Exhibit 10.1(b)

FIRST MODIFICATION OF CREDIT AGREEMENT

THIS FIRST MODIFICATION OF CREDIT AGREEMENT (this “Modification”) is made as of
the 15th day of December, 2006, by and among:  (a) KIMBALL HILL, INC., an
Illinois corporation (the “Borrower”), (b) the Guarantors party to the Credit
Agreement (as hereinafter defined), (c) the several financial institutions
signatory hereto that are party to the Credit Agreement (the “Lenders”), and (d)
HARRIS N.A., as Administrative Agent for itself and the Lenders (“Agent”).

RECITALS

WHEREAS, the Agent, the Lenders, the Borrower, the Guarantors, and certain other
agent and lender parties are party to that certain Credit Agreement, dated
December 21, 2005 (the “Credit Agreement”); and

WHEREAS, the Agent, the Lenders, the Borrowers, and the Guarantors wish to amend
and modify the Credit Agreement as set forth in this Modification;

NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

1.             Definitions.  All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto under the Credit Agreement.

2.             Section 5.1 Amendment.  Section 5.1 of the Credit Agreement is
hereby amended by adding the following defined terms:

“Global Land” means all Real Property owned by any of the Borrower or any
Subsidiary for current or future development or for the future construction of
Housing Units, excluding any subdivided portions thereof upon which construction
of a Housing Unit has commenced beyond the foundation.

“Global Land Value” means the sum of all costs incurred by the Borrower or any
Subsidiary with respect to the acquisition and development of Global Land,
excluding any marketing, corporate, general, or administrative expenses.

“Interest Incurred” means, for any period, the total interest paid or accrued by
the Borrower, the Wholly-owned Subsidiaries and the Special Project Subsidiaries
(including the interest component of any Capital Lease) as calculated in
accordance with GAAP, minus, to the extent included in the foregoing amount,
amortization of any financing fees and costs.

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3.             Section 8.22 Modification.  Section 8.22 of the Credit Agreement
is hereby amended by deleting the text thereof and inserting the following text
in lieu thereof:

(a)           Tangible Net Worth.  The Borrower shall, as of the end of each
fiscal quarter of the Borrower, maintain a Tangible Net Worth in an amount not
less than the sum of (i) $300,000,000.00 and (ii) 50% of the positive Net Income
as earned subsequent to September 30, 2006.

(b)           Leverage Ratio.  The Borrower shall not, at the end of any fiscal
quarter of the Borrower, permit the Leverage Ratio to exceed the ratios set
forth in the below table as corresponding to the fiscal quarters of the Borrower
specified therein:

Fiscal Quarter Ending

 

Maximum Leverage
Ratio

December 31, 2006

 

2.00 to 1.00

March 31, 2007

 

2.00 to 1.00

June 30, 2007 through September 30, 2008

 

1.75 to 1.00

December 31, 2008 and thereafter

 

2.50 to 1.00

 

(c)           Builder Leverage Ratio.  The Borrower shall not, at the end of any
fiscal quarter of the Borrower, permit the Builder Leverage Ratio to exceed 1.50
to 1.00.

(d)           Interest Coverage Ratio.  The Borrower shall not, at the end of
any fiscal quarter of the Borrower, permit the ratio of EBITDA to Interest
Incurred, as calculated over the preceding four fiscal quarters of the Borrower,
to be less than the ratios set forth in the below table as corresponding to the
fiscal quarters of the Borrower specified therein:

Fiscal Quarter Ending

 

Minimum Interest
Coverage Ratio

December 31, 2006

 

1.75 to 1.00

March 31, 2007

 

1.50 to 1.00

June 30, 2007

 

1.40 to 1.00

September 30, 2007

 

1.35 to 1.00

December 31, 2007

 

1.50 to 1.00

March 31, 2008

 

1.75 to 1.00

June 30, 2008 and thereafter

 

2.25 to 1.00

 

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(e)           Global Land Value to Adjusted Tangible Net Worth Ratio.  The
Borrower shall not, at the end of any fiscal quarter of the Borrower, permit the
ratio of Global Land Value to Adjusted Tangible Net Worth to be greater than
1.50 to 1.00.

4.             Ratification.  Except as modified hereby, the terms and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect, and the Borrower and the Guarantors hereby ratify the
terms and conditions thereof.

