0000950147-95-000136.txt : 19950914 0000950147-95-000136.hdr.sgml : 19950914 ACCESSION NUMBER: 0000950147-95-000136 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950908 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEBB DEL CORP CENTRAL INDEX KEY: 0000105189 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 860077724 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-04785 FILM NUMBER: 95571935 BUSINESS ADDRESS: STREET 1: 2231 E CAMELBACK RD CITY: PHOENIX STATE: AZ ZIP: 85016 BUSINESS PHONE: 6028088000 MAIL ADDRESS: STREET 1: 2231 E CAMELBACK ROAD STREET 2: SUITE 400 CITY: PHOENIX STATE: AZ ZIP: 85016 FORMER COMPANY: FORMER CONFORMED NAME: WEBB DEL E CORP DATE OF NAME CHANGE: 19880728 10-K405 1 FORM 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange ---- Act of 1934. For the fiscal year July 1, 1994 to June 30, 1995. ---- Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from N/A to N/A . ------- -------- Commission File Number: 1-4785 DEL WEBB CORPORATION (Exact name of registrant as specified in its charter) Delaware 86-0077724 (State of Incorporation) (IRS Employer Identification Number) 6001 North 24th Street, Phoenix, Arizona 85016 (Address of principal executive offices) (Zip Code) (602) 808-8000 (Registrant's phone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- New York Stock Exchange Common Stock (par value $.001 per share) Pacific Stock Exchange 10 7/8% Senior Notes due 2000 New York Stock Exchange 9 3/4% Senior Subordinated Debentures due 2003 New York Stock Exchange 9% Senior Subordinated Debentures due 2006 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Registrant's Common Stock outstanding at August 21, 1995 was 17,396,007 shares. At that date, the aggregate market value of Registrant's Common shares held by non-affiliates, based upon the closing price of the Common Stock on the New York Stock Exchange on that date, was approximately $339,200,000. Documents Incorporated by Reference Portions of Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on November 8, 1995 are incorporated herein as set forth in Part III of this Annual Report. DEL WEBB CORPORATION FORM 10-K ANNUAL REPORT For the Fiscal Year Ended June 30, 1995 TABLE OF CONTENTS PART I Item 1. PAGE and Item 2. Business and Properties The Company..................................................... 1 Master-Planned Communities...................................... 1 Potential Future Communities.................................... 4 Conventional Homebuilding....................................... 4 Product Design.................................................. 5 Construction.................................................... 5 Sales Activities................................................ 5 Other Real Estate Activities.................................... 6 Competition..................................................... 6 Certain Factors Affecting the Company's Operations.............. 6 Executive Officers of the Company............................... 9 Employees.......................................................11 Item 3. Legal Proceedings...............................................11 Item 4. Submission of Matters to a Vote of Security Holders.............11 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters...................................12 Item 6. Selected Consolidated Financial Data............................13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Certain Consolidated Financial and Operating Data...........15 Results of Operations.......................................17 Liquidity and Financial Condition of the Company............19 Impact of Inflation.........................................20 Accounting Standard Not Yet Adopted by the Company..........20 Item 8. Financial Statements and Supplementary Data.....................21 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................21 PART III Item 10. Directors and Executive Officers of the Registrant..............22 Item 11. Executive Compensation..........................................22 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................22 Item 13. Certain Relationships and Related Transactions..................22 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...........................................23 PART I Items 1 and 2. Business and Properties THE COMPANY Del Webb Corporation is one of the nation's leading developers of age-restricted active adult communities. The Company has extensive experience in the active adult community business, having built and sold more than 50,000 homes at its Sun City communities over the past 35 years. The Company is also delivering homes at Terravita, a gate-guarded, amenity-rich, master-planned residential community in north Scottsdale, Arizona, that is not age-restricted. The Company designs, develops and markets these large-scale, master-planned residential communities, primarily for active adults age 55 and over, controlling all phases of the master plan development process from land selection through the construction and sale of homes. Within its communities, the Company is the exclusive developer of homes. The Company also has significant conventional subdivision homebuilding operations, which it conducts under the name "Coventry Homes," in the Phoenix, Tucson and Las Vegas areas and southern California. The Company was incorporated in 1946 under the laws of the State of Arizona and reincorporated in 1994 under the laws of the State of Delaware. The Company's principal executive offices are located at 6001 North 24th Street, Phoenix, Arizona 85016 and its telephone number is (602) 808-8000. The Company conducts substantially all of its activities through subsidiaries and, as used in this Annual Report, the term "Company" includes Del Webb Corporation and its subsidiaries unless the context indicates otherwise. Statements in this Annual Report as to acreage, mileage, number and years supply of future home sites, square feet and number of present and future residents, employees and shareholders are approximations. MASTER-PLANNED COMMUNITIES At June 30, 1995 the Company had six master-planned communities at which home closings were taking place, two master-planned communities at which it was taking home sales orders, but at which closings had not yet commenced, and two master-planned communities in earlier stages of development. Communities Delivering Homes The following table shows certain information concerning the six communities at which the Company was delivering homes at June 30, 1995.
Sun City Sun City Sun City Sun City Sun City West Tucson Las Vegas Palm Springs Terravita Roseville -------- -------- --------- ------------ --------- --------- First home closing....................... 1978 1987 1989 1992 1994 1995 Total acres.............................. 7,000 1,000 2,500 1,600 800 1,200 Homes at completion...................... 16,500 2,500 7,700 4,800 1,400 3,000 Home closings through June 30, 1995...... 14,247 2,092 4,994 885 425 293 Future home sites (including backlog).... 2,253 408 2,706 3,915 975 2,707 Years supply of future homes based on current or estimated absorption........ 2-3 1-2 3-4 9-15 2-3 3-5 Base price range of homes at June 30, 1995 (in thousands)........ $93-240 $91-224 $95-271 $105-291 $170-380 $126-272
Sun City West ------------- Sun City West is a self-contained active adult community located 25 miles northwest of downtown Phoenix, Arizona. The focal point of Sun City West is its central activities area, including a very large recreation center, the Sundome (a 7,000-seat indoor theater owned by Arizona State University), a library, a bowling alley, tennis courts, lawn bowling greens and a Company-owned 18-hole championship golf course. Sun City West also has eight other 18-hole golf courses (seven of which are owned by the residents' community association and one of which is owned by a private club owned by residents) and three smaller recreation centers. In addition, Sun City West has over 200 civic and social organizations and clubs. Sun City West had a population of 27,000 at June 30, 1995. Sun City Tucson --------------- Sun City Tucson is located 20 miles north of downtown Tucson, Arizona. It is developed around an 18-hole championship golf course. This active adult community's 45,000-square foot primary recreation center includes a social hall, arts and crafts rooms, a large kitchen and a sports and exercise facility. Its outdoor recreational facilities include tennis courts, a swimming pool, shuffleboard courts, bocci ball courts and a miniature golf course. Sun City Tucson also has a smaller recreation facility (including a swimming pool, tennis courts and activity rooms). Another smaller recreation center is under construction. Sun City Tucson has numerous civic and social organizations and clubs and had a population of 4,000 at June 30, 1995. This community will be built out in the near future and the Company has no current plans to build another community in the Tucson area. Sun City Las Vegas ------------------ Sun City Las Vegas is located eight miles northwest of downtown Las Vegas, Nevada. It has two 18-hole championship golf courses, with a third, executive course scheduled to become operational in late 1995. Other amenities in this active adult community include 100,000 total square feet of recreational facilities at two large and one smaller recreation centers. Together, these facilities include meeting halls, arts and crafts rooms and tennis, shuffleboard, bocci ball and horseshoe courts, as