Stock Purchase Agreement - KB Home and Lewis Operating Corp.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
September 21, 2000, is entered into by and among KAUFMAN AND BROAD HOME
CORPORATION, a Delaware corporation (the "Company"), and the other signatories
hereto listed on the signature pages to this Agreement (each a "Shareholder" and
collectively the "Shareholders").
WHEREAS, the Company and the Shareholders (or their predecessors
in interest) are parties to that certain Shareholder Agreement, dated as of
January 7, 1999 (the "Shareholder Agreement"), and that certain Registration
Rights Agreement, dated January 7, 1999 (the "Registration Rights Agreement");
WHEREAS, on the terms and subject to the conditions set forth in
this Agreement, the Shareholders desire to sell, and the Company desires to
purchase, an aggregate of 4,000,000 shares (the "Shares") of the Company's
common stock, par value $1.00 per share ("Common Stock"), held by the
Shareholders; and
WHEREAS, in connection with the sale of the Shares, the Company
and the Shareholders wish to amend the Registration Rights Agreement and the
Shareholder Agreement and enter into the other agreements contained in this
Agreement;
NOW, THEREFORE, upon the premises and the mutual promises herein
contained, and for good and valuable consideration, the receipt and adequacy of
which are acknowledged, the parties hereby agree as follows:
1. Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing the Company shall buy, and each Shareholder shall sell
to the Company, the number of Shares of Common Stock set forth opposite such
Shareholder's name on Exhibit A hereto for a purchase price of (a) Six Dollars
and Fifty Cents ($6.50) per Share in cash and (b) a promissory note for Nineteen
Dollars and Fifty Cents ($19.50) per Share in the form attached hereto as
Exhibit B (the "Promissory Note," and together with the promissory notes issued
to the other Shareholders, the "Promissory Notes"). The aggregate purchase price
for all of the Shares shall be Twenty Six Million Dollars ($26,000,000) in cash
(the "Cash Purchase Price") and Promissory Notes with an aggregate principal
amount of Seventy Eight Million Dollars ($78,000,000).
2. Closing. The purchase and sale of Shares contemplated by this
Agreement (the "Closing") will take place at the offices of Munger, Tolles &
Olson LLP at 355 South Grand Avenue, 35th Floor, Los Angeles, California at
10:00 a.m. (Los Angeles time) on September 21, 2000. At the Closing,
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(a) each Shareholder who is an individual will deliver
to the Company a fully executed and notarized special power of attorney
appointing Robert E. Lewis as such Shareholder's true and lawful
attorney;
(b) each Shareholder that is a corporation or limited
liability company will deliver to the Company an original of such
Shareholder's duly adopted resolutions or a certified copy of its bylaws
or operating agreement authorizing the sale of the Shares and
designating a duly authorized representative to act on behalf of such
Shareholder;
(c) the Shareholders will deliver to the Company
certificates representing the Shares, accompanied by duly executed stock
powers, with signatures guaranteed by a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Program or the Stock Exchange Medallion Program, for transfer to the
Company; and
(d) the Company will deliver to each Shareholder (i)
such Shareholder's portion of the Cash Purchase Price payable by wire
transfer in such an amount and pursuant to the instructions set forth on
Exhibit A and (ii) a duly executed Promissory Note in the principal
amount specified for such Shareholder on Exhibit A.
To the extent that a Shareholder is selling to the Company less than all of the
shares of Common Stock evidenced by a particular stock certificate, within two
business days of the Closing, the Company shall deliver to any such Shareholder
a new certificate of like tenor evidencing the remaining shares of Common Stock
owned by such Shareholder.
3. Amendments.
(a) Amendment of Registration Rights Agreement.
