like (but excluding receivables, pre-paid expenses, the capitalized value of leases, and all costs that are specifically identifiable or are identifiable on a rational and consistent basis with the unexpired service value of tangible assets); and minus

 

(c) any amounts which would otherwise be included in the calculation of Consolidated Tangible Net Worth under subparagraph (a) immediately above of this definition which pertain to or are attributable to Borrower’s or any Subsidiary’s equity interest in any Home Building Joint Venture which is in default with respect to the payment of any monetary obligations owing under any land loan, acquisition and development loan, construction loan, secured or unsecured credit facility, or any other loan or other indebtedness for borrowed money.

 

-5-

“ Consolidated Total Assets ” means, as of any date, for Borrower and its Subsidiaries (excluding all Excluded Subsidiaries) determined on a consolidated basis, all assets determined in accordance with GAAP.

 

“ Contribution Agreement ” means the Contribution and Indemnity Agreement executed and delivered by each Guarantor in form and substance acceptable to Administrative Agent.

 

“ Debtor Relief Laws ” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

“ Debt Rating ” means, as of any date of determination, the rating as determined by any of S&P, Moody’s, or Fitch of Borrower’s non-credit-enhanced (other than guaranties by Subsidiaries), senior unsecured long-term debt.

 

“ Default ” means any event or circumstance that, with the giving of notice or passage of time, or both, would become an Event of Default.

 

“ Defaulting Lender ” has the meaning set forth in Section 10.11 .

 

“ Documentation Agent ” means the Lender or Lenders which is designated in writing by Administrative Agent to serve as Documentation Agent hereunder (subject to Section 10.13 ).

 

“ Dollars ” or “ $ ” means United States dollars.

 

“ Eligible Assignee ” means (a) a Lender; (b) an Affiliate of a Lender that is regularly engaged in the business of making commercial loans of the type evidenced by this Agreement; (c) an Eligible Institution approved by (i) Administrative Agent and each Issuing Bank, and (ii) unless an Event of Default has occurred and is continuing, Borrower (each such approval not to be unreasonably withheld or delayed); or (d) any other Person (other than a natural person) approved by (i) Administrative Agent and each Issuing Bank, and (ii) unless an Event of Default has occurred and is continuing, Borrower (each such approval to be in their sole discretion); provided that notwithstanding the foregoing, “ Eligible Assignee ” shall not include Borrower or Borrower’s Affiliates.

 

“ Eligible Institution ” means a commercial bank or other financial institution that has (or, in the case of a bank or financial institution that is a subsidiary, such bank’s or financial institution’s parent has) (a) a rating of its senior debt obligations of not less than Baa1 by Moody’s or BBB+ by S&P, and (b) total assets in excess of $10,000,000,000.

 

“ Eligible Subsidiary ” means a Subsidiary of Borrower in which (a) Borrower directly or indirectly owns at least ninety percent (90%) of the issued and outstanding ownership interests and (b) a majority of the holders of such ownership interests has the ability to cause such Subsidiary to incur indebtedness, grant liens, and sell or transfer assets.

 

-6-

“ Entitled Land ” means land owned by Borrower or any Eligible Subsidiary that is a Guarantor where all requisite zoning requirements and land use requirements have been satisfied, and all requisite approvals have been obtained from all applicable Governmental Authorities (other than approvals which are simply ministerial and non-discretionary in nature or otherwise not material), in order to develop the land as a residential housing project and construct Units thereon.

 

“ Environmental Laws ” means any and all federal, state, local, and foreign Laws, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements, or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions, and discharges to waste or public systems.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974 .

 

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) under common control with Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

 

“ ERISA Event ” means: (a) a Reportable Event with respect to a Plan; (b) a withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate.

 

“ Escrow Proceeds Receivable ” means funds due to Borrower or any Eligible Subsidiary that is a Guarantor held in escrow following the sale and conveyance of title of a Unit to a buyer.

 

“ Eurodollar Borrowing ” means any Loan or portion thereof designated or redesignated by Borrower as a Eurodollar Borrowing pursuant to Article 3 .

 

“ Eurodollar Lending Office ” means the office or branch of each Lender so designated on the signature pages of this Agreement, or such other office or branch of each Lender as it may hereafter designate, by written notice to Borrower and Administrative Agent, as its Eurodollar Lending Office.

 

“ Eurodollar Rate ” means, for any Interest Period with respect to a Eurodollar Borrowing, the rate per annum equal to the British Bankers Association LIBOR Rate (“ BBA LIBOR ”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by Administrative Agent from time to time) at approximately 11:00 a.m., London time, two

 

-7-

(2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the “ Eurodollar Rate ” for such Interest Period shall be the rate per annum determined by Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Borrowing being made, continued, or converted by Administrative Agent and with a term equivalent to such Interest Period would be offered by Administrative Agent’s London branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two (2) Business Days prior to the commencement of such Interest Period.

 

“ Event of Default ” has the meaning set forth in Section 9.1 .

 

“ Excluded Subsidiaries ” means, collectively, Standard Pacific Financing, Inc., FLS (including any Subsidiaries thereof), Standard Pacific Financing, L.P., and any Home Building Joint Venture that Borrower designates as an “ Excluded Subsidiary ” by written notice to Administrative Agent.

 

“ Existing Agreement ” means the Amended and Restated Revolving Credit Agreement dated as of May 12, 2004, among Borrower, as borrower, the Lenders party thereto, and Bank of America, N.A., as Administrative Agent, as such agreement may have been modified, amended, or restated.

 

“ Existing Letters of Credit ” means the Letters of Credit listed on Schedule 3.9 and issued pursuant to the Existing Agreement.

 

“ Federal Funds Rate ” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, then the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, then the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Administrative Agent on such day on such transactions as determined by Administrative Agent.

 

“ Fee Letter ” means the letter agreement, dated July 5, 2005, among Borrower, Administrative Agent, and Arranger.

 

“ Financial Letter of Credit ” means any letter of credit that is not a Performance Letter of Credit.

 

“ Finished Lots ” means lots of Entitled Land as to which land development construction has been substantially completed, utilities, and all major infrastructure have been stubbed to the site, and building permits may be promptly pulled by Borrower or any Affiliate without the satisfaction of any further material conditions.

 

“ Fitch ” means Fitch IBCA, Duff & Phelps, a division of Fitch, Inc., and any successor thereto.

 

-8-

“ FLS ” means Family Lending Services, Inc., a Delaware corporation.

 

“ Foreign Lender ” has the meaning set forth in Section 10.10(a) .

 

“ FRB ” means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.

 

“ GAAP ” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination; provided that this definition of GAAP shall not include the application of FASB Interpretation No. 46 or EITF 04-5 issued by the Financial Accounting Standards Board and the Emerging Issues Task Force, as such interpretations or pronouncements may be amended or modified from time to time.

 

“ GAAP Value ” means, with respect to each property constituting part of Borrower’s and its Eligible Subsidiaries’ Real Estate Inventory, the asset value for such property or asset determined in accordance with GAAP minus an amount equal to all obligations accrued or otherwise payable by Borrower or such Eligible Subsidiary to third parties pursuant to the terms of any Profit and Participation Agreements executed in connection with such property or asset.

 

“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

 

“ Guarantors ” means all existing and future Material Subsidiaries and each other Subsidiary required to execute a Guaranty pursuant to Section 8.9 , and “ Guarantor ” means any one of the Guarantors.

 

“ Guaranty ” means a continuing guaranty, substantially in the form of Exhibit C , to be executed and delivered by a Guarantor to Administrative Agent for the ratable benefit of Lenders.

 

“ Guaranty of the Subsidiary Letters of Credit ” means a guaranty of Borrower guaranteeing all indebtedness and obligations arising under or relating to the Subsidiary Letters of Credit, substantially in the form of Exhibit L .

 

“ Home Building EBITDA ” means, for Borrower and its Subsidiaries (other than Excluded Subsidiaries) on a consolidated basis and for any period, without duplication: (a) the sum of the following amounts attributable to such period: (i) Consolidated Home Building Net Income; (ii) Consolidated Home Building Interest Expense; (iii) charges against income for all federal, state, and local taxes; (iv) depreciation expense; (v) amortization expense; (vi) write-off of goodwill, impairment charges, and other non-cash charges and expenses (including non-cash charges resulting

 

-9-

from accounting changes); (vii) cash distributions of income earned by Excluded Subsidiaries and Home Building Joint Ventures actually received during such period; and (viii) any losses arising outside of the ordinary course of business which have been included in the determination of Consolidated Home Building Net Income; less (b) (i) any gains or other non-cash items arising outside the ordinary course of business, and (ii) income from Home Building Joint Ventures, which have been included in the determination of Consolidated Home Building Net Income, all as determined on a consolidated basis for Borrower and Subsidiaries (excluding the Excluded Subsidiaries).