well as sports and exercise complexes that include indoor and outdoor swimming pools, saunas, weight training and exercise rooms and a racquetball court. An additional 40,000 square feet of similar facilities are being designed and are currently anticipated to become operational in the Summer of 1996. Sun City Las Vegas has approximately 65 civic and social organizations and clubs and had a population of 9,000 at June 30, 1995. Sun City Palm Springs --------------------- Sun City Palm Springs is located in the Coachella Valley 20 miles east of Palm Springs and 130 miles east of downtown Los Angeles. It is a gate-guarded active adult community that has an 18-hole championship golf course and a 62,000-square foot recreation center with indoor and outdoor swimming pools and therapy spas, tennis courts, bocci ball courts, a fitness and exercise center, arts and crafts studios, a 6,300-square foot ballroom and a full service restaurant and lounge. Sun City Palm Springs had a population of 1,600 at June 30, 1995. Terravita --------- Terravita is a gate-guarded, amenity-rich, master-planned residential community located in north Scottsdale, Arizona, that is not age-restricted. It has an 18-hole championship golf course, a 32,000-square foot clubhouse and fitness center, a swimming pool, tennis courts and other recreational amenities. The Company began delivering homes at Terravita in July 1994. Terravita had a population of 1,000 at June 30, 1995. Sun City Roseville ------------------ Sun City Roseville is located 20 miles northeast of downtown Sacramento, California. This active adult community is planned to include 27 holes of championship golf, nine holes of which are open and nine holes of which are currently under construction, 40 acres of parks and a 52,000-square foot recreation center with indoor and outdoor swimming pools and therapy spas, tennis courts, bocci ball courts, a fitness and exercise center, arts and crafts studios, a ballroom and a full-service restaurant and lounge. Sun City Roseville began home closings in February 1995 and had a population of 500 at June 30, 1995. New Communities Taking Home Sales Orders The following table shows certain information concerning the two communities at which the Company was taking home sale orders at June 30, 1995, but at which home deliveries had not then commenced. Sun City Sun City Hilton Head Georgetown ----------- ---------- Total acres................................. 5,600 5,300 Homes at completion......................... 8,000 9,500 New orders first taken...................... November 1994 June 1995 Net new orders through June 30, 1995........ 149 122 Anticipated First home closing.......................... August 1995 Spring 1996 Base price range of homes at June 30, 1995 (in thousands)............................ $96-245 $101-235 Sun City Hilton Head -------------------- Sun City Hilton Head is located inland 13 miles from Hilton Head Island, South Carolina. It is a gate-guarded active adult community that is currently planned for 8,000 homes, several golf courses, a complex of recreational buildings and other amenities on 5,600 acres, of which 1,920 acres are owned by the Company and 3,680 acres are subject to options expiring in various years through 2000. The Company broke ground at Sun City Hilton Head in May 1994 and began taking new home sales orders in November 1994. In part because Sun City Hilton Head is located on the East Coast, distant from the Company's other communities, and because of the location of Sun City Hilton Head in relation to major metropolitan areas, there is not the same local pent-up demand for initial home sales orders at this community as has existed with certain of the Company's other communities. In addition, rains and flooding severely hampered development and marketing at this community in fiscal 1995. At June 30, 1995 the Company had a backlog of 149 home sale contracts at Sun City Hilton Head. Home closings at Sun City Hilton Head began in August 1995. See "Sales Activities." Sun City Georgetown ------------------- Sun City Georgetown is an active adult community being developed 30 miles north of downtown Austin, Texas. It is currently planned for 9,500 homes on 5,300 acres, of which 1,850 acres are owned by the Company and 3,450 acres are subject to options expiring in various years through 1999. The Company broke ground at Sun City Georgetown in the Spring of 1995 and began taking new home sales orders at this community on June 15, 1995. At June 30, 1995 the Company had a backlog of 122 home sale contracts at Sun City Georgetown. The Company believes that this level of initial home sales activity is attributable to local pent-up demand and will not continue in the future. Delivery of the first homes at this community is currently anticipated in the Spring of 1996. Communities in Earlier Stages of Development The following table shows certain information concerning the two communities in earlier stages of development at June 30, 1995. Sun City MacDonald Ranch Sun City Grand --------------- -------------- Total acres................... 600 4,000 Homes at completion........... 2,300 9,500 Sun City MacDonald Ranch ------------------------ Sun City MacDonald Ranch is located in Henderson, Nevada, near Las Vegas. It is being developed as an active adult community with fewer amenities (for example, an executive golf course instead of a championship golf course) and higher density than the Company's other active adult communities. This community is currently planned for 2,300 homes on 600 acres. The Company broke ground at Sun City MacDonald Ranch in the Spring of 1995 and plans to begin to take new home sales orders at this community in the Fall of 1995. Home closings at Sun City MacDonald Ranch are not currently anticipated to begin before the Spring of 1996. Sun City Grand -------------- Sun City Grand is located on 4,000 acres adjacent to Sun City West. It is currently planned for 9,500 homes, several golf courses and amenities similar to those in other Sun Cities. Development began in the Spring of 1995 and is being coordinated with the build-out of Sun City West. The Company does not currently anticipate that home sales activity will begin at Sun City Grand in fiscal 1996. POTENTIAL FUTURE COMMUNITIES The Company believes that the demographic attributes of its active adult target market segment of people age 55 and over present significant opportunities for carefully selected future active adult communities. The Company's plan is to capitalize on those opportunities and its experience, expertise and reputation by developing active adult communities in strategically selected locations. The current business strategy of the Company includes conducting extensive market research on prospective areas, including consumer surveys and supply and demand analyses, in connection with its evaluation of sites for future active adult communities. At any given time, the Company may have a number of land acquisitions for potential communities under study and in various stages of investigation or negotiation. The Company is currently considering acquiring the land for communities to be located both in areas of the Country where the Company has active adult communities and in other areas, including full four-season areas (i.e., areas which experience cold winters), where it does not have experience in developing communities. In making significant land acquisitions, the Company generally endeavors to acquire options on the land to mitigate the risk of holding the land during the detailed feasibility and entitlement process. However, under certain circumstances, the Company acquires such property directly. In 1992 the Company purchased for $11 million, 5,600 acres of land north of Phoenix (currently known as the Villages at Desert Hills) as the site for a possible master-planned community. In April 1995 the Company received a general plan amendment and development master plan approval (the initial governmental planning approvals required) for 16,500 homes on this property. However, development of this property remains subject to a number of uncertainties and the planning, entitlement and permitting process is still in a relatively early stage. CONVENTIONAL HOMEBUILDING The Company began its conventional subdivision homebuilding operations in the Phoenix area in 1991. The Company expanded its conventional homebuilding operations to Tucson in fiscal 1994 and to Las Vegas and southern California in fiscal 1995. At June 30, 1995 the Company had a backlog of home sales orders at 26 subdivisions -- 18 in the Phoenix area, three in the Tucson area, two in the Las Vegas area and three in southern California. In order to capitalize on its market knowledge and organizational structure, the Company's conventional homebuilding activities are primarily conducted in those metropolitan or market areas in which the Company is developing an active adult community. Through June 30, 1995 the Company's conventional homebuilding operations have generally targeted first-time and move-up buyers, with the base price of homes offered for sale at June 30, 1995 ranging from $80,000 to $316,000. The Company expects homes in this price range to be its main target segment in the future, but it intends to remain flexible when reviewing potential sites in order to pursue attractive opportunities. The Company currently expects that community development will continue to be its primary business activity. For the year ended June 30, 1995, conventional homebuilding operations generated 18 