Exhibit 10.1
LIMITED DURATION WAIVER AGREEMENT AND
AMENDMENT
This LIMITED DURATION WAIVER AGREEMENT AND
AMENDMENT (this “Limited Duration Waiver
Agreement” ) is dated as of January 25, 2008, and is
entered into by and among KIMBALL HILL, INC., an Illinois
corporation (the “Borrower” ), the Guarantors
(defined below), the Lenders (defined below) signatory hereto, and
HARRIS N.A., as administrative agent (in such capacity, the
“Administrative Agent” ) for the
Lenders.
RECITALS :
WHEREAS, the Borrower, the Guarantors party
thereto from time to time (the “Guarantors” ),
the Lenders party thereto from time to time (the
“Lenders” ), the Administrative Agent, Bank of
America, N.A., as the Syndication Agent, KeyBank National
Association and Wachovia Bank, National Association, as the
Co-Documentation Agents, and BMO Capital Markets and Banc of
America Securities, LLC, as the Co-Lead Arrangers and the Joint
Book Runners, have entered into that certain Amended and Restated
Credit Agreement dated as of August 10, 2007 (as amended,
restated, supplemented or otherwise modified from time to time, the
“Credit Agreement” ; each capitalized term used
herein and not otherwise defined shall have the meanings ascribed
to such term in the Credit Agreement); and
WHEREAS, attached hereto (i) as
Schedule 1 is a list of Defaults and Events of Default under
the Credit Agreement of which senior management of the Borrower has
knowledge as of the date hereof (the “Credit Agreement
Defaults” ), (ii) as Schedule 2 is a list of
all breaches and defaults of the Borrower or any of the Guarantors
that have occurred and are continuing under agreements evidencing
or securing Indebtedness for Borrowed Money (other than under the
Credit Agreement) and of which the senior management of the
Borrower has knowledge (the “Borrowed Money
Defaults” ), and (iii) as Schedule 3 is a
list of all written notices received by senior management of the
Borrower of breaches and defaults that have occurred and are
continuing of obligations of the Borrower or any of the Guarantors
under material agreements (other than agreements covered by
clauses (i) and (ii) of this paragraph) which, if not performed in
accordance with the terms thereof, could reasonably be expected to
result in a Material Adverse Effect (the “Material
Agreement Defaults” ); and
WHEREAS, the Borrower has asked the Lenders to
temporarily waive their rights, remedies and options under the
Credit Agreement as a consequence of the Credit Agreement Defaults
and to amend certain provisions of the Credit Agreement, as set
forth in this Limited Duration Waiver Agreement; and
WHEREAS, the Lenders are willing to temporarily
waive the Credit Agreement Defaults, subject to the terms and
conditions set forth in this Limited Duration Waiver
Agreement.
NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION I. DEFINITIONS
1.1. The following terms used in this Limited
Duration Waiver Agreement shall have the meanings set forth
below:
“Borrowed
Money
Defaults”
is defined in the
recitals .
“Credit Agreement
Defaults” is defined in the recitals .
“Effective
Date” is
defined in Section 6.3 hereof.
“Event of
Termination” shall mean the earlier of
(i) 5:00 p.m. (Chicago, Illinois time) on March 14,
2008 or (ii) if prior thereto, any of the following has
occurred and is continuing and the Administrative Agent, acting at
the direction of the Required Lenders, terminates the Limited
Duration Waiver Agreement by giving notice to the Borrower and the
Guarantors:
(a)
the occurrence of any
Default or Event of Default other than (i) the Credit
Agreement Defaults, (ii) the Borrowed Money Defaults or
(iii) the Material Agreement Defaults (unless, except in the
case of the First Bank and Trust revolving credit loan dated as of
February 28,2007 for the reasons set forth in Schedule
2 ), the agreement under which a Borrowed Money Defaults or a
Material Agreement Defaults exists has been accelerated or remedies
to enforce (through judicial process) the performance thereof have
been commenced against the Borrower or one or more of the
Guarantors);
(b)
the failure of the
Borrower or any of the Guarantors to comply with any term,
condition or covenant set forth in this Limited Duration Waiver
Agreement;
(c)
any representation or
warranty made by the Borrower or any of the Guarantors under this
Limited Duration Waiver Agreement shall be false or materially
misleading as of the date made or deemed remade; or
(d)
the date on which the
Borrower, the Guarantors, the Administrative Agent and the Lenders
enter into a modification of the Credit Agreement which expressly
provides for a termination of this Limited Duration Waiver
Agreement.