Effective as of the Closing, Section 2(b)(iii) of the Registration
Rights Agreement shall be amended in its entirety to read as follows:
"(iii) the Company shall not be obligated to file a
registration statement relating to a registration request pursuant to
this Section 2(b): (A) sooner than January 1, 2002 (except that the
foregoing restriction shall not apply to a request for registration of
Registrable Securities held by or on behalf of the estate of a deceased
Shareholder, but in such case the Company shall have no obligation to
serve the Request Notice or to include in the registration any
Registrable Securities other than those held by or on behalf of such
estate); (B) for an aggregate of more than 2,000,000 shares of Common
Stock during the six-month period commencing January 1, 2002 (the
"Demand Period"); (C) more than once in the Demand Period; or (D) if
such registration request (including Registrable Securities requested to
be included in response to a Request Notice) is for a number of
Registrable Securities which have an aggregate market value less than
$10 million."
(b) Amendment of Shareholder Agreement. Effective as of
the Closing, the second sentence of Section 2 of the Shareholder
Agreement shall be amended in its entirety to read as follows:
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"The foregoing agreement (the "Voting Agreement") shall
be suspended automatically and become ineffective on the earliest to
occur of the following events: (a) the aggregate beneficial ownership
(whenever used herein, as defined under Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of Common Stock
by the Shareholders becomes less than 2,000,000 shares, (b) the Board
does not nominate the Shareholders' designee for election at the 2000
annual meeting or a subsequent annual meeting at which directors of the
designee's class are nominated for election, (c) the currently incumbent
chief executive officer of the Company as of September 21, 2000 ceases
to hold the office of chief executive officer, or (d) December 1, 2003."
4. Representations and Warranties of the Shareholders. Each
Shareholder individually represents and warrants to the Company as of the
Closing as follows:
(a) Shareholder has good and marketable title to, and
sole record and beneficial ownership of, the number of the Shares set
forth opposite such Shareholder's name on Exhibit A hereto, which are to
be transferred to the Company pursuant to this Agreement, free and clear
of any and all covenants, conditions, marital property rights, and other
Encumbrances.
(b) If Shareholder is an entity, Shareholder has been
duly incorporated or formed and is validly existing in good standing
under the laws of its state of incorporation or formation. Whether an
individual or an entity, Shareholder has the right, power and authority
to enter into this Agreement and any ancillary agreements hereto, to
transfer, convey and sell to the Company at the Closing the Shares to be
sold to the Company by such Shareholder, and otherwise perform its
obligations under this Agreement and any ancillary agreements. Upon
consummation of the Closing, the Company will acquire from such
Shareholder the legal and beneficial ownership of, and all right to vote
and other rights inhering in the Shares to be sold to the Company by
such Shareholder, free and clear of all covenants, conditions, marital
property rights, or other Encumbrances.
(c) Shareholder is not a party to, subject to or bound
by any Law or Order, and no Action is pending against Shareholder or, to
Shareholder's knowledge, threatened, that would prevent the execution,
delivery or performance of this Agreement by Shareholder or the
transfer, conveyance and sale of the Shares to be sold by Shareholder to
the Company pursuant to the terms hereof.
(d) This Agreement has been duly authorized by all
necessary corporate, partnership or limited liability company action on
the part of Shareholder, and if Shareholder is a corporation,
partnership or limited liability company, this Agreement has been
executed and delivered by Shareholder and is a valid and binding
obligation of Shareholder, enforceable against Shareholder in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws limiting creditors'
rights generally and equitable principles.
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(e) Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
by Shareholder violates or will violate or results or will result in a
breach of any of the terms and provisions of, or constitutes or will
constitute a default under any material Contract to which Shareholder is
a party or is bound or which applies to the Shares being sold, or any
Order applicable to Shareholder or to the Shares being sold.
(f) If and to the extent required, Shareholder hereby
consents to the execution, delivery and performance of this Agreement by
each other Shareholder.
(g) Shareholder will acquire the Promissory Note for
investment for Shareholder's own accounts and not with a view to or for
offer or sale in connection with any distribution thereof. Shareholder
understands that the Promissory Note will not be registered under the
Securities Act of 1933, as amended (the "Securities Act") or any
applicable state securities laws by reason of a specific exemption or
exception from the registration requirements thereof which depend upon,
among other things, the accuracy of Shareholder's representations and
warranties in this Section. Shareholder understands that the Promissory
Note will bear a legend substantially to the effect that the Promissory
Note may not be transferred without the prior consent of the Company
(which shall not be unreasonably withheld) and has not been registered
under the Securities Act or any applicable state securities laws and may
be offered and sold only if so registered or upon delivery to the
Company of an opinion of counsel that an exemption or exception from
such registration is applicable.
