SOLD AND SUCH SALE IS
PERMITTED HEREUNDER, (D) CLAUSE (I) OF THE FOREGOING SHALL NOT APPLY TO
RESTRICTIONS OR CONDITIONS IMPOSED BY ANY AGREEMENT RELATING TO SECURED
INDEBTEDNESS PERMITTED BY THIS AGREEMENT IF SUCH RESTRICTIONS OR CONDITIONS
APPLY ONLY TO THE PROPERTY OR ASSETS SECURING SUCH INDEBTEDNESS AND (E) CLAUSE
(I) OF THE FOREGOING SHALL NOT APPLY TO CUSTOMARY PROVISIONS IN LEASES AND OTHER
CONTRACTS RESTRICTING THE ASSIGNMENT THEREOF.
For the avoidance of doubt, except to the extent that the Borrowers grant a Lien
to the trustee of any Trust Preferred Financing Vehicle, the parties agree that
the rights of such trustee in respect of any Trust Preferred Indebtedness
permitted under this Agreement shall not be deemed a Lien hereunder.
7.09
FINANCIAL COVENANTS.
(A)
CONSOLIDATED TANGIBLE NET WORTH.
PERMIT
ADJUSTED CONSOLIDATED TANGIBLE NET WORTH, AT ANY TIME, TO BE LESS THAN
$700,000,000, PLUS AN AMOUNT EQUAL TO 25% OF THE NET PROCEEDS RECEIVED FROM THE
ISSUANCE AND SALE, AT ANY TIME AFTER THE CLOSING DATE, OF EQUITY INTERESTS OF
KKR FINANCIAL OR ANY SUBSIDIARY (OTHER THAN ISSUANCES TO ANY BORROWER OR A
WHOLLY-OWNED SUBSIDIARY), INCLUDING UPON ANY CONVERSION OF DEBT SECURITIES OF
KKR FINANCIAL INTO SUCH EQUITY INTERESTS.
(B)
COVERAGE RATIO.
PERMIT THE RATIO OF (A) THE
AGGREGATE VALUE OF THE COLLATERAL TO (B) TOTAL REVOLVING CREDIT EXPOSURE TO BE
LESS THAN 2.00 TO 1.00 AT ANY TIME.
(C)
LEVERAGE RATIO.
PERMIT THE RATIO OF
ADJUSTED TOTAL LIABILITIES TO ADJUSTED CONSOLIDATED TANGIBLE NET WORTH, AT ANY
TIME, TO EXCEED THE RATIO OF 2.00 TO 1.00.
(D)
DISTRIBUTIONS.
MAKE ANY DISTRIBUTIONS TO
THEIR RESPECTIVE SHAREHOLDERS (OTHER THAN ANY SUCH SHAREHOLDER THAT IS ITSELF A
BORROWER OR A SUBSIDIARY) IN RESPECT OF ANY TAXABLE YEAR IN AN AGGREGATE AMOUNT
(AS TO ALL SUCH SHAREHOLDERS) IN EXCESS OF 65% OF KKR FINANCIAL'S ESTIMATED
TAXABLE INCOME IN RESPECT OF SUCH TAXABLE YEAR AS REASONABLY DETERMINED BY KKR
FINANCIAL (DETERMINED WITHOUT REGARD TO ANY "PASSIVE ACTIVITY LOSSES" WITHIN THE
MEANING OF SECTION 469 OF THE CODE, ANY "MISCELLANEOUS ITEMIZED DEDUCTIONS"
WITHIN THE MEANING OF SECTION 67 OF THE CODE AND ANY CAPITAL GAINS AND CAPITAL
LOSSES RECOGNIZED ON THE DISPOSITION OF ASSETS, WHICH ARE GENERALLY DETERMINED
ON A PARTNER-BY-PARTNER BASIS WITH REFERENCE TO EACH PARTNER'S TAX BASIS IN
THEIR PARTNERSHIP INTEREST); PROVIDED, THAT NO SUCH DISTRIBUTIONS SHALL BE MADE
UNLESS, BEFORE AND AFTER GIVING EFFECT THERETO, NO BORROWING BASE DEFICIENCY
EXISTS OR WOULD EXIST; AND PROVIDED, FURTHER, THAT NOTWITHSTANDING THE
LIMITATION ON DISTRIBUTIONS (AND IN ADDITION TO THE AMOUNT OF PERMITTED
DISTRIBUTIONS) SET FORTH ABOVE IN THIS SECTION 7.09(D), ANY BORROWER OR
SUBSIDIARY THAT IS A REAL ESTATE INVESTMENT TRUST FOR TAX PURPOSES MAY MAKE
DISTRIBUTIONS IN RESPECT OF ANY CLASS OF PREFERRED SHARES THAT WAS ISSUED TO
SATISFY THE 100-SHAREHOLDER REQUIREMENT IN SECTION 856(A)(5) OF THE CODE IN
ACCORDANCE WITH THE TERMS OF SUCH PREFERRED CLASS OF SHARES.
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7.10
FISCAL YEAR.
PERMIT THE FISCAL YEAR OF THE
BORROWERS TO END ON A DAY OTHER THAN DECEMBER 31 OR PERMIT THE FISCAL QUARTERS