percent of the Company's revenues. PRODUCT DESIGN The Company designs homes to suit its market and endeavors to conform to the popular home design characteristics in the particular geographic market involved. Home designs are periodically reviewed and refined or changed to reflect changing homebuyer tastes in each market. Homes at the Company's communities generally range in size from 1,000 square feet to 3,900 square feet and include two to five (predominantly two and three) bedrooms, two or more baths, kitchen, living/dining area, family room or nook, two-car garages and golf cart space. Built-in appliances are included. The Company offers a program of interior and exterior upgrades, including different styles of cabinetry and floor coverings and, at its communities, a program for architectural changes to allow home buyers to further modify their homes. CONSTRUCTION The Company generally functions as its own general contractor. At all stages of production, the Company's management personnel and on-site superintendents coordinate the activities of subcontractors, consultants and suppliers and subject their work to quality and cost controls. Consulting firms assist in project planning and independent subcontractors are employed to perform almost all of the site development and construction work. Within its active adult communities and, generally, its conventional subdivisions, the Company is the exclusive developer of homes and does not sell vacant lots to others for residential construction purposes. The time required for construction of the Company's homes depends on the weather, time of year, local labor situations, availability of materials and supplies and other factors. The Company strives to coordinate the construction of homes with home sales orders to control the costs and risks associated with completed but unsold inventory. An inventory of unsold homes under construction is maintained for immediate sale to customers. SALES ACTIVITIES At each of its communities the Company establishes a large and well-appointed sales pavilion and an extensive complex of furnished model homes. These models include a wide variety of single family homes, each of which is generally available in several exterior styles. The Company's homes are sold by its commissioned sales personnel, who are available to provide prospective home buyers with floor plans, price information, option selections and tours of models and lots. All communities have co-brokerage programs with independent real estate brokers. Homes are sold through sales contracts, some of which allow customers to purchase homes for delivery up to one year or more in the future. The sales contracts generally require an initial deposit and an additional deposit prior to commencement of construction. The Company provides to all home buyers standardized warranties subject to specified limitations. While more than one factor may contribute to a given home sale, the Company's experience indicates that a substantial portion of the home sales at its communities are attributable to follow-ups on referrals from residents of its communities and, at active adult communities, to the Company's "Vacation Getaway" program. This program enables prospective purchasers to visit an active adult community and stay (for a modest charge) in vacation homes for up to one week to experience the Sun City lifestyle prior to deciding whether to purchase a home. The Company's information is that most homebuyers at its active adult communities generally visit the community in which they purchase on more than one occasion before buying. This may affect the success or initial success of the sales effort at those communities at which a higher proportion of the potential customers do not live within a several-hour driving distance from the community. The Company also markets its communities through billboards, television and radio commercials, local and national print advertising, direct mailings and telemarketing. The Company offers mortgage financing for the purchasers of homes at its communities and conventional subdivisions. The Company sells the mortgages it generates to third parties. OTHER REAL ESTATE ACTIVITIES The Company is completing the development of The Foothills, a 4,140-acre master-planned residential land development project located in Phoenix in which individual land parcels and lots are being sold to other builder/developers for conventional housing and related commercial developments. At June 30, 1995, 424 acres remained to be sold at The Foothills. Of these acres, 401 are zoned for conventional housing and 23 are zoned for commercial development. At June 30, 1995 the Company's investment in The Foothills, net of a valuation allowance recorded in fiscal 1991, was $25.9 million. COMPETITION The Company believes that it maintains a leading position within the active adult community market in each of the metropolitan areas in which it has a community that is currently generating revenues. The Company believes the major competitive factors in active adult community home purchases include location, lifestyle, price, value, recreational facilities and other amenities and builder/developer reputation. The Company believes its reputation, established by building and selling more than 50,000 homes over 35 years and providing an attractive lifestyle for adults age 55 and over, enhances the Company's active adult community marketing position. All of the Company's real estate operations are subject to direct and indirect competition. The Company competes with numerous homebuilders and developers, certain of which have greater financial resources than the Company. The Company also competes generally with most homebuilders and residential developers in its geographic markets and with resales of homes in the general resale market for such housing, including in its own communities. For the Company's active adult communities, there are varying degrees of direct and increasing competition from businesses engaged exclusively or primarily in the sale of homes to buyers age 55 and older and from non-age-restricted, master-planned communities in these areas. The Company competes with new home sales and resales at these other communities. Sun City Hilton Head competes with numerous homebuilders and community developers in the eastern seaboard, including in the Hilton Head area and Florida. A large homebuilder recently commenced developing a 1,300-home, age-restricted community in Indio, California, which is near Sun City Palm Springs. The Company believes there may be significant additional future competition in active adult community development, including competition from conventional community developers. CERTAIN FACTORS AFFECTING THE COMPANY'S OPERATIONS FUTURE COMMUNITIES. The Company's communities will be built out over time. Therefore, the medium- and long-term future of the Company will be dependent on the Company's ability to develop and market future communities successfully. Acquiring land and committing the financial and managerial resources to develop a community on that land involve significant risks. Before these communities generate any revenues, they require material expenditures for, among other things, acquiring land, obtaining development approvals and constructing project infrastructure (such as roads and utilities), recreation centers, model homes and sales facilities. It generally takes several years for communities to achieve cumulative positive cash flow. The Company believes that the development of Sun City Hilton Head presents significant new development and marketing challenges, including acquiring the necessary construction materials and labor in sufficient amounts and on acceptable terms, adapting the Company's construction methods to a different geography and climate, and attracting potential customers from areas and to a market in which the Company has not had significant experience. The Company will incur additional risks to the extent it develops communities in climates or other geographic areas in which it does not have experience developing communities or develops a different size or style of community. Among other things, the Company believes that a significant portion of the home sales at its active adult communities is attributable to referrals from, or sales to, residents of those communities. The extent of such referrals or sales at new communities, including communities developed in other areas of the Country, may be less than the Company has enjoyed at the active adult communities where it currently sells homes. The Company currently is managing the development of a greater number of projects in a wider geographical area than it has previously developed at any given time. LONG-TERM NATURE OF PROJECTS; REAL ESTATE, ECONOMIC AND OTHER CONDITIONS; GEOGRAPHIC CONCENTRATION. The Company's communities are long-term projects. Sales activity at the Company's communities varies from period to period, and the ultimate success of any community cannot necessarily be judged by results in any particular period or periods. A community may generate significantly higher sales levels at inception (whether because of local pent-up demand in the area or other reasons) than it does during later periods over the life of the community. The Company's communities and its other real estate operations are subject to substantial existing and potential competition, real estate market conditions (both where its communities, conventional homebuilding operations and other projects are located and in areas where