(h) Shareholder acknowledges receipt of all information
requested from the Company and considered by Shareholder to be necessary
or appropriate for deciding whether to sell the Shares and acquire the
Promissory Note pursuant to this Agreement, including, without
limitation, any documents filed by the Company with the Securities and
Exchange Commission. Shareholder is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act or has such knowledge
and experience in financial and business matters that Shareholder is
capable of evaluating the merits and risks of, and Shareholder is able
to bear the economic risks of, selling such Shares of Common Stock and
acquiring such Shareholder's interest in the Promissory Note.
Shareholder has had the opportunity to ask questions and receive answers
regarding the terms and conditions of the sale of the Shares and the
acquisition of an interest in the Promissory Note pursuant to this
Agreement, and Shareholder is satisfied with the responsiveness and
adequacy of such answers. Shareholder understands and acknowledges that
events or circumstances may occur after the date hereof that may be
favorable or unfavorable to the Company's earnings, business affairs or
operations, and that such events or circumstances may result in changes
in the fair market value of the Shares.
5. Representations and Warranties of the Company. The Company
represents and warrants to each Shareholder as of the Closing as follows:
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(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
The Company has all necessary corporate power and authority to carry on
its business as now being conducted. The Company has the necessary
corporate power and authority to execute, deliver and perform this
Agreement and the Promissory Notes.
(b) The purchase of the Shares and the issuance of the
Promissory Notes have been duly and validly authorized by the Board of
Directors of the Company and by all other necessary corporate action on
the part of the Company. This Agreement and the Promissory Notes have
been duly executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms except as may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or limiting creditors' rights generally and
equitable principles.
(c) The execution, delivery and performance of this
Agreement by the Company and the issuance of the Promissory Notes will
not violate the provisions of, or constitute a breach or default
(whether upon lapse of time and/or the occurrence of any act or event or
otherwise) under (a) the certificate of incorporation or bylaws of the
Company, (b) any Law or Order to which the Company is subject or (c) any
Contract to which the Company is a party that is material to the
financial condition, results of operations or conduct of the business of
the Company. The execution and delivery of this Agreement by the Company
and the performance of this Agreement by the Company will not require a
filing or registration with, or the issuance of any Permit or Approval
by, any other third party or Governmental Entity.
(d) There is no Order or Action pending or to the
knowledge of the Company, threatened against or affecting the Company
that individually or when aggregated with one or more other Actions has
or might reasonably be expected to have a material adverse effect on the
Company's ability to perform this Agreement or the Promissory Notes.
(e) The Company is acquiring the Shares from the
Shareholders for the Company's own accounts for investment purposes only
and not with a view to or for sale in connection with the public
distribution thereof.
6. Certain Defined Terms. Any capitalized term used in Section 4
or Section 5 of this Agreement but not defined in this Agreement shall have the
meaning assigned to such term in the Purchase Agreement, as amended on January
7, 1999, among the Company and the Sellers named therein, for the purchase and
sale of the homebuilding business of the homebuilding entities of the Lewis
Homes group of companies.
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7. Miscellaneous.
(a) Injunctions. Each party acknowledges and agrees that
irreparable damage would occur in the event that any of the provisions
of this Agreement was not performed in accordance with its specific
terms or was otherwise breached. Therefore, each party shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions
hereof in any court having jurisdiction, such remedy being in addition
to any other remedy to which such party may be entitled at law or in
equity.
(b) Severability. If any term or provision of this
Agreement shall be held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms and
provisions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and each of the
parties shall use its best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term or provision.