 

“ Home Building Joint Venture ” means any Person that was formed for and is engaged in homebuilding operations in which Borrower or any of its Subsidiaries has less than an eighty percent (80%) ownership interest.

 

“ Honor Date ” has the meaning set forth in Section 3.9(g)(i) .

 

“ Increasing Lender ” has the meaning set forth in Section 3.10(b) .

 

“ Interest Coverage Ratio ” has the meaning set forth in Section 8.20.

 

“ Interest Payment Date ” means (a) the eighth (8 ^th ) day of each month for interest due through the last day of the preceding month and (b) the Maturity Date.

 

“ Interest Period ” means, as to each Eurodollar Borrowing, the period commencing on the date specified in the applicable Request for Borrowing or Request for Redesignation of Borrowing by Borrower pursuant to Sections 3.3 or 3.4 and ending seven (7) days, one (1) month, two (2) months, three (3) months or six (6) months thereafter or, to the extent available from all Lenders, nine (9) months or twelve (12) months thereafter, as designated by Borrower in the applicable Request for Borrowing or Request for Redesignation of Borrowing, provided that :

 

(a)

the first (1 st ) day in any Interest Period shall be a Business Day;

 

(b)

any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; and

 

(c)

no Interest Period shall extend beyond the Maturity Date.

 

“ Investment ” means any net investment by Borrower or any Subsidiary in any joint venture, partnership, corporation, limited liability company or other entity, whether by acquisition of stock, assets, or debt, or by loan, advance, transfer of property out of the ordinary course of business, capital contribution, payment pursuant to a guaranty or payment pursuant to any other contingent liability of Borrower in respect of liabilities of such entity, or otherwise. For purposes hereof, the net amount of any Investment shall be calculated as (a) the initial amount of such Investment, plus (b) any additional capital contributions or other similar amounts with respect to such Investment, less (c) all returns of capital with respect to such Investment.

 

-10-

“ Investment Grade Rating ” means that Borrower’s Debt Rating is at least BBB- or Baa3, as applicable, as published by at least two (2) of Moody’s, S&P, and Fitch.

 

“ Issuer Documents ” means with respect to any Letter of Credit, the L/C Application and any other document, agreement, and instrument entered into by the applicable Issuing Bank and Borrower (or any Subsidiary) or in favor of such Issuing Bank and relating to any such Letter of Credit.

 

“ Issuing Banks ” means Bank of America in its individual capacity as a bank issuing Letters of Credit under this Agreement and such other Lenders which agree, at the request of Borrower and with the consent of Administrative Agent (such consent not to be unreasonably withheld), to issue one or more Letters of Credit pursuant to the terms and conditions of this Agreement, and “ Issuing Bank ” means any one of the Issuing Banks.

 

“ Judgment Liens ” means any judgment liens, attachment liens, or any other liens which secure a judgment or any other obligations imposed by court order or other directive of a court.

 

“ Laws ” means, collectively, all international, foreign, federal, state, and local statutes, treaties, rules, regulations, ordinances, codes, and administrative or judicial precedents.

 

“ L/C Advance ” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Pro Rata Share.

 

“ L/C Application ” has the meaning set forth in Section 3.9(b) .

 

“ L/C Borrowing ” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Reference Rate Borrowing.

 

“ L/C Commitment ” means the aggregate principal sum of FOUR HUNDRED FIFTY MILLION DOLLARS ($450,000,000).

 

“ L/C Obligations ” means the sum of (a) the maximum aggregate principal amount which remains undrawn under all outstanding Letters of Credit plus (b) all Unreimbursed Amounts.

 

“ L/C Obligations Amount ” has the meaning set forth in Section 9.2 .

 

“ Lenders ” has the meaning specified in the introductory paragraph.

 

“ Lending Office ” means (a) as to Administrative Agent, the office or offices of Administrative Agent set forth on its signature page to this Agreement, or such other address or account as Administrative Agent may from time to time notify Borrower and Lenders, and (b) as to each Lender, the office or offices of such Lender set forth on its signature page to this Agreement, or such other office or offices as such Lender may from time to time notify Borrower and Administrative Agent.

 

“ Letters of Credit ” has the meaning set forth in Section 3.9(a) and shall include the Existing Letters of Credit.

 

-11-

“ Letter of Credit Subsidiaries ” means any one or more of Borrower’s Subsidiaries or Home Building Joint Ventures.

 

“ Loan ” or “ Loans ” means each of the loans and Borrowings under this Agreement including, without limitation, all Swing Line Advances.

 

“ Loan Documents ” means, collectively, this Agreement, each Note, the Guaranty, Guaranty of the Subsidiary Letters of Credit, the Contribution Agreement, the Fee Letter, each Issuer Document, and each Letter of Credit.

 

“ Lots Under Development ” means (a) Entitled Land where physical site improvement has commenced and is continuing, and (b) Finished Lots.

 

“ Majority Lenders ” means, at any time, Lenders having in excess of sixty-six and two-thirds percent (66  ² / 3 %) of the Total Aggregate Commitment or, if the commitment of each Lender to make Loans and the obligation of any Issuing Bank to issue or extend Letters of Credit have been terminated pursuant to Section 9.2 , Lenders holding in excess of sixty-six and two-thirds percent (66  ² / 3 %) of the then aggregate unpaid principal amount of the Loans.

 

“ Material Adverse Effect ” means: (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, or condition (financial or otherwise) of Borrower and its Subsidiaries, taken as a whole; (b) a material impairment of the ability of Borrower to perform its payment or other material obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect, or enforceability against Borrower of any material obligations of Borrower under any Loan Document to which it is a party.

 

“ Material Subsidiaries” means, as of any date, each Subsidiary of Borrower (other than Excluded Subsidiaries) that owns assets (other than ownership interests in, or intercompany indebtedness of, other Subsidiaries) having a value determined in accordance with GAAP of $5,000,000 or more as of such date. As of the Closing Date, all Material Subsidiaries are listed on Schedule 8.9 .

 

“ Maturity Date ” means the earlier of (a) August 31, 2009, and (b) the effective date of any termination or cancellation of the Total Aggregate Commitment in accordance with the terms of this Agreement.

 

“ Measurement Period ” has the meaning set forth in Section 8.20 .

 

“ Model Unit ” means a Completed Unit to be used as a model home in connection with the sale of Units in a residential housing project.

 

“ Moody’s ” means Moody’s Investors Service, Inc. and any successor thereto.

 

“ Multiemployer Plan ” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five (5) plan years, has made or been obligated to make contributions.

 

-12-

“ Non-Wholly Owned Subsidiary ” means a Subsidiary, less than one hundred percent (100%) of the capital stock of which (including voting and non-voting shares, but exclusive of directors’ qualifying shares) is owned by Borrower and its Subsidiaries (other than Non-Wholly Owned Subsidiaries).

 

“ Notes ” means each promissory note made by Borrower in favor of a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit E .

 

“ Obligations ” means all advances to, and debts, liabilities, obligations, covenants, and duties of, Borrower and Guarantors arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against Borrower or any Guarantor or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

 

“ Opinion of Counsel ” means the favorable written legal opinion of counsel to Borrower and Guarantors, substantially in the form of Exhibit F , together with copies of all factual certificates and legal opinions upon which such counsel has relied.

 

“ Other Taxes ” has the meaning set forth in Section 4.4(b) .

 

“ PBGC ” means the Pension Benefit Guaranty Corporation.

 

“ Pension Plan ” means any “ employee pension benefit plan ” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by Borrower or any ERISA Affiliate or to which Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

 

“ Performance Letter of Credit ” means any letter of credit issued: (a) on behalf of a Person in favor of a Governmental Authority, including, without limitation, any utility, water, or sewer authority, or other similar entity, for the purpose of assuring such Governmental Authority that such Person or an Affiliate of such Person will properly and timely complete work it has agreed to perform for the benefit of such Governmental Authority; (b) in lieu of cash deposits to obtain a license, in place of a utility deposit, or for land option contracts; (c) in lieu of other contract performance, to secure performance warranties payable upon breach, and to secure the performance of labor and materials, including, without limitation, construction, bid, and performance bonds; (d) to secure refund or advance payments on contractual obligations where default of a performance-related contract has occurred; or (e) to secure a Person’s obligations under joint development agreements with third parties to perform and/or pay for or reimburse the costs of construction and/or development related to or benefiting such Person’s property and property belonging to such third parties (so long as such Person’s obligations under such joint development agreement are not past due), entered into in the ordinary course of such Person’s business.