its potential customers reside), the cyclical nature of the real estate business, general national economic conditions and changing demographic conditions. Company data indicate that, for the past several years, a significant number of the home purchasers at its active adult communities in Arizona, Nevada and southern California, particularly Sun City Palm Springs, were from southern California. Four of the Company's conventional homebuilding subdivisions are located in California, including two in Orange County. Any of those communities, particularly Sun City Palm Springs, as well as the Company's southern California conventional homebuilding subdivisions, may be affected by the continuing adverse conditions in the southern California real estate market and the southern California economy generally, including the financial difficulties of certain southern California municipalities. Most of the Company's primary business operations are concentrated in a limited number of metropolitan areas in Arizona, California and Nevada. The Company's geographic concentration and limited number of projects may create increased vulnerability to regional economic downturns or other adverse project-specific matters. GOVERNMENTAL REGULATION AND ENVIRONMENTAL CONSIDERATIONS. The Company's business is subject to extensive federal, state and local regulatory requirements, the broad discretion that governmental agencies have in administering those requirements and "no growth" or "slow growth" political policies, all of which can prevent, delay, make uneconomic or significantly increase the cost of its developments. In addition, environmental concerns and related governmental requirements have affected and will continue to affect all of the Company's community development operations. In connection with the development of the Company's communities and other real estate projects, particularly those located in California, numerous governmental approvals and permits are required throughout the development process, and no assurance can be given as to the receipt (or timing of receipt) of these approvals or permits. In addition, third parties can file lawsuits challenging approvals or permits received, which could cause substantial uncertainties and material delays for the project and, if successful, could result in approvals or permits being voided. FINANCING; LEVERAGE. Real estate development is dependent on the availability and cost of financing. It generally takes several years for new communities to achieve positive cumulative cash flow. In periods of significant growth, therefore, the Company will require significant additional capital resources, whether from issuances of equity or by incurring additional indebtedness. The Company's principal credit facility and the indentures for its publicly-held debt restrict the indebtedness the Company may incur. The availability of debt financing is also dependent on governmental policies and other factors outside the control of the Company. If the Company is at any time not successful in obtaining sufficient capital to fund its development and expansion expenditures, some or all of its projects may be significantly delayed, resulting in cost increases and adverse effects on the Company's results of operations. No assurance can be given as to the availability or cost of any future financing. In addition, the Company's degree of leverage from time to time will affect its interest incurred and may limit funds available for operations. As a result, the Company may be more vulnerable to economic downturns, which could limit its ability to withstand adverse changes or capitalize on business opportunities. If the Company is at any time unable to generate sufficient cash flow from operations to service its debt, refinancing of all or a portion of that debt or obtaining additional financing may be required to avoid defaults (including cross defaults) on some or all of its indebtedness. There can be no assurance that any such refinancing would be possible or that any additional financing could be obtained, or obtained on terms that are favorable or acceptable to the Company. The Company's real estate operations are also dependent upon the availability and cost of mortgage financing for potential customers, to the extent they finance their purchase, and for buyers of the potential customers' existing homes. CONSTRUCTION. The Company has from time to time experienced shortages of materials or qualified tradespeople or volatile increases in the cost of certain materials (particularly increases in the price of lumber and framing, which are significant components of home construction costs), resulting in longer than normal construction periods and increased costs not reflected in the prices of homes for which home sale contracts had been entered into up to one year in advance of scheduled closing. Generally, the Company's home sale contracts do not contain, or contain limited, provisions for price increases if the Company's costs of construction increase. The Company relies heavily on local contractors, who may be inadequately capitalized or understaffed. The inability or failure of one or more local contractors to perform may result in construction delays, increased costs and loss of some home sale contracts. NATURAL RISKS. Sun City Roseville and Sun City Hilton Head are subject to significant seasonal rainfall that can cause delays in construction and development or that can increase costs. Both of these communities were adversely affected by significantly higher than normal rainfall in fiscal 1995. Earthquake faults, including the San Andreas fault, run through the Coachella Valley, which includes Sun City Palm Springs and the communities of Palm Springs, Indio, Palm Desert, La Quinta, Rancho Mirage and Indian Wells. A portion of Sun City Palm Springs is also located in a flood plain. The Coachella Valley Water District has approved the Company's conceptual flood control plan for Sun City Palm Springs and has approved the Company's specific flood control plan for the first phase of this project. A major earthquake or flood could have a material adverse impact on the development of and results of operations for Sun City Palm Springs. Sun City Hilton Head is located in an area which may be subject to hurricanes. A major hurricane could have a material adverse impact on the development of and results of operations for Sun City Hilton Head. EXECUTIVE OFFICERS OF THE COMPANY Set forth below are the names and ages of all executive officers of the Company and the offices held with the Company at July 31, 1995. Years Years as an Employed Executive by the Name Age Position Officer Company -------------------------------------------------------------------------------- P. J. Dion 50 Chairman of the Board and 13 13 Chief Executive Officer J. F. Contadino 53 Senior Vice President 3 4 and President of Coventry Homes J. H. Gleason 53 Senior Vice President, 5 7 Project Planning and Development L. C. Hanneman, Jr. 48 Senior Vice President 6 23 and General Manager - Sun City Las Vegas F. D. Pankratz 45 Senior Vice President and 7 8 General Manager - Sun City Palm Springs C. T. Roach 48 Senior Vice President 6 16 and General Manager - Sun City West J. A. Spencer 46 Senior Vice President and 10 16 Chief Financial Officer J. D. Wilkins 50 Senior Vice President 6 6 and General Manager - Sun City Hilton Head R. C. Jones 50 Vice President and General Counsel 3 3 A. L. Mariucci 38 Vice President and General 9 11 Manager - Terravita D. V. Mickus 49 Vice President, Treasurer 9 12 and Secretary D. E. Rau 38 Vice President and Controller 9 10 D. G. Schreiner 42 Vice President, Marketing 2 4 M. L. Schuttenberg 52 Vice President, Human Resources 2 9 R. R. Wagoner 54 Vice President, Land Development 1 3 -------------------------------------------------------------------------------- EXECUTIVE OFFICERS OF THE COMPANY (Continued) Mr. Dion has been Chairman of the Board and Chief Executive Officer of the Company since November 1987. Mr. Contadino has served as Senior Vice President since January 1994. Prior to that time he served as Vice President from November 1991 to January 1994. He became President of Coventry Homes in January 1991. From 1981 to January 1991, Mr. Contadino was the owner, Chief Executive Officer and President of Coventry Financial, Inc. ("CFI"), a Phoenix-based homebuilder. In January 1991 the Company purchased certain assets from CFI. Mr. Gleason has served as Senior Vice President, Project Planning and Development, since January 1994. Prior to that time he served as Vice President, Project Planning and Development, from June 1993 to January 1994. He became a Vice President of the Company in January 1990. Mr. Hanneman has served as a Senior Vice President of the Company since January 1994. Prior to that time he served as Vice President of the Company from January 1989 to January 1994. Since August 1987 he has served as General Manager of Sun City Las Vegas. Mr. Pankratz became General Manager of Sun City Palm Springs in February 1990. Since September 1988 he has served as Senior Vice President of the Company. Mr. Roach has served as a Senior Vice President of the Company since January 1994. Prior to that time he served as Vice President of the Company from January 1989 to January 1994. Since August 1987 he has served as General Manager of Sun City West. Mr. Spencer became Chief Financial Officer of the Company in April 1993. Since February 1991 he has served as Senior Vice President of the Company. Prior to that time he served as Vice