(c) Waivers, etc. No failure or delay on the part of
either party in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance of steps to enforce
such a right or power preclude any other or further exercise thereof or
the exercise of any other right or power. No modification or waiver of
any provision of this Agreement nor consent to any departure therefrom
shall in any event be effective unless the same shall be in writing and
signed by each of the parties, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which
given.
(d) Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to its subject matter. This
Agreement supersedes all prior agreements and understandings between the
parties, whether written or oral, with respect to the subject matter
hereof. The paragraph headings contained in this Agreement are for
reference purposes only, and shall not affect in any manner the meaning
or interpretation of this Agreement.
(e) Counterparts. For the convenience of the parties,
this Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original but all of which together shall
be one and the same instrument.
(f) Amendment. This Agreement may be amended only by a
written instrument duly executed by each of the Company and the
Shareholders.
(g) Notices. Any notice or other communication hereunder
must be given in writing and delivered in person or sent by telecopy, by
a nationally-recognized overnight courier service or by certified or
registered mail, postage prepaid, receipt requested, addressed as
follows:
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If to the Company, addressed to:
Kaufman and Broad Home Corporation
10990 Wilshire Boulevard
Los Angeles, CA 90024
Attention: Kimberly N. King
Fax No.: (310) 231-4280
with a copy to:
Munger, Tolles & Olson LLP
355 South Grand Avenue
35th Floor
Los Angeles, CA 90071
Attention: Michael O'Sullivan, Esq.
Fax No.: (213) 687-3702
If to the Shareholders, addressed to:
John M. Goodman
Lewis Operating Corp.
1156 N. Mountain Avenue
Upland, CA 91785
Fax No.: (909) 912-6770
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071
Attn: Richard A. Boehmer, Esq.
Fax No.: (213) 430-6407
or to such other address or to such other person as any party shall have
last designated by such notice to the other party. Each such notice or
other communication shall be effective (i) if given by
telecommunication, when transmitted to the applicable number so
specified in (or pursuant to) this Section 7(g) and an appropriate
answer back is received, (ii) if given by overnight courier for next
business day delivery, one business day following delivery by sender to
such overnight courier, (iii) if given by mail, three days after such
communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid, or (iv) if given by any other means,
when actually received at such address.
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(h) Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance
with and be governed by the internal laws of the State of California.
(i) Assignment. Except as provided herein, the parties
may not assign their rights or delegate their obligations under this
Agreement without the prior written consent of the other parties.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Shareholders and the Company have executed this
Agreement as of the date first above written.
KAUFMAN AND BROAD HOME CORPORATION
By: /S/ WILLIAM R. HOLLINGER
-------------------------------------
Name: William R. Hollinger
-----------------------------
Its: Vice President and Controller
------------------------------
SHAREHOLDERS
Ralph M. Lewis
By: /S/ RALPH M. LEWIS BY ROBERT E. LEWIS
-------------------------------------
Robert E. Lewis, his attorney-in-fact
Goldy S. Lewis
By: /S/ GOLDY S. LEWIS BY ROBERT E. LEWIS
-------------------------------------
Robert E. Lewis, his attorney-in-fact
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LHE PLATTE, LLC
By: Lewis Holding Company, a Delaware
limited liability company, its member
By: Forehand Development Corp., a
California corporation, its member
By: /S/ JOHN M. GOODMAN
------------------------------
John M. Goodman, its Authorized
Agent
LH AUGUSTA, LLC
By: /S/ JOHN M. GOODMAN
-------------------------------------
John M. Goodman, its Authorized Agent
LH EVANS, LLC