 

-13-

“ Person ” means any individual or entity, whether a trustee, corporation, general partnership, limited partnership, limited liability company, joint stock company, trust, unincorporated organization, bank, business association, firm, joint venture, Governmental Authority, or otherwise.

 

“ Plan ” means any Pension Plan or Multiemployer Plan.

 

“ Prime Rate ” means for any day a fluctuating rate per annum equal to the rate of interest in effect for such day as publicly announced from time to time by Administrative Agent as its “ prime rate .” The “ prime rate ” is a rate set by Administrative Agent based upon various factors including Administrative Agent’s costs and desired return, general economic conditions, and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change.

 

“ Pro Rata Share ” means, with respect to each Lender at any time, a fraction (expressed as a percentage, carried out to the ninth (9 ^th ) decimal place), the numerator of which is the amount of the Commitment of such Lender at such time and the denominator of which is the amount of the Total Aggregate Commitment at such time; provided that if the commitment of each Lender to make Loans and the obligation of the Issuing Banks to issue Letters of Credit have been terminated pursuant to Section 9.2 , then the Pro Rata Share of each Lender shall be determined based on the Pro Rata Share of such Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof.

 

“ Profit and Participation Agreement ” means an agreement, secured by a deed of trust, mortgage, or other lien against a purchased property or asset, with respect to which the purchaser of any property or asset agrees to pay the seller of such property or asset a profit, price, or premium participation in such property or asset.

 

“ Project Financing Liens ” means any deeds of trust, mortgages, or any other liens which secure any real property acquisition loans, development loans, construction loans, or any other loans pertaining to the acquisition and/or development of, or construction of improvements upon, real property, but excluding any lien referenced in Sections 8.11(b), (d) , (e), (g) , (l) , or (n) .

 

“ Rate Hedging Obligations ” means, for any Person, the net obligations of such Person pursuant to any interest rate hedging agreement or any foreign exchange contract, currency swap agreement, or other similar agreement to which such Person is a party or a beneficiary.

 

“ Real Estate Inventory ” means Unentitled Land, Entitled Land, Lots Under Development, Units Under Construction, and Completed Units (including Model Units).

 

“ Reference Rate ” means, as of any date, the higher of (a) the Prime Rate, and (b) one half of one percent (0.50%) per annum above the Federal Funds Rate. Any change in the Reference Rate shall take effect on the day specified in the public announcement of such change.

 

-14-

“ Reference Rate Borrowing ” means any Loan or portion thereof which is not designated or redesignated by Borrower as a Eurodollar Borrowing pursuant to Sections 3.3 or 3.4 .

 

“ Regulation D ” means Regulation D of the FRB as now or from time to time hereafter in effect and any other regulation issued in substitution therefor.

 

“ Reportable Event ” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the thirty (30) day notice period has been waived.

 

“ Request for Borrowing ” means a written request for a Borrowing substantially in the form of Exhibit G , signed by a Responsible Official of Borrower, and properly completed to provide all information required to be included thereon.

 

“ Request for Letter of Credit ” means a written request for a Letter of Credit substantially in the form of Exhibit H , signed by a Responsible Official of Borrower, and properly completed to provide all information required to be included thereon.

 

“ Request for Redesignation of Borrowing ” means a written request for redesignation of Borrowing substantially in the form of Exhibit I , signed by a Responsible Official of Borrower, and properly completed to provide all information required to be included thereon.

 

“ 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 another Person shall be conclusively presumed to have been authorized by all necessary corporate, partnership, and/or other action on the part of such other Person.

 

“ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

 

“ Seller Nonrecourse Debt ” means indebtedness which satisfies all of the following criteria: (a) such indebtedness is incurred by Borrower or a Subsidiary in connection with its purchase of one or more parcels of Real Estate Inventory (the “ Purchased Property ”), and such indebtedness constitutes the unpaid portion of the purchase price of the Purchased Property; (b) such indebtedness is evidenced by a promissory note or other repayment agreement which is secured by a deed of trust, mortgage, or similar lien on the Purchased Property; and (c) such indebtedness is by its terms, or by operation of law, nonrecourse to Borrower, its Subsidiaries, and its Affiliates.

 

“ Senior Unsecured Home Building Debt ” means, as of any date, without duplication, the sum of (a) Combined Senior Home Building Debt (excluding any Combined Senior Home Building Debt to the extent such debt is (i) non-recourse to Borrower and its Subsidiaries or (ii) secured by real property (but including the amount by which the debt exceeds the value of the real property)), plus (b) the face amount of all undrawn Performance Letters of Credit, in each case issued for the account of, or guaranteed by, Borrower or any of its Subsidiaries (other than Excluded Subsidiaries).

 

-15-

“ Solvent ” means, as to a Person, that (a) the aggregate fair market value of such Person’s assets exceeds its liabilities (whether contingent, subordinated, unmatured, unliquidated, or otherwise), (b) such Person has not incurred debts beyond such Person’s ability to pay such debts as they mature (taking into account all reasonably anticipated financing and refinancing proceeds), and (c) such Person does not have unreasonably small capital to conduct such Person’s businesses. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability discounted to present value at rates believed to be reasonable by such Person.

 

“ Special Circumstance ” means the adoption of any Law or interpretation, or any change therein or thereof, or any change in the interpretation, administration or application thereof by any Governmental Authority, central bank or comparable authority, or compliance by Lenders or their Eurodollar Lending Offices with any request or directive (whether or not having the force of Law) of any Governmental Authority, central bank, or comparable authority, or the occurrence of circumstances affecting the applicable London interbank eurodollar market generally which are beyond the reasonable control of Lenders.

 

“ Subordinated Debt ” means: (a) Borrower’s 9  ¹ / 4 % Senior Subordinated Notes due 2012; and (b) such indebtedness of Borrower that is subordinated to the Obligations pursuant to terms and conditions approved in writing by the Majority Lenders, and as to which Administrative Agent has received a legal opinion, in form and substance reasonably satisfactory to Administrative Agent, confirming the subordinate status of such indebtedness in relation to the Obligations.

 

“ Subsequent Lender ” has the meaning set forth in Section 3.10(b) .

 

“ Subsidiary ” of a Person means a corporation, partnership, joint venture, limited liability company, or other business entity (except for Persons which would not be considered a Subsidiary of such Person but for the application of FASB Interpretation No. 46 or EITF 04-5 issued by the Financial Accounting Standards Board and the Emerging Issues Task Force, as such interpretations or pronouncements may be amended or modified from time to time) (a) of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned by such Person, or (b) (i) the management of which is controlled, directly, or indirectly through one or more intermediaries, or both, by such Person, and (ii) the results of operations of which are required under GAAP to be consolidated with the results of such Person. Unless otherwise specified, all references herein to a “ Subsidiary ” or to “ Subsidiaries ” shall refer to a Subsidiary or Subsidiaries of Borrower.

 

“ Subsidiary Letters of Credit ” has the meaning set forth in Section 3.9(e).

 

“ Swing Line Advances ” means Borrowings initially funded by Swing Line Lender in the manner provided in Section 3.1(h) .

 

“ Swing Line Lender ” means Bank of America in its capacity as provider of Swing Line Advances, or any successor swing line lender hereunder.

 

-16-

“ Swing Line Sublimit ” means an amount equal to $75,000,000. The Swing Line Sublimit is part of, and not in addition to, the Total Aggregate Commitment.

 

“ Syndication Agent ” means the Lender or Lenders which is designated in writing by Administrative Agent to serve as Syndication Agent hereunder (subject to Section 10.13 ).

 

“ Taxes ” has the meaning set forth in Section 4.4(a) .