“Loan
Party” means the Borrower and the
Guarantors.
“Material Agreement
Defaults” is defined in the recitals .
“Termination
Date” means 5:00 p.m. (Chicago, Illinois time)
on the date upon which an Event of Termination first
occurs.
1.2. Unless the context of this Limited
Duration Waiver Agreement requires otherwise, references to the
plural include the singular, references to the singular include the
plural and the term “including” is not limiting. The
words “hereof,” “herein,”
“hereby,” “hereunder,” and similar terms in
this Limited Duration Waiver Agreement refer to this Limited
Duration Waiver Agreement
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as a whole and
not to any particular provision hereof. Section, subsection and
clause references herein are to this Limited Duration Waiver
Agreement unless otherwise specified.
SECTION 2. DEFAULTS; AND AGREEMENT TO LIMITED WAIVER
AND AUTHORIZATION
2.1. The Borrower and each of the Guarantors
acknowledge and agree that the Credit Agreement Defaults have
occurred and are continuing, and as a result thereof, the Lenders
are entitled to exercise their rights, remedies and options against
the Borrower, the Guarantors and the Collateral. The Borrower and
each of the Guarantors acknowledge and agree that the
exercise of
such rights, remedies and
options by the Lenders or the Administrative Agent on their behalf
is not subject to any offsets or defenses by the Borrower or the
Guarantors to their obligations under the Loan Documents, and that
neither the Borrower nor the Guarantors have any claims or
counterclaims against the Lenders or the Administrative Agent;
provided , however , that if permitted under
applicable law, the foregoing shall not affect the rights of third
parties that are not Affiliates of the Borrower or the Guarantors
from making derivative or independent claims against the Lenders or
the Administrative Agent on behalf of the Borrower or the
Guarantors or otherwise.
2.2. From and after the Effective Date until
the existence of an Event of Termination, the Administrative Agent
and the Lenders hereby agree to temporarily waive the Credit
Agreement Defaults, subject to the terms of this Limited Duration
Waiver Agreement. Upon the occurrence of an Event of Termination,
the limited duration waivers set forth herein and the amendments
set forth in Section 3.2 shall be void ab initio and
the Credit Agreement Defaults shall be deemed to exist from and
after January 5, 2008.
2.3. Except as expressly provided herein, the
execution and delivery of this Limited Duration Waiver Agreement
shall not: (a) constitute an extension or modification of the
Credit Agreement or the other Loan Documents; (b) extend the
terms of the Credit Agreement or the due date of any of the
Obligations; or (c) give rise to any obligation on the part of
the Administrative Agent or the Lenders to extend or modify any
term or condition of the Credit Agreement or any of the other Loan
Documents.
SECTION 3. AMENDMENTS AND MODIFICATIONS
TO THE LOAN DOCUMENTS
Notwithstanding anything to the contrary set
forth in the Credit Agreement or the other Loan Documents, the
following provisions shall apply:
3.1. From and after the Effective
Date:
(a)
The Revolving Credit
Commitments are reduced to $400.0 million.
(b)
The Borrower shall have no
right to require any Facility Increase.
3.2. From and after the Effective Date until
the Termination Date:
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(a)
All rights of the Borrower
and the Guarantors under the Loan Documents that are restricted or
prohibited during such time as a Default or Event of Default has
occurred and is continuing shall, except as expressly set forth in
this Section 3 , be restricted or prohibited as if an
Event of Default has occurred and is continuing from and after
January 5, 2008.
