Document:

EX-10.1

 

Exhibit 10.1

DIRECTOR INDEMNIFICATION AGREEMENT

     This DIRECTOR INDEMNIFICATION AGREEMENT (the “Agreement”) made and entered into this
21st day of August, 2007, by and between Haights Cross Communications, Inc., a Delaware
corporation (the “Company”), and John A. McKenna, Jr. (the “Indemnitee”).

     WHEREAS, it is essential that the Company be able to retain and attract as directors, officers
and employees the most capable persons available;

     WHEREAS, increased corporate litigation has subjected directors to litigation risks and
expenses, and the limitations on the availability of director and officer liability insurance has
made it increasingly difficult for the Company to attract and retain such persons;

     WHEREAS, the Company’s By-laws permit it to enter into indemnification arrangements and
agreements;

     WHEREAS, the Company desires to provide the Indemnitee with specific contractual assurances of
the Indemnitee’s rights to full indemnification against litigation risks and expenses (regardless,
among other things, of any amendment to or revocation of the Company’s By-laws or any change in the
ownership of the Company or the composition of its Board of Directors), which indemnification is
intended to be greater than that which is afforded by the Company’s Certificate of Incorporation
and By-laws and, to the extent insurance is available, the coverage of the Indemnitee under the
Company’s directors and officers liability insurance policies; and

     WHEREAS, the Indemnitee is relying upon the rights afforded under this Agreement in accepting
Indemnitee’s position as a director, officer or employee of the Company.

     NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the
Company and Indemnitee do hereby covenant and agree as follows:

     1. Definitions.

           (a) “Corporate Status” describes the status of a person who is serving or has served (i) as a
director, officer or employee of the Company, (ii) in any capacity with respect to any employee
benefit plan of the Company, or (iii) as a director, partner, member, trustee, officer, employee,
or agent of any other Entity at the request of the Company.

           (b) “Entity” shall mean any corporation, partnership, limited liability company, joint
venture, trust, foundation, association, organization or other legal entity and any group or
division of the Company or any of its subsidiaries.

           (c) “Expenses” shall mean all reasonable fees, costs and expenses incurred in connection with
any Proceeding (as defined below), including, without limitation, attorneys’ fees, disbursements
and retainers (including, without limitation, any such fees, disbursements
and retainers incurred by Indemnitee pursuant to Section 10 of this Agreement), fees and
disbursements of expert witnesses, private investigators and professional advisors (including,
without limitation, accountants and investment bankers), court costs, transcript costs, fees of

 

 

experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission
charges, postage, delivery services, secretarial services, and other disbursements and expenses.

           (d) “Indemnifiable Expenses,” “Indemnifiable Liabilities” and “Indemnifiable Amounts” shall
have the meanings ascribed to those terms in Section 3(a) below.

           (e) “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes,
fines and amounts paid in settlement.

           (f) “Proceeding” shall mean any threatened, pending or completed claim, action, suit,
arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal,
or any other proceeding, whether civil, criminal, administrative or investigative, whether formal
or informal, including a proceeding initiated by Indemnitee pursuant to Section 10 of this
Agreement to enforce Indemnitee’s rights hereunder.

     2. Services of Indemnitee. In consideration of the Company’s covenants and commitments
hereunder, Indemnitee agrees to serve or continue to serve as a director, officer or employee of
the Company. However, this Agreement shall not impose any obligation on Indemnitee or the Company
to continue Indemnitee’s service to the Company beyond any period otherwise required by law or by
other agreements or commitments of the parties, if any.

     3. Agreement to Indemnify. The Company agrees to indemnify Indemnitee as follows:

           (a) Subject to the exceptions contained in Section 4(a) below, if Indemnitee was or is a party
or is threatened to be made a party to any Proceeding (other than an action by or in the right of
the Company) by reason of Indemnitee’s Corporate Status, Indemnitee shall be indemnified by the
Company against all Expenses and Liabilities incurred or paid by Indemnitee in connection with such
Proceeding (referred to herein as “Indemnifiable Expenses” and “Indemnifiable Liabilities,”
respectively, and collectively as “Indemnifiable Amounts”).

          
(b) Subject to the exceptions contained in Section 4(b) below, if Indemnitee was or is a party
or is threatened to be made a party to any Proceeding by or in the right of the Company to procure
a judgment in its favor by reason of Indemnitee’s Corporate Status, Indemnitee shall be indemnified
by the Company against all Indemnifiable Expenses.

     4. Exceptions to Indemnification. Indemnitee shall be entitled to indemnification under
Sections 3(a) and 3(b) above in all circumstances other than the following:

           (a) If indemnification is requested under Section 3(a) and it has been adjudicated finally by
a court of competent jurisdiction that, in connection with the subject of the Proceeding out of
which the claim for indemnification has arisen, (i) Indemnitee failed to act in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company,
(ii) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe
that Indemnitee’s conduct was unlawful or (iii) Indemnitee’s conduct
constituted willful misconduct or recklessness, then Indemnitee shall not be entitled to
payment of Indemnifiable Amounts hereunder.