 

“ Temporary Cash Investments ” means: (a) readily marketable, direct, full faith, and credit obligations of the United States of America, or obligations guaranteed by the full faith and credit of the United States of America, maturing within not more than one (1) year from the date of acquisition; (b) short term certificates of deposit and time deposits, which mature within one (1) year from the date of issuance and which are at a Lender, are at a domestic commercial bank having capital and surplus in excess of $100,000,000, or are fully insured by the Federal Deposit Insurance Corporation; (c) commercial paper or master notes maturing in 365 days or less from the date of issuance and rated either “ P-1 ” by Moody’s, or “ A-1 ” by S&P); (d) debt instruments of a domestic issuer which mature in one (1) year or less and which are rated “ A ” or better by Moody’s or S&P on the date of acquisition of such investment; (e) demand deposit accounts which are maintained in the ordinary course of business; (f) short term tax exempt securities including municipal notes, commercial paper, auction rate floaters, and floating rate notes rated either “ P-1 ” by Moodys or “ A-1 ” by S&P; (g) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within not more than one (1) year from the date of acquisition thereof and, at the time of acquisition, having one (1) of the two (2) highest ratings obtainable from any two of S&P, Moody’s, or Fitch (or, if at any time no two (2) of the foregoing shall be rating such obligations, then from such other nationally recognized rating services acceptable to Administrative Agent); (h) domestic corporate bonds, other than domestic corporate bonds issued by Borrower or any of its Affiliates, maturing no more than two (2) years after the date of acquisition thereof and, at the time of acquisition, having a rating of at least A or the equivalent from any two (2) of S&P, Moody’s, or Fitch (or, if at any time no two (2) of the foregoing shall be rating such obligations, then from such other nationally recognized rating services acceptable to Administrative Agent); and (i) shares of money market, mutual, or similar funds which invest primarily in securities of the type described in (a) - (h) above.

 

“ Total Aggregate Commitment ” means the total aggregate combined Commitments of Lenders, as increased as provided in Section 3.10 or decreased as provided in Section 4.16 or Section 4.17 .

 

“ Total Leverage Ratio” means, as of any date, the ratio of (a) Combined Total Home Building Debt to (b) Adjusted Consolidated Tangible Net Worth.

 

“ Unencumbered Real Estate Inventory ” means Real Estate Inventory which is not subject to or encumbered by any deed of trust, mortgage, judgment lien, attachment lien, or any other lien (other than liens which have been bonded around so as to remove such liens as encumbrances against the Real Estate Inventory in a manner satisfactory to Administrative Agent and its legal counsel, or liens which are permitted under Section 8.11(b) , (c) , (j) , (l) , or (n) ).

 

-17-

“ Unentitled Land ” means all land owned by Borrower and its Eligible Subsidiaries which is not Entitled Land.

 

“ Unit ” means single family residential housing units owned by Borrower or any Eligible Subsidiary that is a Guarantor.

 

“ Units Under Construction ” means Units where on-site construction has commenced as evidenced by the trenching of foundations for such Units.

 

“ Unreimbursed Amount ” has the meaning set forth in Section 3.9(g)(i) .

 

“Unsold Land” means the sum of all unsold (a) Finished Lots, (b) Lots Under Development, (c) Entitled Land, and (d) Unentitled Land.

 

“ Voting Stock ” means any class or classes of securities having voting power to elect the directors of a corporation.

 

“ Wholly-Owned Subsidiary ” means a Subsidiary, one hundred percent (100%) of the capital stock of which is owned by Borrower and its wholly-owned Subsidiaries.

 

1.2 Number and Gender of Words; Other References . Unless otherwise specified in the Loan Documents, (a) where appropriate, the singular includes the plural and vice versa , and words of any gender include each other gender, (b) heading and caption references may not be construed in interpreting provisions, (c) monetary references are to currency of the United States of America, (d) section, paragraph, annex, schedule, exhibit, and similar references are to the particular Loan Document in which they are used, (e) references to “ telecopy ,” “ facsimile ,” “ fax ,” or similar terms are to facsimile or telecopy transmissions, (f) references to “ including ” mean including without limiting the generality of any description preceding or following that word, (g) the rule of construction that references to general items that follow references to specific items are limited to the same type or character of those specific items is not applicable in the Loan Documents, (h) references to any Person include that Person’s heirs, personal representatives, successors, trustees, receivers, and permitted assigns, (i) references to any Law include every amendment or supplement to it, rule and regulation adopted under it, and successor or replacement for it, and (j) references to any Loan Document or other document include every renewal, extension, and restatement of it, amendment and supplement to it, and replacement or substitution for it.

 

1.3 Accounting Terms .

 

(a) All accounting terms not specifically defined herein shall be construed in conformity with, and all financial data required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, as in effect from time to time, applied in a manner consistent with that used in preparing the Borrower’s financial statements described in Section 7.5 .

 

(b) Notwithstanding Section 1.3(a) , if at any time any change in GAAP or in any SEC rules and regulations (or the application of such rules and regulations to Borrower) would affect the computation of any financial ratio, covenant, or requirement set forth in any Loan Document, and either Borrower or the Majority Lenders shall so request, then Administrative Agent, Lenders and

 

-18-

Borrower shall negotiate in good faith to amend such ratio, covenant, or requirement to preserve the original intent thereof in light of such change (subject to the approval of the Majority Lenders); provided that until so amended (i) such ratio, covenant, or requirement shall continue to be computed in accordance with GAAP without giving effect to such change therein, and (ii) Borrower shall provide to Administrative Agent and Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change.

 

1.4 Exhibits . All exhibits to this Agreement, either as now existing or as the same may from time to time be supplemented, modified, or amended, are incorporated herein by this reference.

 

1.5 Time References . Unless otherwise specified, all references herein to times of day shall be references to Chicago, Illinois time (daylight or standard, as applicable).

 

1.6 Letter of Credit Amounts . Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit or any documents related thereto, whether or not such maximum face amount is in effect at such time; provided that, in the case of any permanent reduction of the amount available under any Letter of Credit, references to the amount of such Letter of Credit shall be deemed to mean the amount available thereunder after giving effect to any such permanent reduction.

 

ARTICLE 2: RECITALS .

 

This Agreement is made with reference to the following facts:

 

(a) Borrower is primarily engaged in the business of developing residential single-family housing projects.

 

(b) Borrower has applied to Lenders for the Loans to finance its homebuilding operations and acquisitions in the United States of America and for working capital needs and general corporate purposes.

 

(c) Lenders are willing to make the Loans to Borrower on the terms and conditions set forth in this Agreement and in the other Loan Documents.

 

ARTICLE

3: BORROWING PROCEDURES, BORROWING BASE, LETTER OF CREDIT SUBLIMIT, AND POSSIBLE INCREASE IN TOTAL AGGREGATE COMMITMENT .

 

3.1 Disbursement of Loan Proceeds .

 

(a) Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from the Closing Date through the Business Day immediately preceding the Maturity Date, each Lender severally and not jointly agrees to make its Pro Rata Share of Loans to Borrower in such amounts as Borrower may request that do not exceed in the aggregate at any one time outstanding, the Commitment of such Lender ( less such Lender’s Pro Rata Share of all L/C

 

-19-

Obligations, if any). Subject to the limitations set forth herein, Borrower may borrow, repay, and reborrow under each Lender’s Commitment without premium or penalty. In no event shall Lenders be obligated to make Loans to Borrower at any time if, after giving effect to such Loans, the provisions of Section 3.6 would be violated.

 

(b) Unless Administrative Agent otherwise consents, the aggregate amount of each Eurodollar Borrowing shall be in an integral multiple of $1,000,000, but not less than $5,000,000, the aggregate amount of each Reference Rate Borrowing (other than Swing Line Advances or conversions of Swing Line Advances pursuant to Section 3.1(h)(iv) ) shall be in an integral multiple of $100,000, but not less than $500,000, and the aggregate amount of each Swing Line Advance shall be in an integral multiple of $100,000.

 

(c) The Loans made by Lenders pursuant to this Agreement shall be evidenced by each Note.

 

(d) A Request for Borrowing shall be irrevocable upon receipt by Administrative Agent. Administrative Agent shall not be bound by any preliminary information that it may give Borrower concerning a particular Eurodollar Rate before it delivers the binding Eurodollar Rate notice in accordance with Section 3.3(b) .

 

(e) Unless Administrative Agent otherwise consents, no more than ten (10) Eurodollar Borrowings in the aggregate shall be outstanding at any one time; provided, however , up to twelve (12) Eurodollar Borrowings in the aggregate may be outstanding if Borrower pays to Administrative Agent an additional fee of $250 per Eurodollar Borrowing with each Request for Borrowing after the tenth (10th) such request.

 

(f) Administrative Agent will notify each Lender of its receipt of a Request for Borrowing and of the amount of such Lender’s Pro Rata Share of that Borrowing by 1:00 p.m. on the date of timely receipt of a Request for Borrowing by Borrower.

 

(g) Each Lender will make the amount of its Pro Rata Share of each Borrowing available to Administrative Agent for the account of Borrower at Administrative Agent’s payment office (described on the signature page hereof) by 1:00 p.m. on the date of such Borrowing requested by Borrower in funds immediately available to Administrative Agent. Subject to the provisions of Article 6 and Section 3.7 , the proceeds of all such Loans will then be made available to Borrower by Administrative Agent by wire transfer in accordance with written instructions provided to Administrative Agent by Borrower of like funds as received by Administrative Agent.