(b)
Except as set forth in
clause (h) below, Net Cash Proceeds of all
Dispositions shall be deposited by the Borrower into a cash
collateral account to be designated by the Administrative Agent and
under the dominion and control of the Administrative Agent and such
proceeds (or portions thereof) shall be, in the Administrative
Agent’s sole discretion, (x) made available to the
Borrower for general corporate purposes or (y) applied against
outstanding Obligations in accordance with Section 3.1 of the
Credit Agreement.
(c)
The Borrower is permitted
to obtain a Borrowing in the form of advanced Loans only from the
Effective Date and prior to an Event of Termination in the
aggregate principal amount of $10.0 million. Additional advances of
Loans in excess of $10.0 million, not to exceed an incremental $5.0
million in the aggregate shall be permitted if on or before
January 3 I, 2008 the Borrower provides to the
Administrative Agent a 13-week cash flow forecast in form
reasonably satisfactory to the Administrative Agent and such
forecast demonstrates that the Borrower has or thereafter will have
additional liquidity needs, in which case, such additional advances
of Loans will be made available to the Borrower, not to exceed an
incremental $5.0 million in the aggregate ( i.e. from the Effective Date and prior to an
Event of Termination, $15.0 million in the aggregate) (it being
understood that any portion of the Net Cash Proceeds deposited by
the Borrower in the cash collateral account referred to above that
are made available to the Borrower for the purpose set forth in
clause (x) of Section 3.2 shall not reduce
such $15.0 million aggregate amount).
(d)
No Letters of Credit in
excess of $1.0 million shall be issued or extended and no Swing
Loans shall be made (it being understood that advances of the $15.0
million aggregate amount set forth in Section 3.4 shall
be reduced by the face amount of any Letters of Credit that are
issued or extended and outstanding from and after the Effective
Date and prior to an Event of Termination, as the case may
be).
(e)
Notwithstanding the Credit
Agreement Defaults, releases under the fourth sentence of clause
(b) of Section 4.8 of the Credit Agreement may be made by
the Administrative Agent in its reasonable discretion so long as no
Default or Event of Default (other than the Credit Agreement
Defaults) have occurred and are continuing.
(f)
Clause (b) of
Section 7.1 of the Credit Agreement shall be amended to
provide that “no Default or Event of Default (other than the
Credit Agreement Defaults) shall have occurred and be continuing or
would occur as a result of such Credit Event.”
(g)
No other Indebtedness
shall be incurred by the Borrower or any of the Guarantors under
clause (b), clause (d) (unless such Indebtedness is evidenced
by one or more notes that have have been pledged to the
Administrative Agent for the benefit of the Lenders and such notes
have been delivered to the Administrative Agent), clause
(g) or clause (h) of Section 8.7 of the Credit
Agreement, and no Liens shall be granted by the Borrower with
respect thereto.
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(h)
Notwithstanding the Credit
Agreement Defaults, the restrictions in Section 8.10 shall not
apply to or operate to prevent the sales, conveyances, transfers or
Dispositions permitted by clauses (a), (c) (but only if such
Subsidiary is a Wholly-owned Subsidiary), (e), (f) (but only
as to model Housing Units), or (h) of said Section or the
mergers permitted by clause (b) of said Section (but only
if such Subsidiary is a Wholly-owned Subsidiary and it being
understood that such merger shall not extinguish the
Borrower’s and Guarantor’s obligations under the Loan
Documents); provided , however , that notwithstanding
the foregoing, all Net Proceeds received by the Borrower under
Section 1.8(b) of the Credit Agreement (other than
amounts received in connection with sales and conveyances permitted
under clause (a) of Section 8.10 of the Credit Agreement)
shall be deposited by the Borrower into the account designated by
the Administrative Agent pursuant to clause (b) of
this Section 3.2 and held and applied as set forth in
said clause (b).