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           (b) If indemnification is requested under Section 3(b) and

          (i) it has been adjudicated finally by a court of competent jurisdiction that, in
connection with the subject of the Proceeding out of which the claim for indemnification has
arisen, Indemnitee failed to act in good faith and in a manner Indemnitee reasonably
believed to be in or not opposed to the best interests of the Company, Indemnitee shall not
be entitled to payment of Indemnifiable Expenses hereunder; or

          (ii) it has been adjudicated finally by a court of competent jurisdiction that
Indemnitee is liable to the Company with respect to any claim, issue or matter involved in
the Proceeding out of which the claim for indemnification has arisen, including, without
limitation, a claim that Indemnitee received an improper personal benefit or improperly took
advantage of a corporate opportunity, Indemnitee shall not be entitled to payment of
Indemnifiable Expenses hereunder with respect to such claim, issue or matter unless the
court in which such Proceeding was brought shall determine upon application that, despite
the adjudication of liability, but in view of all the circumstances of the case, Indemnitee
is fairly and reasonably entitled to indemnity for such Indemnifiable Expenses which such
court shall deem proper.

     5. Procedure for Payment of Indemnifiable Amounts. Indemnitee shall submit to the
Company a written request specifying the Indemnifiable Amounts for which Indemnitee seeks payment
under Section 3 of this Agreement and the basis for the claim. The Company shall pay such
Indemnifiable Amounts to Indemnitee within twenty (20) calendar days of receipt of the request. At
the request of the Company, Indemnitee shall furnish such documentation and information as are
reasonably available to Indemnitee and necessary to establish that Indemnitee is entitled to
indemnification hereunder.

     6. Indemnification for Expenses of a Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, and without limiting any such provision, to
the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified against
all Expenses reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.
If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the
Company shall indemnify Indemnitee against those Expenses reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter. For
purposes of this Agreement, the termination of any claim, issue or matter in such a Proceeding by
dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim,
issue or matter.

     7. Effect of Certain Resolutions. Neither the settlement nor termination of any
Proceeding nor the failure of the Company to award indemnification or to determine that
indemnification is payable shall create an adverse presumption that Indemnitee is not entitled to
indemnification hereunder. In addition, the termination of any proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not create a
presumption that Indemnitee did not act in good faith and in a manner which Indemnitee

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reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee’s action was
unlawful.

     8. Agreement to Advance Interim Expenses; Conditions. The Company shall pay to
Indemnitee all Indemnifiable Expenses incurred by Indemnitee in connection with any Proceeding,
including a Proceeding by or in the right of the Company, in advance of the final disposition of
such Proceeding, if Indemnitee furnishes the Company with a written undertaking to repay the amount
of such Indemnifiable Expenses advanced to Indemnitee if it is finally determined by a court of
competent jurisdiction that Indemnitee is not entitled under this Agreement to indemnification with
respect to such Indemnifiable Expenses. Such undertaking shall be an unlimited general obligation
of Indemnitee, shall be accepted by the Company without regard to the financial ability of
Indemnitee to make repayment, and in no event shall be required to be secured.

     9. Procedure for Payment of Interim Expenses. Indemnitee shall submit to the Company a
written request specifying the Indemnifiable Expenses for which Indemnitee seeks an advancement
under Section 8 of this Agreement, together with documentation evidencing that Indemnitee has
incurred such Indemnifiable Expenses. Payment of Indemnifiable Expenses under Section 8 shall be
made no later than twenty (20) calendar days after the Company’s receipt of such request and the
undertaking required by Section 8.

     10. Remedies of Indemnitee.

           (a) Right to Petition Court. In the event that Indemnitee makes a request for payment of
Indemnifiable Amounts under Sections 3 and 5 above or a request for an advancement of Indemnifiable
Expenses under Sections 8 and 9 above and the Company fails to make such payment or advancement in
a timely manner pursuant to the terms of this Agreement, Indemnitee may petition the appropriate
judicial authority to enforce the Company’s obligations under this Agreement.

           (b) Burden of Proof. In any judicial proceeding brought under Section 10(a) above, the
Company shall have the burden of proving that Indemnitee is not entitled to payment of
Indemnifiable Amounts hereunder.

           (c) Expenses. The Company agrees to reimburse Indemnitee in full for any Expenses incurred by
Indemnitee in connection with investigating, preparing for, litigating, defending or settling any
action brought by Indemnitee under Section 10(a) above, or in connection with any claim or
counterclaim brought by the Company in connection therewith.

           (d) Validity of Agreement. The Company shall be precluded from asserting in any Proceeding,
including, without limitation, an action under Section 10(a) above, that the provisions of this
Agreement are not valid, binding and enforceable or that there is insufficient
consideration for this Agreement and shall stipulate in court that the Company is bound by all
the provisions of this Agreement.

           (e) Failure to Act Not a Defense. The failure of the Company (including its Board of
Directors or any committee thereof, independent legal counsel, or stockholders) to

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make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the
advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action
brought under Section 10(a) above, and shall not create a presumption that such payment or
advancement is not permissible.

     11. Representations and Warranties of the Company. The Company hereby represents and
warrants to Indemnitee as follows:

           (a) Authority. The Company has all necessary corporate power and authority to enter into, and
be bound by the terms of, this Agreement, and the execution, delivery and performance of the
undertakings contemplated by this Agreement have been duly authorized by the Company.

           (b) Enforceability. This Agreement, when executed and delivered by the Company in accordance
with the provisions hereof, shall be a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
the enforcement of creditors’ rights generally.