 

(h) The following procedures shall apply to Swing Line Advances:

 

(i) Not later than 3:30 p.m. on the Business Day on which a proposed Swing Line Advance is to be made, Swing Line Lender must have received in writing a request that a Swing Line Advance be made on that Business Day, stating that such Advance shall be a Swing Line Advance, and stating the amount of the requested Swing Line Advance.

 

(ii) The obligation of Swing Line Lender to make any Swing Line Advances is subject to the conditions precedent in Section 6.2 . Unless Swing Line Lender has received

 

-20-

notice (by telephone or in writing) from Administrative Agent (including at the request of any Lender) prior to 4:00 p.m. on the date of the proposed Swing Line Advance that one or more of the applicable conditions specified in Article 6 is not then satisfied, then, subject to the terms and conditions hereof, Swing Line Lender shall credit to the Account, from Swing Line Lender’s funds, the amount of the requested Swing Line Advance; provided, however , that after giving effect to any Swing Line Advance, (A) the aggregate amount of all Swing Line Advances does not exceed the Swing Line Sublimit, (B) the aggregate outstanding amount of Loans plus the aggregate outstanding L/C Obligations shall not exceed the Total Aggregate Commitment, and (C) the aggregate outstanding amount of the Loans of any Lender, plus such Lender’s Pro Rata Share of the aggregate outstanding amount of all L/C Obligations, plus such Lender’s Pro Rata Share of the aggregate outstanding amount of all Swing Line Advances shall not exceed such Lender’s Commitment; and provided, further, that Borrower shall not use the proceeds of any Swing Line Advance to refinance any outstanding Swing Line Advance.

 

(iii) On or before 11:00 a.m. on the second (2 ^nd ) Business Day following the Business Day on which a Swing Line Advance is made, Swing Line Lender shall request, on behalf of Borrower (which hereby irrevocably authorizes Swing Line Lender to so request on its behalf), that Lenders make a Reference Rate Borrowing in the amount of such Swing Line Advance.

 

(iv) Each Lender shall deliver to Administrative Agent (for the benefit of Swing Line Lender) before 1:00 p.m. on the Business Day following the Business Day on which notice has been sent to such Lender under Section 3.1(h)(iii) immediately available funds in an amount equal to such Lender’s Pro Rata Share of such Reference Rate Borrowing. Administrative Agent shall pay all such amounts received to Swing Line Lender, which shall immediately apply such amounts to such Swing Line Advance. Except to the extent expressly set forth herein, the obligation of each Lender to make disbursements to Administrative Agent pursuant to this Section 3.1(h)(iv) shall be absolute and unconditional.

 

(v) If for any reason any Swing Line Advance cannot be refinanced by a Reference Rate Borrowing in accordance with Section 3.1(h)(iv) , the request for Reference Rate Borrowing submitted by Swing Line Lender as set forth herein shall be deemed to be a request by Swing Line Lender that each of the Lenders fund its risk participation in the relevant Swing Line Advance and each Lender’s payment to Administrative Agent for the account of Swing Line Lender pursuant to Section 3.1(h)(iii) shall be deemed payment in respect of such participation. In such event, Swing Line Lender shall be deemed irrevocably and unconditionally to have sold and transferred to each Lender without recourse and, each Lender shall have deemed to have irrevocably and unconditionally purchased and received, an undivided interest and participation, to the extent of such Lender’s Pro Rata Share, in all outstanding Swing Line Advances. Each Lender shall promptly (and in any event within two (2) Business Days) pay to Administrative Agent (for the benefit of Swing Line Lender) in immediately available funds an amount equal to such Lender’s Pro Rata Share of the outstanding principal amount of such Swing Line Advances. Administrative Agent shall pay all amounts received to Swing Line Lender, which shall apply such amounts to such Swing Line Advances. Any amount payable to Administrative Agent (for the benefit of Swing Line Lender) pursuant to this Section 3.1(h)(v) and not paid within two (2) Business Days of the

 

-21-

day on which notice of such payment received from Administrative Agent shall bear interest until paid at the Federal Funds Rate. If Lenders make any payment in respect of Swing Line Advances as contemplated by this Section 3.1(h)(v) and thereafter Administrative Agent or Swing Line Lender receives a payment on account of any such Advance, then Administrative Agent or Swing Line Lender, as appropriate, shall promptly pay to each Lender which funded its participation therein an amount equal to such Lender’s Pro Rata Share thereof. The obligation of each Lender to make payments under this Section 3.1(h)(v) shall be unconditional and irrevocable and shall be made under all circumstances. If any payment received on account of any Swing Line Advance and distributed to a Lender as a participant under this Section 3.1(h)(v) is thereafter recovered from Administrative Agent or Swing Line Lender in connection with any bankruptcy or insolvency proceeding relating to Borrower or otherwise, then each Lender which received such distribution shall, upon demand by Administrative Agent, repay to Administrative Agent or Swing Line Lender, as applicable, such Lender’s Pro Rata Share of the amount so recovered together with an amount equal to such Lender’s Pro Rata Share (according to the proportion of (A) the total of such Lender’s required repayment to (B) the total amount so recovered) of any interest or other amount paid or payable by Administrative Agent or Swing Line Lender in respect of the total amount so recovered.

 

(vi) Swing Line Lender shall not be obligated to make any Swing Line Advance pursuant to this Section 3.1(h) if the making of such Swing Line Advance would result in an aggregate amount of Swing Line Advances which are outstanding and not reimbursed by Lenders pursuant to Section 3.1(h)(iv) in excess of the Swing Line Sublimit. Swing Line Advances shall be considered Borrowings for all purposes hereunder (including conditions to disbursement but excluding the notice requirement of Section 3.2 ), subject only to the special reimbursement obligations of Lenders pursuant to this Section 3.1(h) . If Swing Line Lender is excused from its obligation to make a requested Swing Line Advance by this Section 3.1(h)(vi) , then Borrower shall still be entitled to obtain the requested Borrowing pursuant to the other provisions of Article 3 , subject to the conditions applicable to such Borrowings.

 

3.2 Reference Rate Borrowings . All Loans shall at all times constitute Reference Rate Borrowings unless properly designated or redesignated as Eurodollar Borrowings pursuant to Sections 3.3 or 3.4 . Each request by Borrower for a new Reference Rate Borrowing (except for Swing Line Advances) shall be made pursuant to a Request for Borrowing received by Administrative Agent, at Administrative Agent’s Lending Office, not later than 12:00 p.m. at least one (1) Business Day prior to the date the Reference Rate Borrowing is to be funded to Borrower. Administrative Agent will notify each Lender of its receipt of a Request for Borrowing in accordance with Section 3.1(f) .

 

3.3 Eurodollar Borrowing .

 

(a) Each request by Borrower for a Eurodollar Borrowing shall be made pursuant to a Request for Borrowing received by Administrative Agent, at Administrative Agent’s Lending Office, not later than 12:00 p.m. at least three (3) Business Days before the first (1 ^st ) day of the applicable Interest Period. Administrative Agent will notify each Lender of its receipt of a Request for Borrowing in accordance with Section 3.1(f) .

 

-22-

(b) At or about 12:00 p.m. two (2) Business Days prior to the first (1 ^st ) day of the applicable Interest Period, Administrative Agent shall determine the applicable Eurodollar Rate (which determination shall be conclusive in the absence of manifest error) and shall promptly give notice of the same to Borrower and Lenders by telephone or telecopier.

 

(c) Upon fulfillment of the applicable conditions set forth in Article 6 , a Eurodollar Borrowing shall become effective on the first (1 ^st ) day of the applicable Interest Period.

 

(d) Administrative Agent in its sole discretion may require Borrower to request any Eurodollar Borrowing of $100,000,000 or more, or any redesignation of a Reference Rate Borrowing of $100,000,000 or more as a Eurodollar Borrowing, at a time or on a day which is one (1) Business Day earlier than the deadline stated above (or for redesignations of Reference Rate Borrowings, stated in Section 3.4 ) for making such a request.

 

(e) Nothing contained herein shall require Lenders to fund any Eurodollar Borrowing in the London interbank eurodollar market.

 

3.4 Redesignation of Borrowings .

 

(a) If any Eurodollar Borrowing is not repaid on the last day of the applicable Interest Period, then such Borrowing automatically shall be redesignated as a Reference Rate Borrowing on such date.