By: /S/ JOHN M. GOODMAN
-------------------------------------
John M. Goodman, its Authorized Agent
LH GRUNHORN, LLC
By: /S/ JOHN M. GOODMAN
-------------------------------------
John M. Goodman, its Authorized Agent
LH WHITNEY, LLC
By: /S/ JOHN M. GOODMAN
-------------------------------------
John M. Goodman, its Authorized Agent
LH JAGERHORN, LLC
By: /S/ JOHN M. GOODMAN
-------------------------------------
John M. Goodman, its member
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EXHIBIT A
SHAREHOLDERS
---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT OF
SHAREHOLDER SHARES CASH PURCHASE PROMISSORY
SHAREHOLDER WIRE INSTRUCTIONS SOLD (#) PRICE ($) NOTE ($)
---------------------------------------------------------------------------------------------------
Ralph M. Lewis & Bank: Wells Fargo Bank 45,763 297,459.50 892,378.50
Goldy S. Lewis San Francisco, CA
Credit: Long Beach Trust
Services
WDDA: 4068-000868
Fed Routing #: 121000248
FFC Account #: 219349
---------------------------------------------------------------------------------------------------
LHE Platte, LLC Bank: Wells Fargo Bank 400,000 2,600,000.00 7,800,000.00
San Francisco, CA
Credit: Long Beach Trust
Services
WDDA: 4068-000868
Fed Routing #: 121000248
FFC Account #: 216797
---------------------------------------------------------------------------------------------------
LH Augusta, LLC Bank: Wells Fargo Bank 393,935 2,560,577.50 7,681,732.50
San Francisco, CA
Fed Routing #: 121000248
Account #: 4047-100755
---------------------------------------------------------------------------------------------------
LH Evans, LLC Bank: Wells Fargo Bank 1,719,455 11,176,457.50 33,529,372.50
San Francisco, CA
Credit: Long Beach Trust
Services
WDDA: 4068-000868
Fed Routing #: 121000248
FCC Account #: 220960
---------------------------------------------------------------------------------------------------
LH Grunhorn, LLC Bank: Wells Fargo Bank 149,218 969,917.00 2,909,751.00
San Francisco, CA
Fed Routing #: 121000248
Account #: 4047-100771
---------------------------------------------------------------------------------------------------
LH Whitney, LLC Bank: Wells Fargo Bank 1,134,055 7,371,357.50 22,114,072.50
San Francisco, CA
Credit: Long Beach Trust
Services
WDDA: 4068-000868
Fed Routing #: 121000248
FCC Account #: 220969
---------------------------------------------------------------------------------------------------
LH Jagerhorn, LLC Bank: Wells Fargo Bank 157,574 1,024,231.00 3,072,693.00
San Francisco, CA
Fed Routing #: 121000248
Account #: 4047-100797
---------------------------------------------------------------------------------------------------
A- 1
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EXHIBIT B
FORM OF PROMISSORY NOTE
<PAGE> 13
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE OFFERED, SOLD, OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT (A) WITH THE PRIOR CONSENT
OF THE COMPANY (WHICH SHALL NOT BE UNREASONABLY WITHHELD) AND (B) PURSUANT TO
(i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH NOTE WHICH IS EFFECTIVE UNDER
SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES. IN THE
CASE OF TRANSFERS OR OTHER DISPOSITIONS MADE OTHERWISE THAN PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, THE HOLDER SHALL, AT THE
COMPANY'S REQUEST, PROVIDE AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBJECT TO THE PROVISIONS AND ENTITLED TO THE BENEFITS OF A STOCK
PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 21, 2000. A COPY OF SUCH AGREEMENT IS
ON FILE AT THE OFFICES OF THE COMPANY.
---------------
KAUFMAN AND BROAD HOME CORPORATION
6.6% PROMISSORY NOTE
No. R-1
$892,378.50 September 21, 2000
Los Angeles, California
KAUFMAN AND BROAD HOME CORPORATION, a Delaware corporation (the
"Company"), for value received hereby promises to pay to Ralph M. Lewis and
Goldy S. Lewis, jointly (the "Holder"), the aggregate principal sum of
$892,378.50, with $297,459.50 payable on January 4, 2001, $297,459.50 payable on
June 7, 2001, and $297,459.50 payable on December 6, 2001 (the "Final Maturity
Date"), plus interest as hereinafter provided. Notwithstanding the foregoing, on
the Final Maturity Date, the entire remaining unpaid balance of this Note, plus
any and all accrued and unpaid interest, shall be due and payable.