     12. Insurance. The Company will use commercially reasonable efforts to obtain and
maintain a policy or policies of insurance in an amount not less than $1,000,000 with a deductible
of not greater than $50,000, with reputable insurance companies providing the Indemnitee with
coverage for losses from wrongful acts, and to ensure the Company’s performance of its
indemnification obligations under this Agreement. In all policies of director and officer liability
insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee at
least the same rights and benefits as are accorded to the most favorably insured of the Company’s
officers and directors. Notwithstanding the foregoing, if the Company, after employing commercially
reasonable efforts as provided in this Section, determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are disproportionate to the amount of
coverage provided, or if the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit, the Company shall use its commercially reasonable efforts to
obtain and maintain a policy or policies of insurance with coverage having features as similar as
practicable to those described above.

     13. Fees and Expenses. During the term of the Indemnitee’s service as a director, the
Company shall promptly reimburse the Indemnitee for all expenses incurred by him in connection with
his service as a director or member of any board committee or otherwise in connection with the
Company’s business and shall pay or provide the Indemnitee with fees and other compensation,
including stock options or awards, in amounts and value which are at least equal to those provided
to any of the Company’s other directors from time to time.

     14. Contract Rights Not Exclusive. The rights to payment of Indemnifiable Amounts and
advancement of Indemnifiable Expenses provided by this Agreement shall be in addition to, but not
exclusive of, any other rights which Indemnitee may have at any time under applicable law, the
Company’s By-laws or Certificate of Incorporation, or any other agreement, vote of stockholders or
directors, or otherwise, both as to action in Indemnitee’s official capacity and as to action in
any other capacity as a result of Indemnitee’s serving as a director of the Company.

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     15. Successors. This Agreement shall be (a) binding upon all successors and assigns of
the Company (including any transferee of all or a substantial portion of the business, stock and/or
assets of the Company and any direct or indirect successor by merger or consolidation or otherwise
by operation of law) and (b) binding on and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of Indemnitee. This Agreement shall continue for the
benefit of Indemnitee and such heirs, personal representatives, executors and administrators after
Indemnitee has ceased to have Corporate Status.

     16. Subrogation. In the event of any payment of Indemnifiable Amounts under this
Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of
contribution or recovery of Indemnitee against other persons, and Indemnitee shall take, at the
request of the Company, all reasonable action necessary to secure such rights, including the
execution of such documents as are necessary to enable the Company to bring suit to enforce such
rights.

     17. Change in Law. To the extent that a change in applicable law (whether by statute or
judicial decision) shall permit broader indemnification than is provided under the terms of the
Certificate of Incorporation or By-laws of the Company and this Agreement, Indemnitee shall be
entitled to such broader indemnification and this Agreement shall be deemed to be amended to such
extent.

     18. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement, or any clause thereof, shall be determined by a court of competent
jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause
shall be limited or modified in its application to the minimum extent necessary to make such
provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this
Agreement shall remain fully enforceable and binding on the parties.

     19. Indemnitee as Plaintiff. Except as provided in Section 10(c) of this Agreement and in
the next sentence, Indemnitee shall not be entitled to payment of Indemnifiable Amounts or
advancement of Indemnifiable Expenses with respect to any Proceeding brought by Indemnitee against
the Company, any Entity which it controls, any director or officer thereof, or any third party,
unless the Company has consented to the initiation of such Proceeding. This Section shall not apply
to counterclaims or affirmative defenses asserted by Indemnitee in an action brought against
Indemnitee.

     20. Modifications and Waiver. Except as provided in Section 17 above with respect to
changes in applicable law which broaden the right of Indemnitee to be indemnified by the Company,
no supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by each of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement
(whether or not similar), nor shall such waiver constitute a continuing waiver.

     21. General Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered by hand, (b) when
transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified

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or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

	 	 	 	 	 
	 

	 	(a)     If to Indemnitee, to:
	 	John A. McKenna, Jr.
	 

	 	 	 	39 Very Merry Road
	 

	 	 	 	Stamford, CT 06903 
	 
	 	 	 	 
	 

	 	(b)     If to the Company, to:
	 	Haights Cross Communications, Inc.
	 

	 	 	 	10 New King Street
	 

	 	 	 	Suite 110 
	 

	 	 	 	White Plains, NY 10604 
	 

	 	 	 	Facsimile: (914) 289-9401 
	 

	 	 	 	Attn: President

or to such other address as may have been furnished in the same manner by any party to the others.

     22. Governing Law. This Agreement shall be governed by and construed and enforced under
the laws of the State of New York without giving effect to the provisions thereof relating to
conflicts of law.

     23. Consent to Jurisdiction. The Company hereby irrevocably and unconditionally consents
to the jurisdiction of the courts located in the State of New York to construe and enforce the
covenants contained in this Agreement. The Company hereby irrevocably and unconditionally waives
any objection to the laying of venue of any Proceeding arising out of or relating to this Agreement
in the courts located in the State of New York, and hereby irrevocably and unconditionally waives
and agrees not to plead or claim that any such Proceeding brought in any such court has been
brought in an inconvenient forum.

     24. Agreement Governs. This Agreement is to be deemed consistent wherever possible with
relevant provisions of the Company’s Amended and Restated By-laws and Certificate of Incorporation;
however, in the event of a conflict between this Agreement and such provisions, the provisions of
this Agreement shall control.