 

(b) Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from the Closing Date until one (1) month preceding the Maturity Date, Borrower may request that all or a portion of outstanding Reference Rate Borrowings be redesignated as a Eurodollar Borrowing; provided that the Interest Period for such Eurodollar Borrowing shall end on or before the Maturity Date.

 

(c) Each redesignation of all or a portion of outstanding Reference Rate Borrowings as a Eurodollar Borrowing shall be made pursuant to a written Request for Redesignation of Borrowing. Not later than 12:00 p.m. at least three (3) Business Days prior to the first (1 ^st ) day of the applicable Interest Period, Administrative Agent shall have received, at Administrative Agent’s Lending Office, a properly completed Request for Redesignation of Borrowing specifying (i) the requested date of redesignation, (ii) the requested amount of Reference Rate Borrowings to be redesignated as a Eurodollar Borrowing, and (iii) the requested Interest Period. Administrative Agent may, in its sole and absolute discretion, permit a Request for Redesignation of Borrowing to be made by telecopier or by telephone (with confirmation sent promptly by telecopier) by Borrower.

 

(d) Administrative Agent will notify each Lender of its receipt of a Request for Redesignation by 2:00 p.m. on the date of timely receipt of a Request for Redesignation from Borrower. All redesignations shall be made ratably according to the respective outstanding principal amount of the Loans with respect to which the Request for Redesignation was given is then held by each Lender.

 

-23-

(e) Unless Administrative Agent otherwise consents, the amount of Reference Rate Borrowings to be redesignated as a Eurodollar Borrowing shall be an integral multiple of $1,000,000, but not less than $5,000,000.

 

(f) With respect to any redesignation of Reference Rate Borrowing as a Eurodollar Borrowing, at or about 12:00 p.m. two (2) Business Days prior to the first (1 ^st ) day of the applicable Interest Period, Administrative Agent shall determine the applicable Eurodollar Rate (which determination shall be conclusive in the absence of manifest error) and shall promptly give notice of the same to Borrower and Lenders by telephone or telecopier.

 

(g) Upon fulfillment of the applicable conditions set forth in this Agreement, the redesignation of all or a portion of outstanding Reference Rate Borrowings as a Eurodollar Borrowing shall become effective on the first (1 ^st ) day of the applicable Interest Period.

 

(h) A Request for Redesignation of Borrowing shall be irrevocable upon receipt by Administrative Agent.

 

(i) Nothing contained herein shall require Lenders to fund any Eurodollar Borrowing resulting from redesignation of all or a portion of any of the Reference Rate Borrowings in the London interbank eurodollar market.

 

(j) Notwithstanding anything herein to the contrary, unless all of Lenders otherwise agree, during the existence of a Default or an Event of Default, (i) Borrower may not elect to have a Loan converted into a Eurodollar Borrowing and (ii) each Eurodollar Borrowing shall, on the last day of its respective Interest Period, be redesignated as a Reference Rate Borrowing.

 

3.5 Calculation of Borrowing Base . The following provisions in this Section 3.5 shall apply at all times in which an Investment Grade Rating does not exist.

 

(a) Borrowing Base Certificate; Approval . The Borrowing Base shall be calculated at the times and in the manner set forth in this Section 3.5(a) :

 

(i) Within forty-five (45) days after the end of each calendar quarter, and at such other times as the Majority Lenders may reasonably require (provided that such calculation is to be made as of the last day of a calendar month), Borrower shall provide Administrative Agent with a Borrowing Base Certificate (and Administrative Agent will promptly forward to each Lender) showing Borrower’s calculations of the components of the Borrowing Base and such data supporting such calculations as the Majority Lenders may require. The Majority Lenders shall have a period of thirty (30) days following receipt of a Borrowing Base Certificate to notify Administrative Agent (who shall notify Borrower) of the Majority Lenders’ approval or disapproval thereof. Failure of the Majority Lenders to so notify Administrative Agent and Administrative Agent to so notify Borrower within such thirty (30) day period shall be deemed approval and such Borrowing Base as set forth in such Borrowing Base Certificate shall be effective as of the date approved (or deemed approved) by the Majority Lenders. The amount so approved (or deemed approved) shall constitute the Borrowing Base until such time as the Borrowing Base is redetermined in accordance with this Section 3.5(a) .

 

-24-

(ii) In the event that Administrative Agent (as requested by the Majority Lenders) timely notifies Borrower of disapproval of a Borrowing Base Certificate, then Administrative Agent shall, at the same time, notify Borrower in writing of the amount of the Borrowing Base as reasonably determined by the Majority Lenders and the basis of such determination, and the effective date thereof (which shall be the date of the giving of such notice by Administrative Agent), and such amount shall thereupon and thereafter constitute the Borrowing Base which shall remain in effect until such time as the Borrowing Base is redetermined in accordance with this Section 3.5(a) . The Majority Lenders and Borrower shall each cooperate in good faith with the other in the calculation of the Borrowing Base in circumstances where the Majority Lenders disapprove a Borrowing Base Certificate prepared by Borrower.

 

(iii) Each determination of the Borrowing Base in accordance with this Section 3.5(a) shall be binding and conclusive upon the parties hereto, and provided that the Majority Lenders are not bound to rely on information and figures provided by Borrower if the Majority Lenders determine in good faith that it would be inappropriate to do so. Nothing contained herein shall be deemed to restrict Borrower from submitting additional Borrowing Base Certificates to Administrative Agent for the Majority Lenders’ approval at times other than those required hereunder.

 

(b) Amount of Borrowing Base . As used herein in the Agreement, the term “ Borrowing Base ” shall have the meaning set forth in this Section 3.5(b) :

 

(i) Except as set forth in Sections 3.5(b)(ii), (iii), and (iv) , the Borrowing Base shall consist of the Dollar amount equal to the sum of the following Unencumbered Real Estate Inventory owned by Borrower or any Eligible Subsidiary that is a Guarantor:

 

(A) Entitled Land . Fifty percent (50%) of the GAAP Value of all Entitled Land (subject to the twenty percent (20%) limitation specified in Section 3.5(b)(iii) ); plus

 

(B) Lots Under Development . Sixty-five percent (65%) of the GAAP Value of all Lots Under Development; plus

 

(C) Units Under Construction and Completed Units . Ninety percent (90%) of the GAAP Value of all Units Under Construction and Completed Units (subject to adjustment for Completed Units as set forth in Section 3.5(b)(ii) ); plus

 

(D) Escrow Proceeds Receivable . One hundred percent (100%) of the amount of Escrow Proceeds Receivable.

 

(ii) Advance rates for Completed Units shall decrease as follows with the passage of time following the dates such Units become Completed Units: (A) 180 days following the date such Units become Completed Units (other than with respect to Model Units, as to which clause (C) shall apply) the applicable advance rate shall decrease from ninety percent (90%) (as specified in Section 3.5(b)(i)(C) above) to fifty percent (50%); (B) 360 days following the date that such Units become Completed Units (other than with respect to Model Units, as to

 

-25-

which clause (C) shall apply) the applicable advance rate shall decrease from fifty percent (50%) to zero percent (0%) (i.e., no value shall be attributed to the Borrowing Base); and (C) with respect to Model Units, 180 days following the sale of the last production Unit in the applicable project relating to such Model Unit, the applicable advance rate for such Model Units shall decrease from ninety percent (90%) (as specified in Section 3.5(b)(i)(C) above) to zero percent (0%) (i.e., no value shall be attributed to the Borrowing Base).

 

(iii) Anything in this Agreement to the contrary notwithstanding, in the event that more than twenty percent (20%) of the Borrowing Base is attributable to Entitled Land, then any Entitled Land in excess of such twenty percent (20%) limitation shall have a zero percent (0%) advance rate (i.e., shall add no value to the Borrowing Base).

 

(iv) Only Real Estate Inventory which is Unencumbered Real Estate Inventory may be added to the Borrowing Base. Any Real Estate Inventory that is not Unencumbered Real Estate Inventory shall have no value for purposes of the Borrowing Base (i.e., a zero percent (0%) advance rate). Furthermore, Unentitled Land shall have no value for purposes of the Borrowing Base (i.e., a zero percent (0%) advance rate). Once Units or any other Real Estate Inventory are sold and conveyed to a buyer, or otherwise cease to be owned by Borrower (or any Eligible Subsidiary that is a Guarantor), the applicable advance rate shall decrease to zero percent (0%), and Borrower shall not be entitled to have any value for such assets attributed to the Borrowing Base. Any Unencumbered Real Estate Inventory that is subject to a Profit and Participation Agreement shall have no value for purposes of the Borrowing Base (i.e., a zero percent (0%) advance rate) if (A) such Profit and Participation Agreement is not on market terms, as determined in the reasonable discretion of Administrative Agent, or (B) any dispute exists between the parties thereto with respect to the terms of such Profit and Participation Agreement that is in arbitration or litigation.