(i)
The proviso in
Section 8.20 of the Credit Agreement shall be amended to add
“(other than the Credit Agreement Defaults)” after the
word “exists” in such proviso.
(j)
For the fiscal quarters
ending September 30, 2007 and December 31, 2007, the
covenant levels in clauses (a), (b), (c), (e) and (f)
of Section 8.22 of
the Credit Agreement shall be amended to be the levels for such
covenants set forth on Schedule 4 . Clause (g) of
Section 8.22 of the Credit Agreement shall be amended to
provide that the Borrower shall not, at any time, permit Liquidity
to be less than $1.0 million.
(k)
From and after the
Effective Date through, but not including, the date on which an
Event of Termination occurs, all Loans (other than existing
Eurodollar Loans until the expiration of the relevant Interest
Period) shall bear interest at the Base Rate.
(1)
Until the expiration of
the relevant interest period, the Applicable Margin with respect to
existing Eurodollar Loans shall be Level IV.
(m)
From and after
January 5, 2008, the Applicable Margin with respect to the
Commitment Fee shall be Level IV.
(n)
The Borrower shall have no
option to request that any Loans bear interest at a rate based upon
the LIBOR Index Rate, and upon the expiration of the relevant
Interest Period, all outstanding Eurodollar Loans shall
automatically be converted to Base Rate Loans (and for purposes of
Section 1.5 of the Credit Agreement, this Limited
Duration Waiver Agreement shall constitute a notice by the Borrower
that all outstanding Eurodollar Loans shall be so converted and
that this notice is acceptable to the Administrative
Agent).
(o)
Notwithstanding anything
to the contrary set forth in Footnote I of the Form of Borrowing
Base Certificate attached as Exhibit E to the Credit
Agreement, if an Appraisal has not yet been completed under clause
(b) of Section 4.7 of the Credit Agreement with respect to a
Borrowing Base Property, the valuation of such Borrowing Base
Property shall be that set forth in the most recent Borrowing Base
Certificate delivered by the Borrower until the Appraised Value for
such Borrowing Base Property is established under clause (a)
of Section 5.1 of this Limited Duration Waiver
Agreement.
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SECTION 4. REPRESENTATIONS AND
WARRANTIES
In
consideration of the limited agreement of Administrative Agent and
the Lenders to temporarily waive the Credit Agreement Defaults as
expressly set forth herein and to continue to fund the Revolving
Loans and issue and participate in Letters of Credit as set forth
in this Credit Agreement, each Loan Party hereby represents and
warrants to Administrative Agent and the Lenders as
follows:
4.1. The execution, delivery and performance of
this Limited Duration Waiver Agreement by such Loan Party are
within its power and have been duly authorized by all necessary
action, and this Limited Duration Waiver Agreement constitutes a
valid and legally binding agreement, enforceable against such Loan
Party in accordance with its terms.
4.2. All Loan Documents to which such Loan
Party is a party, including the Credit Agreement, constitute valid
and legally binding obligations of such Loan Party, enforceable
against such Loan Party in accordance with the terms thereof and
each Loan Party hereby ratifies and reaffirms its obligations under
each Loan Document which is applicable to or binding on such Loan
Party.
4.3. Except as contemplated by this Limited
Duration Waiver Agreement, neither any Loan Party nor any
Subsidiary of any Loan Party is in violation in any respect of
(a) any term of its charter, bylaws or other constitutive
documents or (b) any term in any material agreement or other
material instrument to which it is a party or by which it or any of
its property may be bound, in each case where such violation,
individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
4.4. After giving effect to the provisions of
this Limited Duration Waiver Agreement, the representations and
warranties of the Borrower contained in Section 6 of
the Credit Agreement are true and correct as though made on and as
of such date (except to the extent that such representations and
warranties relate to an earlier date, in which case they are true
and correct as of such date, and disregarding any breaches or
adverse effects arising out of the Credit Agreement Defaults,
Borrowed Money Defaults or Material Agreement Defaults or any of
the other matters expressly set forth in this Limited Duration
Waiver Agreement); provided , however , that no
Default or Event of Default exists other than the Credit Agreement
Defaults.