[End of Text]

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     IN WITNESS WHEREOF, the parties hereto have executed this Director Indemnification Agreement
as of the day and year first above written.

	 	 	 	 	 
	 	THE COMPANY:

HAIGHTS CROSS COMMUNICATIONS, INC.

 	 
	 	By: 	/s/ Paul J. Crecca 	 
	 	 	Name:  	Paul J. Crecca 	 
	 	 	Title:  	Executive Vice President and Chief
Financial Officer 	 
	 
	 	INDEMNITEE:

 	 
	  	/s/
John A. McKenna, Jr.	 
	 	Name:  	John A. McKenna, Jr. 

8Exhibit 10.39

 

Exhibit 10.39

THIRD AMENDMENT AGREEMENT

This Third Amendment Agreement dated as of August 17, 2007 (“Amendment”) is entered into with
reference to the Revolving Loan Agreement dated as of November 22, 2005, as amended (the “Loan
Agreement”), among KB HOME, a Delaware corporation (“Borrower”), the Banks party thereto, and Bank
of America, N.A., as Administrative Agent. Borrower and the Administrative Agent, acting on behalf
of the Required Banks under the Loan Agreement, agree to amend the Loan Agreement as follows:

	1.	 	Definitions. Capitalized terms used but not defined herein have the meanings set
forth in the Loan Agreement.

	 
	2.	 	Consent to Reduced Consolidated Interest Coverage Ratio. Administrative Agent and
Required Banks consent and agree, on a one time basis, as follows:

	 	(a)	 	Notwithstanding the provisions of Section 6.11 of the Loan Agreement, with
respect to the Reduction Period (as defined below):

	 	(1)	 	Subject to Section 2(h) of this Amendment, Borrower shall not
permit the Consolidated Interest Coverage Ratio, at the end of each of the
first 8 consecutive Fiscal Quarters included within such period, to be less
than 1.00 to 1.00.

	 
	 	(2)	 	Subject to Section 2(h) of this Amendment, Borrower shall not
permit the Consolidated Interest Coverage Ratio, at the end of the
9th Fiscal Quarter included within such period, to be less than 1.50
to 1.00.

	 
	 	(3)	 	Following the date of this Amendment and during the Reduction
Period, Borrower shall not and shall not permit any of its Consolidated
Subsidiaries to (notwithstanding the provisions of Sections 6.4(e) and 6.12 of
the Loan Agreement), retire, redeem, purchase or otherwise acquire for value
any shares of capital stock or any warrant or right to acquire shares of
capital stock or any other equity security issued by Borrower, unless both of
the following conditions have been met:

	 	(A)	 	the Consolidated Leverage Ratio at the end of
the preceding Fiscal Quarter for which a Compliance Certificate has
been delivered pursuant to Section 7.2 of the Loan Agreement is not
greater than 0.90 to 1.00; and

	 
	 	(B)	 	no Default or Event of Default has occurred and
is continuing or would result therefrom.

	 	(b)	 	If the Consolidated Interest Coverage Ratio at the end of any Fiscal Quarter
included within the Reduction Period is less than 2.00 to 1.00 but greater than or
equal to 1.50 to 1.00, Applicable Rates as of any date of determination during the
Reduction Period shall mean the following percentages per annum, based upon the
Applicable Pricing Level on that date, subject to the provisions of Articles II and III
of the Loan Agreement:

-1-

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Applicable Letter of
	Applicable	 	 	 	 	 	Applicable	 	Credit Fee
	Pricing	 	Applicable Base	 	Commitment Fee	 	Applicable Eurodollar
	Level	 	Rate Spread	 	Rate	 	Rate Spread
	I
	 	 	0.000	%	 	 	0.200	%	 	 	0.750	%
	II
	 	 	0.000	%	 	 	0.225	%	 	 	0.875	%
	III
	 	 	0.000	%	 	 	0.250	%	 	 	1.000	%
	IV
	 	 	0.000	%	 	 	0.275	%	 	 	1.250	%
	V
	 	 	0.000	%	 	 	0.300	%	 	 	1.625	%

If the Consolidated Interest Coverage Ratio at the end of any Fiscal Quarter
included within the Reduction Period is less than 1.50 to 1.00 but greater than or
equal to 1.25 to 1.00, Applicable Rates as of any date of determination during the
Reduction Period shall mean the following percentages per annum, based upon the
Applicable Pricing Level on that date, subject to the provisions of Articles II and
III of the Loan Agreement:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Applicable Letter of
	Applicable	 	 	 	 	 	Applicable	 	Credit Fee
	Pricing	 	Applicable Base	 	Commitment Fee	 	Applicable Eurodollar
	Level	 	Rate Spread	 	Rate	 	Rate Spread
	I
	 	 	0.000	%	 	 	0.225	%	 	 	0.875	%
	II
	 	 	0.000	%	 	 	0.250	%	 	 	1.000	%
	III
	 	 	0.000	%	 	 	0.275	%	 	 	1.125	%
	IV
	 	 	0.000	%	 	 	0.300	%	 	 	1.375	%
	V
	 	 	0.000	%	 	 	0.325	%	 	 	1.750	%