5.             No Default or Event of Default.  The Borrower and the Guarantors
reaffirm as of the date hereof, all of the covenants, representations, and
warranties contained in the Credit Agreement and the other Loan Documents.  The
Borrower and the Guarantors further warrant and represent, as of the date
hereof, the following:

(a)           The Credit Agreement and the Loan Documents are binding and
enforceable, except as enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors’ rights generally and
general principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law);

(b)           There does not exist a Default or Event of Default under the
Credit Agreement or any of the Loan Documents; and

(c)           None of the Borrower or any Guarantor has any claim, defense,
right to set-off, or counterclaim against the obligations evidenced or secured
by the Credit Agreement or any of the Loan Documents or against the Agent or the
Lenders.

6.             Successors and Assigns.  This Modification shall be binding upon
and inure to the benefit of the Agent, the Lenders, the Borrower, the Guarantors
and their respective successors and assigns.

7.             Cross Reference.  All references in the Loan Documents to the
Credit Agreement shall hereafter include the modifications to the Credit
Agreement set forth herein.

8.             Time of the Essence.  Time is of the essence of this
Modification.

9.             Counterparts.  This Modification may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which when
taken together shall constitute one and the same instrument.

[SIGNATURES ON FOLLOWING PAGES]

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IN WITNESS WHEREOF, the undersigned have duly executed this Modification as of
the date first set forth above.

 

BORROWER:

 

 

 

KIMBALL HILL, INC., an Illinois corporation

 

 

 

By:

 /s/ David K. Hill

 

 

Name:

  David K. Hill

 

 

Title:

    Chairman & CEO

 

 

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GUARANTORS:

 

 

CACTUS HILLS, LLC

 

KIMBALL HILL HOMES AUSTIN
INVESTMENTS, L.L.C.

 

KIMBALL HILL HOMES AUSTIN
OPERATIONS, L.L.C.

 

KIMBALL HILL HOMES DALLAS
INVESTMENTS, L.L.C.

 

KIMBALL HILL HOMES DALLAS
OPERATIONS, L.L.C.

 

KIMBALL HILL HOMES HOUSTON
INVESTMENTS, L.L.C.

 

KIMBALL HILL HOMES HOUSTON
OPERATIONS, L.L.C.

 

KIMBALL HILL TEXAS INVESTMENT
COMPANY, L.L.C.

 

 

 

 

 

By:

   /s/ David K. Hill

 

 

 

David K. Hill

 

 

Chairman and CEO

 

 

 

 

 

 

 

EAST LAKE PARK, INC.

 

KIMBALL HILL STATEWAY, INC.

 

 

 

 

 

By:

   /s/ David K. Hill

 

 

 

David K. Hill

 

 

President

 

 

 

 

KIMBALL HILL FAR EAST DETROIT, LLC

 

 

 

 

 

By:

   /s/ David K. Hill

 

 

 

David K. Hill

 

 

Chairman and CEO

 

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KH FINANCIAL HOLDING COMPANY

 

 

KHH TEXAS TRADING COMPANY L.P.

 

 

KIMBALL HILL HOMES AUSTIN, L.P.

 

 

KIMBALL HILL HOMES CALIFORNIA, INC.

 

 

KIMBALL HILL HOMES DALLAS, L.P.

 

 

KIMBALL HILL HOMES FLORIDA, INC.

 

 

KIMBALL HILL HOMES HOUSTON, L.P.

 

 

KIMBALL HILL HOMES ILLINOIS, LLC

 

 

KIMBALL HILL HOMES NEVADA, INC.

 

 

KIMBALL HILL HOMES OHIO, INC.

 

 

KIMBALL HILL HOMES OREGON, INC.

 

 

KIMBALL HILL HOMES REALTY FLORIDA,
INC.

 

 

KIMBALL HILL HOMES SAN ANTONIO, L.P.

 

 

KIMBALL HILL HOMES TEXAS, INC.

 

 

KIMBALL HILL HOMES WASHINGTON, INC.

 

 

KIMBALL HILL HOMES WISCONSIN,
INC.

 

 

NATIONAL CREDIT AND GUARANTY
CORPORATION

 

 

RIVER OAKS REALTY, L.P.

 

 

 

 

 

 

 

 

By:

   /s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

 

 

 

 

 

 

 

 

 

18TH AND PEORIA, LLC

 

By:

Kimball Hill Suburban Centers,
L.L.C., its manager

 

 

 

 

 

By:

Kimball Hill, Inc., its
manager

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

 

Chairman and CEO

 

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KIMBALL HILL SUBURBAN CENTERS,
L.L.C.

 

KIMBALL HILL URBAN CENTERS, L.L.C.

 

THE GLENS AT WESTLAKE, L.L.C.

 

 

 

 

By:

Kimball Hill, Inc., its manager

 

 

 

 

 

 

 

 

 

 

By:

/s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

 

 

 

 

KIMBALL HILL URBAN CENTERS
CHICAGO ONE, L.L.C.