4.5. Attached hereto (i) as Schedule
1 is a list of the Credit Agreement Defaults of which senior
management of the Borrower has knowledge as of the date hereof,
(ii) as Schedule 2 is a list of the Borrowed Money
Defaults of which the senior management of the Borrower has
knowledge as of the date hereof, and (iii) as
Schedule 3 is a list of all Material Agreement
Defaults.
SECTION 5. COVENANTS AND
AGREEMENTS
5.1. In order to induce Administrative Agent
and the Lenders to enter into this Limited Duration Waiver
Agreement, the Borrower and each of the Guarantors covenant and
agree as follows:
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(a)
Updated Appraisals are
being obtained for each of the Borrowing Base Properties, and to
the extent that the methodology set forth in an updated Appraisal
has been approved by the Borrower and the Administrative Agent, the
Appraised Value set forth therein shall be that which is used for
the Borrowing Base Property covered thereby in the Borrowing Base
Certificate that is to be delivered from time to time after the
Effective Date by the Borrower pursuant to clause (a) of
Section 8.5 of the Credit Agreement.
(b)
On or before
January 31, 2008, the Borrower shall deliver a 13-week cash
flow forecast in form reasonably acceptable to the Administrative
Agent.
(c)
On or before
February 8, 2008, certain members of the Borrower’s
senior management and the Borrower’s advisors shall be
available for a telephone conference call to update the
Administrative Agent and the Lenders on the Borrower’s cash flows and discuss
generally the Borrower’s financial advisor’s business
plan review process.
(d)
On or before
February 29, 2008, the Borrower shall deliver to the
Administrative Agent a report on the Borrower’s business plan
in form and substance satisfactory to the Administrative
Agent.
(e)
On or about March 7,
2008, certain members of the Borrower’s senior management and
the Borrower’s financial and legal advisors shall be
available for an in-person meeting with the Lenders and the
Administrative Agent at a location designated by the Administrative
Agent in Chicago, Illinois, at which meeting the Borrower and such
advisors shall discuss the Borrower’s business plan and other
issues as the Administrative Agent and the Lenders may reasonably
request.
(f)
The Borrower shall
continue to have engaged a financial consultant approved by the
Lenders pursuant to terms reasonably acceptable to the
Administrative Agent (it being understood that
Alvarez & Marsal North America, LLC is acceptable to the
Lenders) from and after the Effective Date through and including
the date upon which an Event of Termination has
occurred.
(g)
The Borrower shall
cooperate with the Administrative Agent in its review of the Liens
on the Collateral.
(h)
The running of any time
period of statute of limitations shall be tolled during the period
commencing on the Effective Date of this Limited Duration Waiver
Agreement and ending on the Termination Date.
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(i)
The acceptance by the
Administrative Agent or any of the Lenders of any payments made by
or on behalf of any Loan Party prior to or on or after the
Termination Date, and the application of such payments by the
Administrative Agent or the Lenders, shall not in any way be
considered to be a cure of any Default or Event of Default
(including the Credit Agreement Defaults), a discharge by any of
the Loan Parties thereunder or with respect thereto, or an
estoppel, acceptance of course of conduct or further waiver
thereunder by the Lenders or the Administrative Agent on their
behalf.