If the Consolidated Interest Coverage Ratio at the end of any Fiscal Quarter
included within the Reduction Period is less than 1.25 to 1.00 but greater than or
equal to 1.00 to 1.00, Applicable Rates as of any date of determination during the
Reduction Period shall mean the following percentages per annum, based upon the
Applicable Pricing Level on that date, subject to the provisions of Articles II and
III of the Loan Agreement:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Applicable Letter of
	Applicable	 	 	 	 	 	Applicable	 	Credit Fee
	Pricing	 	Applicable Base	 	Commitment Fee	 	Applicable Eurodollar
	Level	 	Rate Spread	 	Rate	 	Rate Spread
	I
	 	 	0.000	%	 	 	0.250	%	 	 	1.000	%
	II
	 	 	0.000	%	 	 	0.275	%	 	 	1.125	%
	III
	 	 	0.000	%	 	 	0.300	%	 	 	1.250	%
	IV
	 	 	0.000	%	 	 	0.325	%	 	 	1.500	%
	V
	 	 	0.000	%	 	 	0.350	%	 	 	1.875	%

If the Consolidated Interest Coverage Ratio at the end of any Fiscal Quarter
included within the Reduction Period is less than 1.00 to 1.00, Applicable Rates as
of any date of determination during the Reduction Period shall mean the following
percentages per annum, based upon the Applicable Pricing Level on that date, subject
to the provisions of Articles II and III of the Loan Agreement:

-2-

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Applicable Letter of
	Applicable	 	 	 	 	 	Applicable	 	Credit Fee
	Pricing	 	Applicable Base	 	Commitment Fee	 	Applicable Eurodollar
	Level 	 	Rate Spread	 	Rate	 	Rate Spread
	I
	 	 	0.000	%	 	 	0.300	%	 	 	1.125	%
	II
	 	 	0.000	%	 	 	0.325	%	 	 	1.250	%
	III
	 	 	0.000	%	 	 	0.350	%	 	 	1.375	%
	IV
	 	 	0.000	%	 	 	0.375	%	 	 	1.625	%
	V
	 	 	0.000	%	 	 	0.400	%	 	 	2.000	%

With respect to any Fiscal Quarter included within the Reduction Period, any change
in the Applicable Rate resulting from a change in the Consolidated Interest Coverage
Ratio or Consolidated Leverage Ratio shall be effective as of the first Business Day
immediately following the date a Compliance Certificate for such Fiscal Quarter is
delivered pursuant to Section 7.2 of the Loan Agreement; provided,
however, that if a Compliance Certificate is not delivered on or prior to a
date required by Section 7.2 of the Loan Agreement, and if the Compliance
Certificate indicates that the Applicable Rate of Borrower will increase
(i.e., becomes less favorable to Borrower), the date of increase in the
Applicable Rate will be deemed to be the date upon which such Compliance Certificate
was due under Section 7.2 of the Loan Agreement, not the date upon which such
Compliance Certificate was delivered.

The Applicable Rates applicable with respect to the last Fiscal Quarter of the
Reduction Period shall continue to be effective until the first Business Day
following receipt by Administrative Agent of a Compliance Certificate delivered
pursuant to Section 7.2 of the Loan Agreement showing the Consolidated Interest
Coverage Ratio to be greater than or equal to 2.00 to 1.00.

	 	(c)	 	“Reduction Period” means the one time period of 9 consecutive Fiscal Quarters
commencing with the beginning of the Fiscal Quarter chosen by Borrower. Borrower shall
designate the Reduction Period concurrently with its delivery to the Administrative
Agent of a Compliance Certificate for the first Fiscal Quarter of such period by
delivering its notice of designation (the “Reduction Designation”) to Administrative
Agent. The Reduction Designation is irrevocable upon the Administrative Agent’s
receipt thereof. For the avoidance of doubt, the Reduction Period includes the
Elimination Period.

	 
	 	(d)	 	Any failure to comply with Section 2(a) of this Amendment during the Reduction
Period shall constitute a failure to comply with Section 6.11 of the Loan Agreement for
purposes of Section 9.1 thereof.

	 
	 	(e)	 	Notwithstanding the provisions of Sections 2(a), 2(b) and 2(c) of this
Amendment, if the Consolidated Interest Coverage Ratio for any Fiscal Quarter included
within the Reduction Period as set forth in a Compliance Certificate delivered pursuant
to Section 7.2 of the Loan Agreement is equal to or greater than 2.00 to 1.00, the
provisions set forth in Sections 2(a) and 2(b) of this Amendment shall cease to apply
as of the date of delivery of such Compliance Certificate. If a subsequent Compliance
Certificate delivered pursuant to Section 7.2 of the Loan Agreement for a Fiscal
Quarter included within the Reduction Period shows a Consolidated Interest Coverage
Ratio less than 2.00 to 1.00 as of the end of the Fiscal Quarter covered by such
Compliance Certificate, the

-3-

 

	 	 	 	provisions set forth in Sections 2(a) and 2(b) of this Amendment shall again begin
to apply as of the date of delivery of such Compliance Certificate.