 

3.6 Borrowing Base . The sum of the aggregate principal amount at any time outstanding under the Loans plus the L/C Obligations shall not at any time exceed (a) at any time in which an Investment Grade Rating exists, the Total Aggregate Commitment or (b) at any time in which an Investment Grade Rating does not exist, the lesser of (i) the Total Aggregate Commitment, or (ii) the Borrowing Base less Senior Unsecured Home Building Debt (exclusive of the outstanding amount of the Loans and L/C Obligations).

 

3.7 Payments by Lenders to Administrative Agent .

 

(a) Unless Administrative Agent receives notice from a Lender on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least one (1) Business Day prior to the date of such Borrowing, that such Lender will not make available as and when required hereunder to Administrative Agent for the account of Borrower the amount of that Lender’s Pro Rata Share of the Borrowing, Administrative Agent may assume that each Lender has made such amount available to Administrative Agent in immediately available funds on the date of Borrowing and Administrative Agent may (but shall not be so required), in reliance upon such assumption, make available to Borrower on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to Administrative Agent in immediately available funds as and when required hereunder, that Lender shall on the Business Day following such date of Borrowing make such amount available to Administrative Agent, together with interest at the Federal Funds Rate for each day during

 

-26-

such period. A notice from Administrative Agent submitted to any Lender with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, then such payment to Administrative Agent shall constitute such Lender’s Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to Administrative Agent on the Business Day following the date of Borrowing, then Administrative Agent will notify Borrower of such failure to fund and, upon demand by Administrative Agent, Borrower shall pay such amount to Administrative Agent for Administrative Agent’s account, together with accrued interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing.

 

(b) The obligations of the Lenders hereunder to make Loans, to fund participations in Letters of Credit and Swing Line Advances and to make payments pursuant to Section 10.7 are several and not joint. The failure of any Lender to make any Loan on any date of Borrowing shall not relieve any other Lender of any obligation hereunder to make a Loan on such date of Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on any date of Borrowing.

 

3.8 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Obligations made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share, such Lender shall immediately (a) notify Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Obligations made by them as shall be necessary to cause such purchasing Lender to share the excess payment pro rata with each of them; provided, however , that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 11.7 ) with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation. Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 3.8 and will in each case notify Lenders following any such purchases or repayments.

 

3.9 Letter of Credit Sublimit .

 

(a) Amounts and Terms of Letters of Credit . During the period from the date of this Agreement to, but excluding, the Maturity Date, and subject to the terms and conditions of this Agreement, upon Borrower’s request pursuant to Section 3.9(b) , an Issuing Bank shall issue one or more Financial Letters of Credit or Performance Letters of Credit (each, a “ Letter of Credit ,” and collectively, the “ Letters of Credit ”) for the account of Borrower or the account of a Letter of Credit Subsidiary; provided that no Issuing Bank shall be obligated to issue any Letter of Credit if, after giving effect thereto, (i) the L/C Obligations would exceed the L/C Commitment, or (ii) the total aggregate outstanding Loans plus the L/C Obligations would exceed the Total Aggregate Commitment, or (iii) at all times in which an Investment Grade Rating does not exist, the Senior

 

-27-

Unsecured Home Building Debt would exceed the Borrowing Base, or (iv) the issuance of such Letter of Credit would violate one or more policies of such Issuing Bank. All Letters of Credit shall be on the applicable Issuing Bank’s standard forms of letters of credit at the time of issuance.

 

(b) Request for Credit . Borrower, on or after the date of this Agreement, shall give an Issuing Bank notice of its request for the issuance of a Letter of Credit by delivering to such Issuing Bank (with a copy to Administrative Agent) (i) a Request for Letter of Credit and (ii) a duly executed and completed L/C Application on such Issuing Bank’s then current form (herein, an “ L/C Application ”) not later than 11:00 a.m. at least four (4) Business Days prior to the proposed issuance date. Such Request for Letter of Credit shall specify: (i) the date on which the issuance of Letter of Credit is requested to be made (which day shall be a Business Day); and (ii) the amount of the Letter of Credit.

 

(c) Fees . For each Letter of Credit issued by an Issuing Bank (and upon any renewal thereof), Borrower shall pay (i) to Administrative Agent, for the account of each Lender in accordance with its Pro Rata Share, from Borrower’s own funds a fee equal to the Applicable Margin for Eurodollar Borrowings (based on a 360 day year) times the daily maximum amount available to be drawn under such Letter of Credit (the “ Letter of Credit Commission Fees ”), and (ii) directly to the applicable Issuing Bank for its own account, from Borrower’s own funds a fee equal to the greater of (A) .125% per annum (based on a 360-day year) times the daily maximum amount available to be drawn under such Letter of Credit, and (B) $250 per annum (the “ Letter of Credit Fronting Fees ”). The Letter of Credit Commission Fees and the Letter of Credit Fronting Fees payable under clauses (i) and (ii) above shall be payable on (x) the eighth (8 ^th ) day of each quarter for fees accrued through the last day of the preceding quarter and (y) on the Maturity Date; provided, however, that with respect to the Letter of Credit Fronting Fees, any Issuing Bank may, at its option, require that the Letter of Credit Fronting Fees be paid quarterly in advance. In addition, Borrower shall pay directly to the applicable Issuing Bank for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the applicable Issuing Bank relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

 

(d) Conditions Precedent to Issuance of Letters of Credit . No Issuing Bank shall issue, increase, or renew any Letter of Credit requested by Borrower unless the following conditions precedent have been satisfied:

 

(i) Conditions to Borrowings shall be Satisfied . Each of the conditions specified in Sections 6.1 and 6.2 to Borrowings shall also be applicable as conditions precedent to the issuance, increase, amendment, or renewal of any Letter of Credit.

 

(ii) L/C Application . The Issuing Bank requested to issue the Letter of Credit shall have received from Borrower, in form and substance satisfactory to such Issuing Bank, (A) a duly executed and completed L/C Application which L/C Application shall set forth, among other things, the beneficiary, the amount, and the term of the proposed Letter of Credit, and (B) a duly executed and completed Request for Letter of Credit (in the form of Exhibit H ).

 

-28-

(iii) Issuing Bank Approval . The Issuing Bank requested to issue, increase, or renew the Letter of Credit shall have determined that the amount of any requested, increased, or renewed Letter of Credit, the beneficiary thereof, and the other terms contained in the documents pertaining to such Letter of Credit are satisfactory to such Issuing Bank in the exercise of its reasonable discretion.

 

(iv) Payment of Fees . In addition to and concurrently with the payment of the fees described in Section 3.9(c) , Borrower shall pay directly to the applicable Issuing Bank its customary issuance, presentation, amendment, and other processing fees, and all other standard costs and charges of such Issuing Bank relating to letters of credit as from time to time in effect.

 

(v) Telephone Confirmation . Prior to the issuance, increase, amendment, or renewal of any Letter of Credit, the applicable Issuing Bank shall confirm by telephone or in writing with Administrative Agent that (A) Administrative Agent has received a copy of the duly executed and completed L/C Application from Borrower and, if not, the applicable Issuing Bank will provide Administrative Agent with a copy thereof and (B) following the issuance, increase, amendment, or renewal of such Letter of Credit, none of the limitations set forth in Section 3.9 would be violated and that all conditions precedent to such issuance have been satisfied.

 

(vi) Expiry Date . The expiry date of such requested Letter of Credit would not occur more than three hundred sixty-four (364) days after the Maturity Date, unless all the Lenders have approved such expiry date.

 

(vii) Order, Judgment, or Decree . No order, judgment, or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the applicable Issuing Bank from issuing such Letter of Credit, or any law applicable to such Issuing Bank or any request or directive (whether or not having the force of Law) from any Governmental Authority with jurisdiction over such Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve, or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost, or expense which was not applicable on the Closing Date and which such Issuing Bank in good faith deems material to it.

 

(viii) Violation of Law; Issuing Bank Policies . The issuance of such Letter of Credit would not (x) violate any Laws or (y) violate one or more policies of the Issuing Bank.