SECTION 6. MISCELLANEOUS
6.1. ACKNOWLEDGMENT OF OBLIGATIONS AND
VALIDITY AND ENFORCEABILITY OF LOAN DOCUMENTS . Except as
expressly set forth herein, the Credit Agreement and other Loan
Documents shall remain in full force and effect. Each Loan Party
expressly acknowledges and agrees that:
(a)
as of January 14,
2008, the total aggregate outstanding amount of principal under the
Credit Agreement with respect to the Revolving Loans, the Swing
Loans and the Letters of Credit is $321,988,242.07 (the
“Prior Loans Principal Amount” ), and the Prior
Loans Principal Amount has accrued, and continues to accrue,
interest at the rates provided in the Credit Agreement;
(b)
the Credit Agreement, the
other Loan Documents and the Obligations under the Loan Documents,
including the Prior Loans Principal Amount, are valid and
enforceable by Administrative Agent, the L/C Issuer and the
Lenders, and each Loan Party expressly ratifies and reaffirms its
obligations under the Credit Agreement and other Loan Documents to
which it is a party, free and clear of all defenses, offsets,
counterclaims and adjustments of any kind or nature;
provided , however , that if permitted under
applicable law, the foregoing shall not affect the rights of third
parties that are not Affiliates of the Borrower or the Guarantors
from making derivative or independent claims against the Lenders or the
Administrative Agent on behalf of the Borrower or the Guarantors or
otherwise; and
(c)
Each Loan Party agrees
that it shall not dispute the validity or enforceability of the
Credit Agreement and other Loan Documents or any of its obligations
thereunder, or the validity, perfection, priority, enforceability
or extent of Administrative Agent’s Lien against any item of
Collateral. No Loan Party has any knowledge of any challenge to
Administrative Agent’s or any Lender’s claims arising
under the Loan Documents, or to the effectiveness of the Loan
Documents.
6.2. EXPENSES . All reasonable fees and
expenses of the Administrative Agent in connection with the
Defaults, Events of Default, preparation of outlines of proposed
terms and the execution and delivery of this Limited Duration
Waiver Agreement shall be paid in full promptly after submission by
the Administrative Agent of invoices (with reasonable back-up
documentation), including, without limitation, the fees, costs and
expenses of appraisers and counsel to the Administrative
Agent.
6.3. CONDITIONS PRECEDENT . This Limited
Duration Waiver Agreement shall become effective and be deemed
effective as of January 5, 2008 until the existence of an
Event of
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Termination
(the “Effective Date” ), upon the occurrence of
each of the following, to the satisfaction of Administrative Agent
(or waived by the Administrative Agent in its sole discretion) on
or before 5:00 pm (Chicago, Illinois time) on January 18,
2008:
(a)
The Administrative Agent
shall have received counterparts of this Limited Duration Waiver
Agreement, duly executed and delivered by the required parties
hereto; and
(b)
The Administrative Agent
shall have received, for the benefit of the Lenders that have
delivered their executed counterpart to this Limited Duration
Waiver Agreement on or before 5:00 pm (Chicago, Illinois time) on
January 24, 2008, in accordance with their respective
pro rata shares of the Revolving Credit Commitment
(after giving effect to the reduction thereto on the Effective
Date), a fee in the amount of twenty-five basis points times the
principal amount of such Lender’s Revolving Credit
Commitment, which fee shall be earned and due and payable on the
date hereof, and after payment, such fee shall be non-refundable;
and
(c)
The Administrative Agent
shall have received such other information and documents as
Administrative Agent may request, in form and substance reasonably
satisfactory to Administrative Agent.
6.4. AMENDMENTS . No amendment or
modification of any of the Loan Documents or the provisions of this
Limited Duration Waiver Agreement shall be effective without the
written agreement of Administrative Agent and, as applicable under
Section 13.13 of the Credit Agreement, the Lenders or
the Required Lenders, and no termination or waiver of any provision
of this Limited Duration Waiver Agreement, or consent to any
departure by any Loan Party therefrom, shall in any event be
effective without the written concurrence of Administrative Agent
and, as applicable under Section 13.13 of the Credit
Agreement, the Lenders or the Required Lenders. Any waiver or
consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
6.5. DEFAULT WAIVER . The Administrative
Agent’s and the Lenders’ failure, at any time or times
hereafter, to require strict performance by Loan Parties with any
provision or term of this Limited Duration Waiver Agreement shall
not affect or diminish any right of Administrative Agent or the
Lenders thereafter to demand st
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