	 	(f)	 	During the Reduction Period, Section 6.10 of the Loan Agreement shall be
amended to read in its entirety as follows:

	 	6.10	 	Consolidated Leverage Ratio. Permit
the Consolidated Leverage Ratio to be, at the end of any Fiscal
Quarter, greater than:

	 	(a)	 	2.00 to 1.00 (if the Consolidated
Interest Coverage Ratio at the end of that Fiscal Quarter is
greater than or equal to 1.50 to 1.00);

	 
	 	(b)	 	1.50 to 1.00 (if the Consolidated
Interest Coverage Ratio at the end of that Fiscal Quarter is
less than 1.50 to 1.00 but greater than or equal to 1.25 to
1.00); or

	 
	 	(c)	 	1.25 to 1.00 (if the Consolidated
Interest Coverage Ratio at the end of that Fiscal Quarter is
less than 1.25 to 1.00).

	 	(g)	 	“Elimination Period” means the one time period of up to 4 consecutive Fiscal
Quarters (all of which must occur within the Reduction Period) commencing with the
beginning of a Fiscal Quarter contained within the Reduction Period chosen by Borrower.
Borrower shall designate the Elimination Period concurrently with its delivery to the
Administrative Agent of a Compliance Certificate for the first Fiscal Quarter of such
period by delivering its notice of designation (the “Elimination Designation”) to
Administrative Agent. The Elimination Designation is irrevocable upon the
Administrative Agent’s receipt thereof.

	 
	 	(h)	 	Notwithstanding any other provisions of this Amendment or the Loan Agreement:

	 	(1)	 	During the Elimination Period, Borrower shall not be subject to
the provisions of Sections 2(a)(1) and 2(a)(2) of this Amendment and Section
6.11 of the Loan Agreement; provided, however, that a
Compliance Certificate delivered pursuant to Section 7.2 of the Loan Agreement
shall include a calculation of the Consolidated Interest Coverage Ratio at the
end of each Fiscal Quarter included within the Elimination Period.

	 
	 	(2)	 	During the Elimination Period, Borrower shall not permit the
Consolidated Leverage Ratio to be greater than 1.10 to 1.00.

	 
	 	(3)	 	Upon delivery of the Elimination Designation, Borrower shall
establish an interest-bearing interest reserve account with Administrative
Agent (the “Reserve Account”) and shall maintain at all times (except as
otherwise provided below) in such interest reserve account cash deposits in an
amount (the “Minimum Reserve Amount”) equal to the Consolidated Interest
Expense for the then most recently completed Fiscal Quarter, as shown in the
Compliance Certificate for such Fiscal Quarter delivered pursuant to Section
7.2 of the Loan Agreement, times 4.

	 
	 	 	 	Any deficiency in the Minimum Reserve Amount or redeposit of the Minimum
Reserve Amount, as required per the terms set forth below, shall be funded
into 

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	 	 	 	the Reserve Account within one Business Day immediately following the
date a Compliance Certificate is delivered pursuant to Section 7.2 of the
Loan Agreement, subject to the following:

	 	(A)	 	if a Compliance Certificate is not delivered on
or prior to a date required by Section 7.2 of the Loan Agreement, an
amount equal to 10% of the then effective Minimum Reserve Amount shall
be additionally funded into the Reserve Account within 3 Business Days
immediately following the date upon which such Compliance Certificate
was due under Section 7.2 of the Loan Agreement; and

	 
	 	(B)	 	if, as a result of any restatement of or other
adjustment to the financial statements of Borrower or a calculation
error, Borrower or Administrative Agent determines that (i) the
Consolidated Interest Expense as calculated by Borrower as of any
applicable date was inaccurate and (ii) a proper calculation of the
Consolidated Interest Expense would have resulted in an increase in the
Minimum Reserve Amount, an amount equal to such increase shall be
additionally funded into the Reserve Account within 3 Business Days
immediately following the date of such determination by Borrower or
Administrative Agent.

Borrower may withdraw all amounts deposited in the Reserve Account on the
first Business Day following receipt by the Administrative Agent of
Compliance Certificate(s) delivered pursuant to Section 7.2 of the Loan
Agreement with respect to a Fiscal Quarter of the Elimination Period (other
than the first Fiscal Quarter of the Elimination Period) showing that:

	 	(C)	 	the Consolidated Interest Coverage Ratio is
greater than or equal to 1.00 to 1.00; and

	 
	 	(D)	 	no Default or Event of Default has then
occurred and is continuing at the time of withdrawal (and Borrower
delivers a certificate of a Senior Officer to this effect).

But, if at the end of any Fiscal Quarter of the Elimination Period following
when such release of the Minimum Reserve Amount was previously permitted
pursuant to the terms above the Borrower submits a Compliance Certificate
required by Section 7.2 of the Loan Agreement showing that the Consolidated
Interest Coverage Ratio is less than 1.00 to 1.00, then Borrower shall
redeposit and maintain the Minimum Reserve Amount in the Reserve Account
until such time as:

	 	(E)	 	the Borrower submits a Compliance Certificate
required by Section 7.2 of the Loan Agreement establishing that the
Consolidated Interest Coverage Ratio is:

	 	(i)	 	greater than or equal to 1.00 to
1.00 during the Elimination Period;

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	 	(ii)	 	greater than or equal to the then
applicable Consolidated Interest Coverage Ratio requirement that
would be imposed by Sections 2(a)(1) or 2(a)(2) of this
Amendment during the Reduction Period (other than the
Elimination Period); or

	 
	 	(iii)	 	in compliance with Section 6.11
of the Loan Agreement (without giving effect to this Amendment)
at the end of any Fiscal Quarter ending after the Reduction
Period; and

	 	(F)	 	no Default or Event of Default has then
occurred and is continuing.