President and Controller of the Company from January 1985 to February 1991. Mr. Wilkins has served as a Senior Vice President of the Company and General Manager of Sun City Hilton Head since January 1994. Prior to that time he served as a Vice President of the Company and General Manager of Sun City Tucson from July 1989 to January 1994. Mr. Jones became Vice President and General Counsel of the Company in January 1992. From March 1990 to November 1991 he was a partner with the law firm of Gaston & Snow. Ms. Mariucci has served as Vice President of the Company since June 1986, when she began serving as Vice President, Corporate Planning and Development. She became General Manager of Terravita in December 1992. Mr. Mickus has served as Vice President and Treasurer since November 1985 and as Secretary commencing in June 1991. Mr. Rau became Vice President and Controller in February 1991. Prior to that time he served as Vice President, Taxes and Human Resources from May 1990 to February 1991. Mr. Schreiner became Vice President, Marketing in December 1992. Prior to that time he served as Senior Vice President, Marketing and Operations, of Coventry Homes from October 1992 to December 1992 and Vice President, Marketing and Operations, of Coventry Homes from January 1991 to October 1992. Mr. Schreiner was employed by CFI from April 1987 to January 1991. Ms. Schuttenberg became Vice President, Human Resources, in April 1993. Prior to that time she served as Director of Human Resources from March 1992 to April 1993 and as Director of Taxes from April 1989 to March 1992. Mr. Wagoner became Vice President, Land Development, in January 1994. Prior to that time he served as Director of Land Development from January 1992 to January 1994. Prior to 1992 Mr. Wagoner was employed by Collar, Williams and White Engineering in Phoenix, where he held various positions, including President. EMPLOYEES At June 30, 1995 the Company had 1,800 employees. The Company currently has no unionized employees. The Company believes that its employee relations are generally satisfactory. Item 3. Legal Proceedings The Company is a party to various legal proceedings arising in the ordinary course of business. While it is not feasible to predict the ultimate disposition of these matters, it is the opinion of management that their outcome will not have a material adverse effect on the financial condition of the Company. Item 4. Submission of Matters to a Vote of Security Holders None. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters The Company's common stock is listed on the New York Stock Exchange NYSE and Pacific Stock Exchange under the trading symbol (WBB). The following table sets forth the high and low sales prices of the Company's common stock on the New York Stock Exchange for the two fiscal years ended June 30, 1995. Sales Price -------------------------------------------------------------------------------- Fiscal Year 1995 Fiscal Year 1994 -------------------------------------------------------------------------------- Quarter Ended High Low High Low -------------------------------------------------------------------------------- September 30 17 3/8 13 5/8 16 11 3/4 December 31 17 5/8 14 1/4 16 1/2 11 5/8 March 31 20 17 18 3/8 14 1/2 June 30 23 5/8 16 5/8 17 1/2 14 1/2 -------------------------------------------------------------------------------- As of July 31, 1995 the number of shareholders of record of common stock of the Company was 3,329. The Company has paid regular quarterly dividends of $.05 per share for each quarter in the last five fiscal years. The amount and timing of any future dividends is subject to the discretion of the Board of Directors. Among the factors which the Board of Directors may consider in determining the amount and timing of dividends are the earnings, cash needs and capital resources of the Company. In addition, the Company is party to a loan agreement and various indentures that contain covenants restricting the Company's ability to pay dividends and acquire its common stock. Under the most restrictive of these covenants, at June 30, 1995 approximately $16.9 million of the Company's retained earnings were available for payment of cash dividends and for the acquisition by the Company of its common stock. The Company repurchased 1,046,751 shares of its common stock in fiscal 1994 (for an aggregate cost of $13.3 million) and 444 shares of its common stock in fiscal 1995 (for an aggregate cost of $8,000). In August 1995 the Company publicly sold 2,474,900 shares of its common stock at a price to the public of $19.50 per share. Item 6. Selected Consolidated Financial Data (Not covered by report of independent auditors) The following tables set forth selected consolidated financial data of the Company as of and for each of the five fiscal years ended June 30, 1995. They should be read in conjunction with the Consolidated Financial Statements and Notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Dollars In Thousands Except Per Share Data Year Ended June 30, --------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 --------------------------------------------------------------------------------------------------------------------- Statement of earnings information: Revenues: Home sales - communities $ 620,012 $ 405,462 $ 324,817 $ 226,014 $ 220,294 Home sales - conventional homebuilding 144,469 79,992 44,456 27,097 4,795 Land sales and other 38,638 24,607 21,313 7,761 2,973 --------------------------------------------------------------------------------------------------------------------- Total revenues $ 803,119 $ 510,061 $ 390,586 $ 260,872 $ 228,062 ===================================================================================================================== Earnings (loss): Continuing operations (1) $ 28,491 $ 17,021 $ 16,863 $ 14,068 $ 7,111 Discontinued operations (2) - - (12,810) - - Extraordinary gain (3) - - 458 3,039 5,006 Cumulative effect of accounting change (1) - - 20,000 - - --------------------------------------------------------------------------------------------------------------------- Net earnings $ 28,491 $ 17,021 $ 24,511 $ 17,107 $ 12,117 ===================================================================================================================== Net earnings per share: Continuing operations $ 1.87 $ 1.13 $ 1.05 $ 1.09 $ .75 Total 1.87 1.13 1.53 1.33 1.28 ===================================================================================================================== Cash dividends per share $ .20 $ .20 $ .20 $ .20 $ .20 ===================================================================================================================== (1) Earnings from continuing operations for fiscal 1995, 1994 and 1993 reflect a higher income tax rate (a rate more closely approximating the statutory rate) than for previous years as a result of the Company's adoption of Statement of Financial Accounting Standards ("SFAS") No. 109 effective July 1, 1992. In fiscal 1993 the Company recognized a $20 million increase in net earnings as a result of a cumulative effect of an accounting change from the adoption of SFAS No. 109. Earnings from continuing operations and net earnings for fiscal 1991 were reduced by a $5 million pre-tax valuation allowance related to the Company's residential land development project. (2) The loss from discontinued operations for fiscal 1993 primarily consisted of additional loss provisions related to the Company's discontinued land development projects. (3) The extraordinary gains recognized by the Company in fiscal 1993, 1992 and 1991 resulted from the extinguishment of debt on discounted bases. Dollars In Thousands Year Ended June 30, ---------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---------------------------------------------------------------------------------------------------------------------- Balance sheet information at year-end: Total assets $ 925,050 $ 758,424 $ 555,586 $ 442,051 $ 261,939 Notes payable and senior debt $ 284,585 $ 189,657 $ 133,175 $ 159,637 $ 28,272 Subordinated debt 206,673 206,019 108,688 12,622 59,233 --------- --------- ---------- ---------- ---------- Total notes payable, senior and subordinated debt $ 491,258 $ 395,676 $ 241,863 $ 172,259 $ 87,505 Shareholders' equity $ 229,342 $ 201,324 $ 199,446 $ 178,615 $ 112,350 Total notes payable, senior and subordinated debt divided by total notes payable, senior and subordinated debt and shareholders' equity 68.2% 66.3% 54.8% 49.1% 43.8% ======================================================================================================================
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion of results of operations and financial condition should be read in conjunction with the Selected Consolidated Financial Data and the Consolidated Financial Statements and Notes thereto. CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA ------------------------------------------------- Set forth below is certain consolidated financial and operating data of the Company as of and for each of the three fiscal years ended June 30, 1995.