This Note is issued in connection with the transactions described in
that certain Stock Purchase Agreement and among the Company, Holder and certain
other holders of the Company's common stock, dated as of September 21, 2000, as
the same may from time to time be amended, modified or supplemented (the
"Purchase Agreement"). Payment of the principal of, and interest on, this Note
shall be made in lawful money of the United States of America by wire transfer
to the Holder pursuant to the wire instructions set forth on Exhibit A hereto.
Holder is subject to certain restrictions and shall be entitled to certain
rights and privileges set forth in the Purchase Agreement. Capitalized terms
used herein but not defined herein shall have the meaning set forth in the
Purchase Agreement.
<PAGE> 14
1. INTEREST. This Note shall bear simple interest on the unpaid
principal balance hereof at a rate of 6.6 percent per annum. Interest shall be
calculated on the basis of a 365 or 366 day year, as applicable, and charged
for the actual number of days elapsed. Interest on the unpaid principal balance
of this Note shall be due and payable on the outstanding balance at the time of
each payment of principal.
2. PREPAYMENT. The Company may, without premium or penalty, prepay all
or a portion of the outstanding principal balance due under this Note, provided
that each such prepayment is accompanied by accrued interest on the amount of
principal repaid calculated to the date of such prepayment. Any partial
prepayments shall be applied to installments of principal in inverse order of
their maturity.
3. RESTRICTIONS ON TRANSFER. Title to this Note may not be offered,
sold, or otherwise transferred, pledged or hypothecated without the prior
written consent of the Company (which shall not be unreasonably withheld).
4. EVENTS OF DEFAULT. If any of the events specified in this Section 4
shall occur (herein individually referred to as an "Event of Default"), Holder
may, so long as such condition exists, declare the entire principal and unpaid
accrued interest hereon immediately due and payable, by notice in writing to the
Company.
(a) If the Company shall fail to pay when due any payment of principal
or interest on this Note and such failure continues for 5 days after Holder
notifies the Company in writing; or
(b) The institution by the Company of proceedings to be adjudicated as
bankrupt or insolvent, or the consent by it to institution of bankruptcy or
insolvency proceedings against it or the filing by it of a petition or answer or
consent seeking reorganization or release under the federal Bankruptcy Act, or
any other applicable federal or state law, or the consent by it to the filing of
any such petition or the appointment of a receiver, liquidator, assignee,
trustee or other similar official of the Company, or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the taking of corporate action by the Company in furtherance of any such
action; or
(c) If, within sixty (60) days after the commencement of an action
against the Company (and service of process in connection therewith on the
Company) seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of the Company or
all orders or proceedings thereunder affecting the operations or the business of
the Company stayed, or if the stay of any such order or proceeding shall
thereafter be set aside, or if, within sixty (60) days after the appointment
without the consent or acquiescence of the Company or any trustee, receiver or
liquidator of the Company or of all or any substantial part of the properties of
the Company, such appointment shall not have been vacated; or
<PAGE> 15
(d) Any declared default of the Company under any Senior Indebtedness
(as defined below) that gives the holder thereof the right to accelerate such
Senior Indebtedness, and such Senior Indebtedness is in fact accelerated by the
holder. For purposes hereof, "Senior Indebtedness" means (i) all indebtedness to
banks, commercial finance lenders, insurance companies or other financial
institutions regularly engaged in the business of lending money, which is
borrowed by the Company (whether or not secured), (ii) all indebtedness which by
its terms is senior in right of payment to the Company's general unsecured
indebtedness, and (iii) any such indebtedness or any debentures, notes or other
evidence of indebtedness issued in exchange for or to refinance such Senior
Indebtedness, or any indebtedness arising from the satisfaction of such Senior
Indebtedness by a guarantor.