Notwithstanding the foregoing, Borrower may withdraw any amounts from the
Reserve Account that exceed the amount of Consolidated Interest Expense for
the then most recently completed Fiscal Quarter, as shown in the Compliance
Certificate for such Fiscal Quarter delivered pursuant to Section 7.2 of the
Loan Agreement, times 4, provided, that no Default or Event of
Default has then occurred and is continuing at the time of withdrawal (and
Borrower delivers a certificate of a Senior Officer to this effect).

Borrower’s failure to comply with the provisions of any of Sections 2(h)(2) or
2(h)(3) of this Amendment shall constitute an Event of Default.

	 	(i)	 	For the avoidance of doubt, during the Elimination Period, the definition of
“Unrestricted Cash” set forth in Section 1.1 of the Loan Agreement shall exclude all
amounts deposited in the Reserve Account.

	3.	 	Permanent Amendments to Loan Agreement.

	 	(a)	 	The definition of “Applicable Pricing Level” set forth in Section 1.1 of the
Loan Agreement shall be amended by adding the following paragraph at the end of the
definition:

If, as a result of any restatement of or other adjustment to the financial
statements of Borrower or a calculation error, Borrower or Administrative
Agent determines that (i) the Consolidated Leverage Ratio or Consolidated
Interest Coverage Ratio as calculated by Borrower as of any applicable date
was inaccurate and (ii) a proper calculation of the Consolidated Leverage
Ratio or Consolidated Interest Coverage Ratio would have resulted in higher
pricing for such period, Borrower shall immediately and retroactively be
obligated to pay to Administrative Agent, for the account of the applicable
Bank, promptly on demand by Administrative Agent (or, after the occurrence
of an actual or deemed entry of an order for relief with respect to Borrower
under the Bankruptcy Code of the United States of America, automatically and
without further action by Administrative Agent, any Bank, or any Issuing
Bank), an amount equal to the excess of the amount of interest and fees that
should have been paid for such period over the amount of interest and fees
actually paid for such period. This paragraph shall not limit the rights of
Administrative Agent, any Bank, or any Issuing Bank, as the case may be,
under Section 2.5(c)(iii), Section 2.5(j) or Section 3.7 or under Article
IX. Borrower’s obligations under this paragraph shall survive the
termination of the Commitments and the repayment of all other Obligations
hereunder.

-6-

 

	 	(b)	 	The definition of “Consolidated EBITDA” set forth in Section 1.1 of the Loan
Agreement shall be amended to read in its entirety as follows:

“Consolidated EBITDA” means, for any period, the sum
of (a) Consolidated Net Income for such period, minus (b)
interest income to the extent included in calculating Consolidated Net
Income for such period, plus (c) any extraordinary loss reflected in
such Consolidated Net Income, minus (d) any extraordinary gain
reflected in such Consolidated Net Income, plus (e) Consolidated
Interest Expense for such period, plus (f) the aggregate amount of
federal, state and foreign income taxes payable by Borrower and its
Consolidated Subsidiaries for such period, plus (g) depreciation,
amortization and all other non-cash expenses of Borrower and its
Consolidated Subsidiaries for such period, in each case as determined in
accordance with Generally Accepted Accounting Principles consistently
applied, plus (h) any Distributions made in Cash by KB France to
Borrower during such period, and in the case of items (e), (f) and (g), only
to the extent deducted in the determination of Consolidated Net Income for
such period.

	 	(c)	 	The definition of “Consolidated Interest Expense” set forth in Section
1.1 of the Loan Agreement shall be amended to read in its entirety as follows:

“Consolidated Interest Expense” means, for any period, the aggregate
amount of interest, fees, charges and related expenses (but excluding
premiums and non-cash amounts arising as a result of prepayment or
extinguishment of Indebtedness) paid or payable to a lender by Borrower and
its Consolidated Subsidiaries on a consolidated basis in connection with
borrowed money (including any capitalized interest and accretion of original
issue discount on long-term debt) and the interest portion of any
capitalized lease payments less interest income of Borrower and its
Consolidated Subsidiaries on a consolidated basis.

	 	(d)	 	The definition of “Consolidated Total Indebtedness” set forth in Section 1.1 of
the Loan Agreement shall be amended to read in its entirety as follows:

“Consolidated Total Indebtedness” means, as of any date of
determination, all Indebtedness and Contingent Guaranty Obligations of
Borrower and its Consolidated Subsidiaries on a consolidated basis on that
date (without duplication for any guaranty by Borrower of a Consolidated
Subsidiary’s Indebtedness or any guaranty by a Consolidated Subsidiary of
either Borrower’s or another Consolidated Subsidiary’s Indebtedness or
otherwise) minus (a) all Indebtedness and Contingent Guaranty
Obligations of Financial Subsidiaries on a consolidated basis (but only to
the extent that such Financial Subsidiaries are also Consolidated
Subsidiaries and there is no recourse to Borrower or any other Consolidated
Subsidiary) on that date minus (b) all Indebtedness and Contingent
Guaranty Obligations of Foreign Subsidiaries of the Borrower on a
consolidated basis (but only to the extent that such Foreign Subsidiaries of
the Borrower are also Consolidated Subsidiaries and there is no recourse to
Borrower or any other Consolidated Subsidiary or any of their respective
Property) on that date minus (c) the amount, if any, by which the
aggregate Cash and Cash Equivalents (exclusive of any amount maintained in
any interest reserve account required by this Agreement) of Borrower and its
Consolidated Subsidiaries (other than the

-7-

 

Financial Subsidiaries and Foreign Subsidiaries) on a consolidated basis on
that date are in excess of $15,000,000.