Year Ended Change Change June 30, 1995 vs 1994 1994 vs 1993 ------------------------------------------------------------ ------------------- ------------------- 1995 1994 1993 Amount Percent Amount Percent ------------------------------------------------------------ ------------------- ------------------- OPERATING DATA: Number of net new orders: (1) Sun City West 946 1,156 1,031 (210) (18.2%) 125 12.1% Sun City Tucson 310 357 305 (47) (13.2%) 52 17.0% Sun City Las Vegas 770 863 801 (93) (10.8%) 62 7.7% Sun City Palm Springs (2) 267 315 450 (48) (15.2%) (135) (30.0%) Sun City Roseville (3) 515 349 N/A 166 47.6% 349 N/A Sun City Hilton Head (3) 149 N/A N/A 149 N/A N/A N/A Sun City Georgetown (3) 122 N/A N/A 122 N/A N/A N/A Terravita (3) 392 331 N/A 61 18.4% 331 N/A Coventry Homes 1,063 774 414 289 37.3% 360 87.0% ----------------------------------------------------------- ------------------ ------------------- Total 4,534 4,145 3,001 389 9.4% 1,144 38.1% =========================================================== ================== =================== Number of home closings: Sun City West 1,104 1,161 850 (57) (4.9%) 311 36.6% Sun City Tucson 444 342 263 102 29.8% 79 30.0% Sun City Las Vegas 847 815 710 32 3.9% 105 14.8% Sun City Palm Springs (2) 282 278 325 4 1.4% (47) (14.5%) Sun City Roseville (3) 293 N/A N/A 293 N/A N/A N/A Terravita (3) 425 N/A N/A 425 N/A N/A N/A Coventry Homes 921 587 416 334 56.9% 171 41.1% ----------------------------------------------------------- ------------------ ------------------- Total 4,316 3,183 2,564 1,133 35.6% 619 24.1% =========================================================== ================== =================== BACKLOG DATA: Homes under contract at June 30: Sun City West 502 660 665 (158) (23.9%) (5) (0.8%) Sun City Tucson 149 283 268 (134) (47.3%) 15 5.6% Sun City Las Vegas 402 479 431 (77) (16.1%) 48 11.1% Sun City Palm Springs (2) 147 162 125 (15) (9.3%) 37 29.6% Sun City Roseville (3) 571 349 N/A 222 63.6% 349 N/A Sun City Hilton Head (3) 149 N/A N/A 149 N/A N/A N/A Sun City Georgetown (3) 122 N/A N/A 122 N/A N/A N/A Terravita (3) 298 331 N/A (33) (10.0%) 331 N/A Coventry Homes 540 398 211 142 35.7% 187 88.6% ----------------------------------------------------------- ------------------ ------------------- Total (4) 2,880 2,662 1,700 218 8.2% 962 56.6% =========================================================== ================== =================== Aggregate contract sales amount (dollars in millions) $565 $471 $260 $94 20.0% $211 81.2% Average contract sales amount per home (dollars in thousands) $196 $177 $153 $19 10.7% $24 15.7% =========================================================== ================== =================== AVERAGE REVENUE PER HOME CLOSING: Sun City West $151,100 143,500 134,800 $ 7,600 5.3% $ 8,700 6.5% Sun City Tucson 164,400 159,700 147,900 4,700 2.9% 11,800 8.0% Sun City Las Vegas 180,700 160,800 151,800 19,900 12.4% 9,000 5.9% Sun City Palm Springs 214,400 191,400 195,600 23,000 12.0% (4,200) (2.1%) Sun City Roseville 201,100 N/A N/A N/A N/A N/A N/A Terravita 253,700 N/A N/A N/A N/A N/A N/A Coventry Homes 156,900 136,300 106,900 20,600 15.1% 29,400 27.5% Weighted average $177,100 $152,400 $144,000 $24,600 16.1% $ 8,500 5.9% =========================================================== ================== =================== OPERATING STATISTICS: Cost of sales as a percentage of revenues 80.4% 79.2% 77.4% 1.2% 1.5% 1.8% 2.3% Selling, general and administrative expenses as a percentage of revenues 14.1% 15.6% 16.0% (1.5%) (9.6%) (0.4%) (2.5%) Earnings from continuing operations before income taxes as a percentage of revenues 5.5% 5.1% 6.3% 0.4% 7.8% (1.2%) (19.0%) Ratio of home closings to homes under contract in backlog at beginning of year 162.1% 187.2% 203.0% (25.1%) (13.4%) (15.8%) (7.8%) =========================================================== ================ ================ (1) Net of cancellations. The Company recognizes revenue at close of escrow. (2) The Company began taking new home sales orders at Sun City Palm Springs in July 1992. Of the 450 new orders taken in fiscal 1993 at Sun City Palm Springs, 235 were to customers who had made non-binding reservations prior to July 1, 1992. Home closings at Sun City Palm Springs began in October 1992. (3) The Company began taking new home sales orders at Sun City Roseville in May 1994, at Sun City Hilton Head in November 1994, at Sun City Georgetown in June 1995 and at Terravita in November 1993. Home closings at Sun City Roseville began in February 1995 and at Terravita in July 1994. (4) A majority of the backlog at June 30, 1995 is currently anticipated to result in revenues in the next 12 months. However, a majority of the backlog at June 30, 1995 is contingent upon the availability of financing for the customer, sale of the customer's existing residence or other factors. Also, as a practical matter, the Company's ability to obtain damages for breach of contract by a potential home buyer are limited to retaining all or a portion of the deposit received. In the years ended June 30, 1995, 1994 and 1993 cancellations of home sales orders as a percentage of new home sales orders written during the year were 18.3 percent, 15.6 percent and 14.1 percent, respectively.
RESULTS OF OPERATIONS --------------------- REVENUES. (Dollars in Millions) -------------------------------------------------------------------------------- Fiscal Fiscal Fiscal 1995 Change 1994 Change 1993 -------------------------------------------------------------------------------- $803.1 57.5% $510.1 30.6% $390.6 Home closings at Terravita and Sun City Roseville accounted for $107.8 million and $58.9 million, respectively, of the increase in revenues for the fiscal year ended June 30, 1995 compared to the fiscal year ended June 30, 1994. The Company had not yet begun delivering homes at these communities in fiscal 1994. Increased home closings (due to a higher beginning backlog) at the Company's more mature active adult communities (Sun City West, Sun City Tucson, Sun City Las Vegas and Sun City Palm Springs) accounted for $14.0 million of the increase in revenues. Increased home closings at Coventry Homes, the Company's conventional homebuilding operation, accounted for $45.5 million of the increase in revenues. Coventry Homes' increased home closings were due both to an increase in Phoenix-area operations and to the expansion of operations in the Tucson and Las Vegas areas and southern California. Increases in the average revenue per home closing at the Company's more mature active adult communities and Coventry Homes accounted for $33.8 million and $19.0 million, respectively, of the increase in revenues. These increases in average revenues per home closing were partially due to sales price increases implemented by the Company and partially due to market-driven changes in product mix. Land sales and other revenues were $14.0 million higher in fiscal 1995 than in fiscal 1994. Increased home closings at the Company's active adult communities and Coventry Homes accounted for $60.3 million and $18.3 million, respectively, of the increase in revenues for fiscal 1994 compared to the fiscal year ended June 30, 1993. Increases in the average revenue per home closing at the Company's active adult communities and Coventry Homes accounted for $20.2 million and $17.3 million, respectively, of the increase in revenues. These increases in average revenue per home closing were partially due to sales price increases implemented by the Company and partially due to a greater percentage of sales of larger active adult community homes or at more expensive conventional homebuilding subdivisions. The Company experienced decreased home closings and average revenue per home closing at Sun City Palm Springs for fiscal 1994 compared to fiscal 1993, primarily due to a decrease in net new orders and a greater percentage of sales of smaller homes. COST OF SALES. The increase in cost of sales to $646.1 million in fiscal 1995 compared to $404.2 million in fiscal 1994 was primarily due to the increase in home closings. As a percentage of revenues, cost of sales increased to 80.4 percent for fiscal 1995 compared to 79.2 percent for fiscal 1994. This increase was the result of a variety of factors, including changes in the mix of contributions by various communities and Coventry Homes, increased amortization of capitalized interest to cost of sales and decreased base housing margins at Sun City Tucson. Increased borrowings and higher interest rates resulted in an increase in amortization of capitalized interest to 4.8 percent of total cost of sales for fiscal 1995 compared to 4.5 percent for fiscal 1994. Pricing strategies employed by the Company to facilitate the completion of Sun City Tucson resulted in a decrease in base housing margins at that community. On a period-to-period basis, cost of sales as a percentage of revenues will vary due to, among other things, changes in product mix, differences between individual communities, lot premiums, upgrades and extras, price increases, changes in construction costs and changes in the amortization of capitalized interest and other common costs. Management anticipates that (i) continued increases in the amortization of capitalized interest to cost of sales resulting from higher levels of indebtedness and increases in land held for longer-term development (with respect to which land the Company cannot allocate capitalized interest) and (ii) changes in estimates on which the amortization of other common costs is based will result in a greater percentage of capitalized interest and other common costs being amortized to cost of sales in the next fiscal year than in prior years. Because the Company capitalizes interest and amortizes capitalized interest as home closings occur over the lives of its projects and the Company has several communities at which closings have not yet begun, a significant portion of the reduction in interest costs resulting from the use of proceeds of the August 1995 public offering of 2,474,900 shares of common stock to repay indebtedness will not be reflected in reported earnings for the Company's fiscal year ended June 30, 1996 and some portion will not be reflected in the following year. See "Liquidity and Financial Condition of the Company." The increase in cost of sales in fiscal 1994 compared to fiscal 1993 was primarily due to increased home closings at all locations other than Sun City Palm Springs. The Company also experienced an increase in its cost of sales as a percentage of revenues from 77.4 percent in fiscal 1993 to 79.2 percent in fiscal 1994, primarily reflecting the impact of higher lumber costs. Average framing lumber composite prices were 22 percent higher for the 12 months ended June 30, 1994 than for the 12 months ended June 30, 1993. For the Company, framing costs represented 14.8 percent of total cost of sales for fiscal 1994 compared to 12.1 percent for fiscal 1993. These lumber cost increases adversely impacted the Company because homes with fixed sales prices established in sales contracts entered into up to a year earlier were constructed and delivered at higher than anticipated costs. In an effort to reduce the effects of rising costs, the Company implemented sales price increases and entered into fixed-price framing contracts for a significant portion of its homes constructed through December 1994. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Of the increase in selling, general and administrative expenses to $113.2 million in fiscal 1995 as compared to $79.7 million in fiscal 1994, $9.2 million was attributable to higher sales and marketing expenses and $7.9 million was attributable to increased commissions on the higher revenues. The balance of the increase was attributable to a variety of general and administrative expenses. Since a significant portion of selling, general and administrative expenses is fixed, the increase in revenues for fiscal 1995 resulted in a decrease in these expenses as a percentage of revenues as compared to fiscal 1994. Of the increase in selling, general and administrative expenses to $79.7 million in fiscal 1994 as compared to $62.6 million in fiscal 1993, $3.0 million was attributable to increased sales and marketing expenses and $3.8 million was attributable to increased commissions on the increased revenues. The balance of the increase was attributable to a variety of general and administrative expenses. The increase in revenues from fiscal 1993 to fiscal 1994 also resulted in a decrease in these expenses as a percentage of revenues. OTHER EXPENSE, NET. Included in other expense, net in fiscal 1993 was $2.0 million of previously capitalized costs related to an option the Company had to purchase land near Austin, Texas as the site of a potential active adult community, partially offset by $1.1 million of other income. INCOME TAXES. The increase in income taxes to $15.3 million in fiscal 1995 as compared to $9.2 million in fiscal 1994 was due to the increase in earnings from continuing operations before income taxes. The effective tax rate in both years was 35 percent. The increase in income taxes to $9.2 million in fiscal 1994 as compared to $7.9 million in fiscal 1993 was due to the increase in earnings from continuing operations before income taxes and an increase in the effective tax rate from 32 percent to 35 percent. For financial reporting and cash flow purposes, a recent state tax law change and, possibly, certain other matters are currently anticipated to result in the Company's effective tax rate being less in future periods than it would otherwise have been. LOSS FROM DISCONTINUED OPERATIONS. The non-cash provision for discontinued operations recorded by the Company in fiscal 1993 was attributable to the change in carrying values of the Company's two commercial land development projects from net realizable values to market values, net of anticipated holding and disposal costs, and to the settlement of other matters. EXTRAORDINARY GAIN. The extraordinary gain recognized by the Company in fiscal 1993 resulted from the extinguishment of a portion of notes payable on a discounted basis. CUMULATIVE EFFECT OF ACCOUNTING CHANGE. The $20 million cumulative effect of accounting change in fiscal 1993 resulted from the Company's adoption of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, effective July 1, 1992. NET NEW ORDER ACTIVITY AND BACKLOG. Net new orders increased 9.4 percent in fiscal 1995 compared to fiscal 1994. This increase was attributable to new sales orders at Sun City Roseville, Sun City Hilton Head, Sun City Georgetown and the expansion of Coventry Homes' conventional subdivision homebuilding operations. The Company did not have a full year of sales activity at Sun City Roseville in fiscal 1994 and began home sales activity at Sun City Hilton Head and Sun City Georgetown in fiscal 1995. At the more mature communities of Sun City West, Sun City Las Vegas, Sun City Tucson and Sun City Palm Springs, net new orders decreased by 14.8 percent, due primarily to exceptionally high new order activity at Sun City West and Sun City Las Vegas in the prior year, the winding down of new order activity at Sun City Tucson as build-out of that community approaches and the effect on Sun City Palm Springs of continued adverse conditions in the southern California economy. Cancellations of home sales orders as a percentage of new home sales orders written increased to 18.3 percent for fiscal 1995 compared to 15.6 percent for fiscal 1994 and 14.1 percent for fiscal 1993. The increases were primarily attributable to Sun City Roseville and Terravita, which experienced strong new order activity but higher cancellation percentages than the Company's more mature active adult communities. Management believes that cancellations at these new communities may have been higher than they would otherwise have been as a result of extended home delivery periods resulting from new orders taken prior to site and amenity development. The number of homes in backlog at June 30, 1995 was 8.2 percent higher than at June 30, 1994. This increase was primarily attributable to the inclusion of homes under contract at Sun City Hilton Head and Sun City Georgetown and increases in backlog at Sun City Roseville and Coventry Homes, partially offset by declines in homes under contract at the Company's more mature communities. Net new orders increased 38.1 percent in fiscal 1994 compared to fiscal 1993, primarily reflecting increased sales orders for Coventry Homes (resulting from a larger number of subdivisions than in fiscal 1993), new sales orders at Sun City Roseville (at which the Company began taking new sales orders in May 1994) and new sales orders at Terravita (at which the Company began taking new sales orders in November 1993). The Company also experienced increased sales orders atall operating active adult communities except Sun City Palm Springs, where net new orders were affected by continued adverse conditions in the southern California economy. The number of homes under contract at June 30, 1994 was 56.6 percent higher than at June 30, 1993. This increase was primarily attributable to the initial sales orders at Sun City Roseville and Terravita and to an 88.6 percent increase for Coventry Homes. LIQUIDITY AND FINANCIAL CONDITION OF THE COMPANY ------------------------------------------------ In November 1994 the Company negotiated an amendment to its senior unsecured revolving credit facility to increase the amount of the facility from $125 million to $175 million. In June 1995 the senior unsecured revolving credit facility was further amended to increase the amount of the facility to $300 million, which will provide greater flexibility in the nature and timing of future development expenditures. In connection with this amendment, the Company repaid its secured Coventry Homes bank debt and reduced the amount of its short-term lines of credit from $20 million to $10 million. At June 30, 1995 the Company had $18.9 million of cash and short-term investments and $141.5 million and $8.3 million of unused borrowing capacity under its $300 million unsecured revolving credit facility and $10 million of short-term lines of credit, respectively. In August 1995 the Company publicly sold 2,474,900 shares of its common stock. The net proceeds of approximately $45 million were used to repay a portion of the indebtedness outstanding under the Company's $300 million senior unsecured revolving credit facility. The Company intends to reborrow under the senior unsecured revolving credit agreement from time to time as necessary to fund development of existing and new projects and for other general corporate purposes. Management believes that the Company's current borrowing capacity, when combined with existing cash and short-term investments and currently anticipated cash flows from the Company's operating communities, conventional homebuilding activities and residential land development project, will provide the Company with adequate capital resources to fund the Company's currently anticipated operating requirements for the next 12 months. Cash flows from the Company's operating communities, however, are expected to be negatively impacted by the decline in net new order activity and backlog at the Company's more mature active adult communities. The Company's senior unsecured revolving credit facility and the indentures for the Company's publicly-held debt contain restrictions which could, depending on the circumstances, affect