 

KIMBALL HILL URBAN CENTERS
CHICAGO TWO, L.L.C.

 

KIMBALL HILL URBAN CENTERS SPECIAL
PURPOSES, L.L.C.

 

 

By:

Kimball Hill Urban Centers, L.L.C.,
its manager

 

 

 

 

 

 

By:

Kimball Hill, Inc., its
manager

 

 

 

 

 

 

 

By:

/s/ David K. Hill

 

 

 

 

 

David K. Hill

 

 

 

 

Chairman and CEO

 

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BRIDLE RIDGE LIMITED PARTNERSHIP

 

PARKVIEW LIMITED PARTNERSHIP

 

RIVER POINTE LIMITED PARTNERSHIP

 

SONATA AT MORADA RANCH LIMITED
PARTNERSHIP

 

WINDMILL PARK LIMITED PARTNERSHIP

 

 

 

 

By:

Kimball Hill Homes California, Inc.,

 

 

its general partner

 

 

 

 

 

By:

/s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

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KIMBALL HILL BELLEVUE RANCH, LLC

 

KIMBALL HILL REFLECTIONS, LLC

 

KIMBALL HILL SHELDON LAKES, LLC

 

KIMBALL HILL VILLAGES, LLC

 

 

 

 

By:

Kimball Hill Homes California, Inc.,
its manager

 

 

 

 

 

 

 

 

By:

/s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

 

 

KIMBALL HILL CHADWICK FARMS
LIMITED PARTNERSHIP

 

KIMBALL WEST FRISCO LIMITED
PARTNERSHIP

 

 

 

 

By:

Kimball Hill Homes Dallas,
L.P., its general partner

 

 

 

 

 

 

 

 

By:

/s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

 

 

KIMBALL HILL CALUSA PALMS LIMITED
PARTNERSHIP

 

KIMBALL HILL MARBELLA ESTATES
LIMITED PARTNERSHIP

 

 

 

 

By:

Kimball Hill Homes Florida, Inc., its
general partner

 

 

 

 

 

By:

/s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

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INDIAN TRAILS LIMITED PARTNERSHIP

 

 

 

 

By:

Kimball Hill Homes Houston, L.P.,
its general partner

 

 

 

 

 

 

 

 

By:

/s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

KIMBALL HILL TX PROPERTIES, LLC

 

 

 

 

By:

Kimball Hill Homes Houston, L.P.,
its manager

 

 

 

 

 

 

 

 

By:

    /s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

ASTOR PLACE LIMITED PARTNERSHIP

 

BOLINGBROOK LIMITED PARTNERSHIP

 

EDGEWATER LIMITED PARTNERSHIP

 

HUNTINGTON CHASE LIMITED
PARTNERSHIP

 

LEGEND LAKES LIMITED PARTNERSHIP

 

THE GLEN TOWNHOMES LIMITED
PARTNERSHIP

 

THE HAMILTON PLACE PARTNERSHIP

 

WATERFORD LIMITED PARTNERSHIP

 

WHISPERING MEADOW LIMITED
PARTNERSHIP

 

WHITE OAK LIMITED PARTNERSHIP

 

 

 

 

By:

Kimball Hill Homes Illinois, LLC,
its general partner

 

 

 

 

 

By:

   /s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

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KH INGHAM PARK SOUTH, LLC

 

 

KH SRAV II, LLC

 

 

 

 

 

By:

Kimball Hill Homes Illinois, LLC,
its manager

 

 

 

 

 

 

By:

 

/s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

 

 

 

 

 

 

 

 

KIMBALL HILL CENTENNIAL HEIGHTS
LIMITED PARTNERSHIP

 

KIMBALL HILL HEATHERS/CAPAROLA
LIMITED PARTNERSHIP

 

KIMBALL MOUNTAIN FIRST LIMITED
PARTNERSHIP

 

 

By:

Kimball Hill Homes Nevada, Inc., its
general partner

 

 

 

 

 

 

 

 

 

By:

 

/s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

 

 

 

 

 

 

 

 

KIMBALL COVE LIMITED PARTNERSHIP

 

 

KIMBALL HILL LYNDEN PARK II LIMITED
PARTNERSHIP

 

 

 

 

 

By:

Kimball Hill Homes Texas, Inc., its
general partner

 

 

 

 

 

 

 

 

 

By:

 

/s/ David K. Hill

 

 

 

 

David K. Hill

 

 

 

Chairman and CEO

 

 

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RIVER OAKS HOMES, LLP

 

 

 

By:

Kimball Hill Homes Texas, Inc.,
its manager

 

 

 

 

 

 

By:

 

/s/ David K. Hill

 

 

 

David K. Hill

 

 

Chairman and CEO

 

 

 

 

 

 

GABLES AT HIDDENBROOK LIMITED
PARTNERSHIP

 

 

 

By:

Kimball Hill Homes Washington,
Inc., its general partner

 

 

 

 

 

 

By:

 

/s/ David K. Hill

 

 

 

David K. Hill

 

 

Chairman and CEO

 

 

 

 

 

 

PARK SHORE, L.L.C.