	 	(e)	 	Section 6.9 of the Loan Agreement shall be amended to read in its entirety as
follows:

	 	6.9	 	Consolidated Tangible Net Worth.
Permit Consolidated Tangible Net Worth to be, at the end of any Fiscal
Quarter, less than an amount equal to (a) $2,000,000,000, plus
(b) an amount equal to 50% of aggregate of the cumulative Consolidated
Net Income for each Fiscal Quarter contained in the fiscal period
commencing on September 1, 2007 and ending as of the last day of such
Fiscal Quarter (provided that there shall be no reduction
hereunder in the event of a consolidated net loss in any such Fiscal
Quarter), plus (c) an amount equal to 50% of the cumulative net
proceeds received by Borrower from the issuance of its capital stock
subsequent to August 31, 2007.

	4.	 	Consent Fee. Borrower agrees to pay to the Administrative Agent, for the account
of each “Consenting Bank” (as defined in Annex I), a fee equal to 0.200% of the Pro Rata
Share of the Commitment held by such Consenting Bank (the “Consent Fee”). The Consent Fee
shall be payable to the Consenting Banks only if Consenting Banks constitute Required Banks
and shall be paid by Borrower promptly after receipt of consents from Required Banks. Upon
payment by Borrower, the Consent Fee received by each Consenting Bank shall be fully earned
and nonrefundable.

	 
	5.	 	Conditions Precedent. The effectiveness of this Amendment is conditioned upon the
receipt by the Administrative Agent of:

	 	(a)	 	a projected income statement, projected balance sheet and projections of
Borrower’s Consolidated Interest Coverage Ratio, Consolidated Leverage Ratio and
Consolidated Tangible Net Worth (collectively, the “Projections”);

	 
	 	(b)	 	written consents to the execution, delivery and performance hereof from the
Required Banks under the Loan Agreement;

	 
	 	(c)	 	the Consent Fee from the Borrower in the amount payable to each Consenting
Bank; and

	 
	 	(d)	 	such other fees and expenses in such amounts and at such times as heretofore
set forth in a letter agreement between Borrower and the Administrative Agent and as
otherwise required under the Loan Agreement.

	6.	 	Representations and Warranties. Borrower represents and warrants to the
Administrative Agent and the Banks that:

	 	(a)	 	No Default or Event of Default has occurred and remains continuing and that
each of the representations and warranties of Borrower (other than the
representations and warranties contained in Sections 4.4(a),
4.6, 4.9, 4.18 and 4.19 of the Loan Agreement)
contained in Article IV of the Loan Agreement (each as updated from time to
time in accordance with the terms of the Loan Agreement, and except that the financial
statements referred to in Section 4.7(a) of the Loan Agreement shall be deemed
to refer to the most recent financial statements delivered pursuant to Section 7.1(a) of the Loan
Agreement and the Borrowing Base Certificate referred to in Section 4.7(b)
of the Loan Agreement shall be

-8-

 

	 	 	 	deemed to refer to the most recent Borrowing Base
Certificate delivered pursuant to Section 2.8 of the Loan Agreement) is true
and correct in all material respects as of the date hereof (other than those which
relate by their terms solely to another date).

	 	(b)	 	As of the date hereof, the assumptions upon which each of the Projections are
based are believed by management of Borrower to be reasonable and consistent with other
assumptions and facts known to Borrower as of the date hereof. Nothing in this Section
6(b) shall be construed as a representation or warranty as of any date other than the
date hereof or that any of the Projections will in fact be achieved by Borrower.

	 
	 	(c)	 	Without expanding the scope of the representations and warranties set forth in
Section 6(b), the information provided by Borrower to the Banks in connection with this
Amendment, taken as a whole, has not contained any untrue statement of a material fact
and has not omitted a material fact necessary to make the statements contained therein,
taken as a whole, not misleading under the totality of the circumstances existing at
the date such information was provided and in the context in which it was provided.

	7.	 	Updated Projections. Borrower shall, upon the reasonable request of Administrative
Agent, provide updates to the Projections during the Reduction Period. Each update shall be
based upon the Projections then most recently formulated by Borrower.

	 
	8.	 	Effect of One Time Consent; Confirmation. Except to the limited extent expressly
set forth in this Amendment, no consent or waiver, express or implied, by the Administrative
Agent or any Bank to or for any breach of or deviation from any covenant, condition or duty
by any Loan Party may be deemed a consent or waiver to or of any other breach of the same or
any other covenant, condition or duty. In all other respects, the terms of the Loan
Agreement and the other Loan Documents are confirmed.

[signatures continued on following page]

-9-

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the
date first written above.

	 	 	 	 	 	 	 
	 	 	KB HOME, a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kelly K. Masuda
 

Kelly K. Masuda
	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:
	 	Senior Vice President, Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., as Administrative Agent and as a Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark Mokelke
 

Mark Mokelke
	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:
	 	Vice President

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