5. STATUS. Until the Company pays to the Holder the first principal
payment required under this Note, this Note shall rank pari passu in right of
payment with the general unsecured indebtedness of the Company which by its
terms is not subordinated to this Note. From and after the date the Company
makes such payment, this Note shall be subordinate and junior in right of
payment to all existing and future Senior Indebtedness of the Company. For so
long as the Notes are so subordinated, the Company shall not make any payments
on account of the Notes or acquire any of the Notes if a default in the payment
of principal of, premium, if any, or interest on Senior Indebtedness occurs and
is continuing beyond any applicable period of grace (a "Payment Default") or any
other default occurs and is continuing with respect to any Senior Indebtedness
that permits the holders thereof to accelerate its maturity ( a "Non-payment
Default") and the Company or trustee thereof, as applicable, receives a notice
of such default (a "Payment Blockage Notice") meeting the requirements specified
in the terms of such Senior Indebtedness. In the case of a Payment Default,
payments on the Note shall be resumed by the Company upon the date on which such
default is cured or waived in accordance with the terms of such Senior
Indebtedness or such default ceases to exist. In the case of a Non-Payment
Default, payments on the Note shall be resumed by the Company upon the earlier
of: (a) the date on which such Non-Payment Default is cured or waived in
accordance with the terms of such Senior Indebtedness, (b) 179 days after the
date on which the applicable Payment Blockage Notice is received, or (c) the
date on which the payment blockage period is otherwise terminated or the holders
of such Senior Indebtedness consent to payments on the Note. With respect to any
Non-Payment Default, during the term of this Note the aggregate of all periods
of payment blockage shall not exceed 179 days. No Non-Payment Default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
shall be, or be made, the basis of a subsequent Payment Blockage Notice unless
such default shall have been cured or waived in accordance with the terms of
such Senior Indebtedness for a period of not less than 90 days. At all times,
this Note shall be senior as to liquidation and distributions of stock or cash
to all existing and future classes of Company common stock.
6. EXCHANGE OF NOTE. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Note, and in
the case of loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or, in the case of
mutilation, on surrender and cancellation of the mutilated Note, the Company at
its expense shall execute and deliver, in lieu of the Note, a new Note of the
same form and amount.
<PAGE> 16
7. NO STOCKHOLDER RIGHTS. This Note shall not confer upon Holder or
any other person the right to vote, to receive dividends or other distributions,
to consent or to receive notice as a shareholder in respect of any meeting of
shareholders, or any other rights whatsoever as a shareholder of the Company.
8. AMENDMENT. All amendments to this Note require the written consent
of the Company and Holder.
9. WAIVER. The Company hereby waives presentment, demand for payment,
notice of dishonor, notice of nonpayment, protest, notice of protest, and any
and all other notices and demands in connection with the delivery, acceptance,
performance, default, or enforcement of this Note.
10. NOTE REGISTER. This Note shall be registered in the Note Register
maintained by the Company. The Company shall be entitled to treat the Holder
whose name appears in the Note Register as the owner in fact for all purposes
(notwithstanding any notation of ownership or other writing hereon made by
anyone or any notice to the contrary).
11. SIGNATURES. If this Note bears the signatures of individuals who
were at any time the proper officers of the Company at the time of singing, such
signatures shall bind the Company, notwithstanding that any such individuals
shall have ceased to hold such offices prior to the delivery of this Note or
did not hold such offices on the date of the Purchase Agreement.
12. NOTICES. All notices to the Company under this Note shall be in
writing and addressed to the Company at 10990 Wilshire Boulevard, Los Angeles,
California 90024, Attn: Kimberly N. King, or to other such address of the
Company as the Company may notify the Holders.
13. GOVERNING LAW. This Note shall be construed, interpreted and
governed by the laws of the State of California, without regard to its
conflicts-of-law provisions.
14. HEADINGS. All headings used herein are used for convenience only
and shall not be used to construe or interpret this Note.
[Remainder of Page Intentionally Left Blank]
<PAGE> 17
In witness whereof, the Company has caused this Note to be executed by
a duly authorized officer and attested by its Secretary, this 21st day of
September, 2000.
Kaufman and Broad Home Corporation
By:
-------------------------------
William R. Hollinger
Vice President and Controller
By:
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Kimberly King
Secretary