 

(ix) Lender Default . If a default of any Lender’s obligation to fund under Section 3.9(g)(ii) exists or any Lender is at such time a Defaulting Lender, then either (1) the applicable Issuing Bank shall have entered into satisfactory arrangements with Borrower or such Lender to eliminate such Issuing Bank’s risk with respect to such Lender or (2) after giving effect to such Letter of Credit, the total outstanding amount under the Notes plus the L/C Obligations does not exceed the Total Aggregate Commitment excluding the Commitment of such Defaulting Lender.

 

-29-

(e) Subsidiary Letters of Credit . Borrower has requested that Letters of Credit from time to time upon its request be issued by an Issuing Bank (the “ Subsidiary Letters of Credit ”) with Borrower and any one or more of Borrower’s Subsidiaries or Home Building Joint Ventures (collectively, the “ Letter of Credit Subsidiaries ”) as the “ account parties ” (which would be liable under the reimbursement agreements pertaining to such Subsidiary Letters of Credit) thereunder. Subsidiary Letters of Credit shall constitute “Letters of Credit” hereunder, and all terms and conditions specified above in this Section 3.9 with respect to Letters of Credit shall be applicable to such Subsidiary Letters of Credit. Without limiting the foregoing, any draws under such Subsidiary Letters of Credit shall constitute Loans hereunder which Borrower is obligated to repay (as more fully set forth in Section 3.9(g) ), all amounts remaining undrawn on under all such Subsidiary Letters of Credit shall constitute part of the “ L/C Obligations ,” and the fees and issuance procedures shall be as specified above. In addition to all terms and conditions specified in Section 3.9(d) above to the issuance of Letters of Credit, it shall be a condition to the issuance of any Subsidiary Letter of Credit that Borrower shall have executed the Guaranty of the Subsidiary Letters of Credit as well as such other documents as the applicable Issuing Bank and/or Administrative Agent may reasonably request (and shall have reaffirmed such guaranty from time to time upon Administrative Agent’s request). All waivers and releases made by Borrower which are set forth in the Guaranty of the Subsidiary Letters of Credit are incorporated herein by this reference and shall also be applicable to any Loans (and Borrower’s obligation to repay such Loans) made or to be made under Section 3.9(g) with respect to draws under the Subsidiary Letters of Credit.

 

(f) Existing Letters of Credit . All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date, shall be subject to and governed by the terms and conditions hereof.

 

(g) Drawings and Reimbursements; Funding of Participations .

 

(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the applicable Issuing Bank shall notify Borrower and Administrative Agent thereof. Not later than 1:00 p.m. on the date of any payment by an Issuing Bank under a Letter of Credit (each such date, an “ Honor Date ”), Borrower shall reimburse such Issuing Bank through Administrative Agent in an amount equal to the amount of such drawing; provided that if the notice of drawing described in the preceding sentence is not received by Borrower by 12:00 noon, then Borrower shall reimburse such Issuing Bank by 1:00 p.m. on the next succeeding Business Day in an amount equal to the amount of such drawing together with interest at the rate applicable to Reference Rate Borrowings. If Borrower fails to so reimburse such Issuing Bank by such time, then Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “ Unreimbursed Amount ”), and the amount of such Lender’s Pro Rata Share thereof. In such event, Borrower shall be deemed to have requested a Reference Rate Borrowing to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 3.1 for the principal amount of Reference Rate Borrowings, but subject to the amount of the unutilized portion of the Total Aggregate Commitment and the conditions set forth in Article 6 (other than the delivery of a Request for Borrowing). Any notice given by an Issuing Bank or Administrative Agent pursuant to this Section 3.9(g)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

-30-

(ii) Each Lender (including each Lender acting as an Issuing Bank) shall upon any notice pursuant to Section 3.9(g)(i) make funds available to Administrative Agent for the account of the applicable Issuing Bank at Administrative Agent’s Lending Office in an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 3:00 p.m. on the Business Day specified in such notice by Administrative Agent, whereupon, subject to the provisions of Section 3.9(g)(iii) , each Lender that so makes funds available shall be deemed to have made a Reference Rate Borrowing to Borrower in such amount. Administrative Agent shall remit the funds so received to the applicable Issuing Bank.

 

(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Reference Rate Borrowing because the conditions set forth in Article 6 cannot be satisfied or for any other reason, Borrower shall be deemed to have incurred from the applicable Issuing Bank an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate specified in Section 4.3 . In such event, each Lender’s payment to Administrative Agent for the account of the applicable Issuing Bank pursuant to Section 3.9(g)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 3.9 .

 

(iv) Until each Lender funds its Reference Rate Borrowing or L/C Advance pursuant to this Section 3.9(g) to reimburse the applicable Issuing Bank for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Pro Rata Share of such amount shall be solely for the account of the applicable Issuing Bank.

 

(v) Each Lender’s obligation to make Reference Rate Borrowings or L/C Advances to reimburse each Issuing Bank for amounts drawn under Letters of Credit, as contemplated by this Section 3.9(g) , shall be absolute and unconditional and shall not be affected by any circumstance, including: (A) any set-off, counterclaim, recoupment, defense, or other right which such Lender may have against the applicable Issuing Bank, Borrower, or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default or Event of Default; or (C) any other occurrence, event, or condition, whether or not similar to any of the foregoing; provided, however , that each Lender’s obligation to make Reference Rate Loans pursuant to this Section 3.9(g) is subject to the conditions set forth in Article 6 (other than delivery by Borrower of a Notice of Borrowing). No such making of an L/C Advance shall relieve or otherwise impair the obligation of Borrower to reimburse the applicable Issuing Bank for the amount of any payment made by the applicable Issuing Bank under any Letter of Credit, together with interest as provided herein.

 

(vi) If any Lender fails to make available to Administrative Agent for the account of the applicable Issuing Bank any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 3.9(g) by the time specified in Section 3.9(g)(ii) , the applicable Issuing Bank shall be entitled to recover from such Lender (acting through Administrative Agent), on demand, such amount with interest thereon for the period from the

 

-31-

date such payment is required to the date on which such payment is immediately available to the applicable Issuing Bank at a rate per annum equal to the Federal Funds Rate from time to time in effect. A certificate of the applicable Issuing Bank submitted to any Lender (through Administrative Agent) with respect to any amounts owing under this Section 3.9(g)(vi) shall be conclusive absent manifest error.

 

(h) Repayment of Participations .

 

(i) At any time after an Issuing Bank has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 3.9(g) , if Administrative Agent receives for the account of such Issuing Bank any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from Borrower or otherwise, including proceeds of cash collateral applied thereto by Administrative Agent), Administrative Agent will distribute to such Lender its Pro Rata Share thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in the same funds as those received by Administrative Agent.

 

(ii) If any payment received by Administrative Agent for the account of an Issuing Bank pursuant to Section 3.9(g)(i) is required to be returned under any of the circumstances described in Section 11.4 (including pursuant to any settlement entered into by such Issuing Bank in its discretion), each Lender shall pay to Administrative Agent for the account of such Issuing Bank its Pro Rata Share thereof on demand of Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.

 

(i) Obligations Absolute . The obligation of Borrower to reimburse each Issuing Bank for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional, and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

 

(i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;

 

(ii) the existence of any claim, counterclaim, set-off, defense, or other right that Borrower or any Letter of Credit Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the applicable Issuing Bank, or any other Person, whether in connection with this Agreement, the transactions contemplated hereby, or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

(iii) any draft, demand, certificate, or other document presented under such 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; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

 

-32-

(iv) any payment by the applicable Issuing Bank under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the applicable Issuing Bank under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver, or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or

 

(v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, Borrower or any Letter of Credit Subsidiary.

 

Borrower and each Letter of Credit Subsidiary shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with Borrower’s or any Letter of Credit Subsidiary’s instructions or other irregularity, Borrower and such Letter of Credit Subsidiary will immediately notify the applicable Issuing Bank. Borrower and each Letter of Credit Subsidiary shall be conclusively deemed to have waived any such claim against the applicable Issuing Bank and its correspondents unless such notice is given as aforesaid.

 

(j) Role of Issuing Bank . Each Lender and Borrower agree that, in paying any drawing under a Letter of Credit, no Issuing Bank shall have any responsibility to obtain any document (other than any sight draft, certificates, and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. No Issuing Bank, no Agent-Related Person, nor any of their respective correspondents, participants, or assignees shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Majority Lenders, as applicable, (ii) any action taken or omitted in the absence of gross negligence or willful misconduct, or (iii) the due execution, effectiveness, validity, or enforceability of any document or instrument related to any Letter of Credit or L/C Application. Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however , that this assumption is not intended to, and shall not, preclude Borrower’s pursuing s