 

 

 

By:

Kimball Hill Homes Wisconsin, Inc.,
its manager

 

 

 

 

 

 

By:

 

/s/ David K. Hill

 

 

 

David K. Hill

 

 

Chairman and CEO

 

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HARRIS N.A., as Administrative Agent, L/C Issuer,
and a Lender

 

 

 

 

 

By:

 

/s/ Scott W. Morris

 

 

Name:

Scott W. Morris

 

 

Title:

 

Vice President

 

 

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BANK OF AMERICA, N.A., as a Lender

 

 

 

 

 

By:

 

/s/ Patricia A. Provenzano

 

 

Name:

 

Patricia A. Provenzano

 

 

Title:

 

Senior Vice President

 

 

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KEYBANK NATIONAL ASSOCIATION, as a
Lender

 

 

 

 

 

By:

 

/s/ Kevin DeLozier

 

 

Name:

 

Kevin DeLozier

 

 

Title:

 

Senior Vice President

 

 

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WACHOVIA BANK, NATIONAL
ASSOCIATION, as a Lender

 

 

 

 

 

By:

 

/s/ Maurice M. Ryan

 

 

Name:

 

Maurice M. Ryan

 

 

Title:

 

Vice President

 

 

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CHARTER ONE BANK, N.A., as a Lender

 

 

 

 

 

By:

 

/s/ Jason K. Welch

 

 

Name:

 

Jason K. Welch

 

 

Title:

 

Vice President

 

 

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FIRST BANK, as a Lender

 

 

 

 

 

By:

 

/s/ James C. Brennan

 

 

Name:

 

James C. Brennan

 

 

Title:

 

Vice President

 

 

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LaSALLE BANK, NATIONAL ASSOCIATION, as
a Lender

 

 

 

 

 

By:

 

/s/ Nathan Weyer

 

 

Name:

 

Nathan Weyer

 

 

Title:

 

First Vice President

 

 

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FIFTH THIRD BANK, as a Lender

 

 

 

 

 

By:

 

/s/ Thomas W. O’Connell

 

 

Name:

 

Thomas W. O’Connell

 

 

Title:

 

Assistant Vice President

 

 

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ASSOCIATED BANK NATIONAL
ASSOCIATION, as a Lender

 

 

 

 

 

By:

 

/s/ Robert J. Burda

 

 

Name:

 

Robert J. Burda

 

 

Title:

 

Vice President

 

 

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NATIONAL CITY BANK, as a Lender

 

 

 

 

 

By:

 

/s/ Gina Fridberg

 

 

Name:

 

Gina Fridberg

 

 

Title:

 

Assistant Vice President

 

 

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CITIBANK, N.A., as a Lender

 

 

 

 

 

By:

 

/s/ Glen R. Bell

 

 

Name:

 

Glen R. Bell

 

 

Title:

 

Vice President

 

 

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FRANKLIN BANK, SSB, as a Lender

 

 

 

 

 

By:

 

/s/ Sherry K. Day

 

 

Name:

 

Sherry K. Day

 

 

Title:

 

Senior Vice President

 

 

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JPMORGAN CHASE BANK, N.A., as a Lender

 

 

 

 

 

By:

 

/s/ Elizabeth Ritenour

 

 

Name:

 

Elizabeth Ritenour

 

 

Title:

 

Vice President

 

 

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MB FINANCIAL BANK, N.A., Successor in
Interest to OAK BROOK BANK, as a Lender

 

 

 

 

 

By:

 

/s/ Christopher Hutter

 

 

Name:

 

Christopher Hutter

 

 

Title:

 

Vice President

 

 

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BANK OF THE WEST, as a Lender

 

 

 

 

 

By:

 

/s/ Lynn Foster

 

 

Name:

 

Lynn Foster

 

 

Title:

 

Senior Vice President

 

 

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COMERICA BANK, as a Lender

 

 

 

 

 

By:

 

/s/ Charles Weddell

 

 

Name:

 

Charles Weddell

 

 

Title:

 

Vice President

 

 

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COMPASS BANK, as a Lender

 

 

 

 

 

By:

 

/s/ Johanna Duke Paley

 

 

Name:

 

Johanna Duke Paley

 

 

Title:

 

Senior Vice President

 

 

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