the Company's ability to borrow in the future. If the Company at any time is not successful in obtaining sufficient capital to fund its then planned development and expansion expenditures, some or all of its projects may be significantly delayed. Any such delay could result in cost increases and may adversely affect the Company's results of operations. The cash flow for each of the Company's communities can differ substantially from reported earnings, depending on the status of the development cycle. The initial years of development or expansion require significant cash outlays for, among other things, land acquisition, obtaining master plan and other approvals, construction of amenities (including golf courses and recreation centers), model homes, sales and administration facilities, major roads, utilities, general landscaping and interest. Since these costs are capitalized, this can result in income reported for financial statement purposes during those initial years significantly exceeding cash flow. However, after the initial years of development or expansion, when these expenditures are made, cash flow can significantly exceed income reported for financial statement purposes, as costs of sales includes amortization charges for substantial amounts of previously expended costs. During fiscal 1995 the Company generated $212.4 million of net cash from community sales activities, used $100.3 million of cash for land and lot and amenity development at operating communities, paid $98.2 million for costs related to communities in the pre-operating stage, used $6.5 million of net cash for conventional homebuilding operations and used $65.0 million of cash for other operating activities. The Company believes that, of the $820.4 million of cash spent by the Company during fiscal 1995 for land acquisitions, lot and amenity development, home construction and other operating activities, approximately $135.9 million was to some extent discretionary as to timing and precedes the actual construction of homes from which cash can be generated upon closing of home sale contracts. This $135.9 million was comprised of $98.2 million related to projects in the pre-operating stage and $37.7 million for land acquisitions and amenity development at operating communities. At June 30, 1995, under the most restrictive of the covenants in the Company's debt agreements, $16.9 million of the Company's retained earnings was available for payment of cash dividends and for the acquisition by the Company of its common stock. IMPACT OF INFLATION ------------------- Operations of the Company can be impacted by inflation. Home and land sales prices can increase, but inflation can also cause increases in interest costs and the costs of land, raw materials and subcontracted labor. Unless such increased costs are recovered through higher sales prices, operating margins will decrease. High mortgage interest rates may also make it more difficult for the Company's potential customers to sell their existing homes in order to move to one of the Company's communities or to finance the purchases of their new homes. ACCOUNTING STANDARD NOT YET ADOPTED BY THE COMPANY -------------------------------------------------- The Financial Accounting Standards Board recently issued SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which the Company will be required to implement effective for the fiscal year ending June 30, 1997. This statement requires that long-lived assets must be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flows (undiscounted and without interest charges) from an asset to be held and used is less than the carrying value of the asset, an impairment loss must be recognized in the amount of the difference between the carrying value and fair value. Assets to be disposed of must be valued at the lower of carrying value or fair value less costs to sell. Management believes that if this standard were to be implemented currently, there would not be an impairment loss; however, until it is implemented, management will periodically reassess the Company's situation in relation to SFAS No. 121. Item 8. Financial Statements and Supplementary Data The response to this item is submitted as a separate section of this report below. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant For information with respect to the Executive Officers of the Registrant, see "Item 1 -- Executive Officers of the Company" at the end of Part I of this report. Information with respect to the Directors of the Registrant is incorporated herein by reference to the Registrant's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the most recent fiscal year covered by this Form 10-K. Item 11. Executive Compensation Information in response to this Item is incorporated herein by reference to the Registrant's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the most recent fiscal year covered by this Form 10-K. Item 12. Security Ownership of Certain Beneficial Owners and Management Information in response to this Item is incorporated herein by reference to the Registrant's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the most recent fiscal year covered by this Form 10-K. Item 13. Certain Relationships and Related Transactions Information in response to this Item is incorporated herein by reference to the Registrant's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the most recent fiscal year covered by this Form 10-K. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. and 2. The response to this portion of Item 14 is submitted as a separate section of this report beginning on page 25. 3. Exhibits The Exhibit Index attached to this Report is hereby incorporated by reference. (b) The Company did not file any reports on Form 8-K during the fourth quarter of fiscal 1995. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, who is duly authorized to do so, in Phoenix, Arizona on the 30th day of August, 1995. DEL WEBB CORPORATION (Registrant) By: /s/ Philip J. Dion ------------------------------------ Philip J. Dion Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. Signature Title Date -------------------------------------------------------------------------------- /s/ Philip J. Dion Chairman and Chief Executive August 30, 1995 ---------------------------- Officer (Philip J. Dion) (Principal Executive Officer) /s/ John A. Spencer Senior Vice President and Chief August 30, 1995 ---------------------------- Financial Officer (John A. Spencer) (Principal Financial Officer) /s/ David E. Rau Vice President and Controller August 30, 1995 ---------------------------- (Principal Accounting Officer) (David E. Rau) /s/ D. Kent Anderson Director August 30, 1995 ---------------------------- (D. Kent Anderson) /s/ Robert Bennett Director August 30, 1995 ---------------------------- (Robert Bennett) /s/ Hugh F. Culverhouse, Jr. Director August 30, 1995 ---------------------------- (Hugh F. Culverhouse, Jr.) /s/ Kenny C. Guinn Director August 30, 1995 ---------------------------- (Kenny C. Guinn) /s/ J. Russell Nelson Director August 30, 1995 ---------------------------- (J. Russell Nelson) /s/ Peter A. Nelson Director August 30, 1995 ---------------------------- (Peter A. Nelson) /s/ Michael E. Rossi Director August 30, 1995 ---------------------------- (Michael E. Rossi) /s/ C. Anthony Wainwright Director August 30, 1995 ---------------------------- (C. Anthony Wainwright) /s/ Sam Yellen Director August 30, 1995 ---------------------------- (Sam Yellen) DEL WEBB CORPORATION FORM 10-K Item 8, Item 14(a) (1) and (2) Index of Consolidated Financial Statements and Schedule The following financial statements required to be included in Item 8 and other disclosures by the Registrant are listed below: PAGE Management's Report.......................................................... 26 Independent Auditors' Report................................................. 27 Consolidated Financial Statements: Balance Sheets as of June 30, 1995 and 1994........................... 28 Statements of Earnings for each of the years in the three-year period ended June 30, 1995.......................................... 29 Statements of Shareholders' Equity for each of the years in the three-year period ended June 30, 1995............................... 30 Statements of Cash Flows for each of the years in the three-year period ended June 30, 1995.......................................... 31 Notes to Consolidated Financial Statements............................ 33 Separate financial statements of the Company's subsidiaries that are guarantors of the Company's 10 7/8% Senior Notes due 2000 are not included because those subsidiaries are jointly and severally liable as guarantors of the Notes and the aggregate assets, liabilities, earnings and equity of those subsidiaries are substantially equivalent to the assets, liabilities, earnings and equity of the Company and its subsidiaries on a consolidated basis. The following financial statement schedule of the Registrant and its subsidiaries is included in Item 14(a) (2): consolidated Financial Statement Schedule: PAGE II Valuation and Qualifying Accounts for each of the years in the three-year period ended June 30, 1995............................. 46 Schedules other than the one listed above are omitted because the conditions requiring their filing do not exist or because the required information is given in the financial statements, including the notes thereto. MANAGEMENT'S REPORT Financial Statements Del Webb Corporation is responsible for the preparation, integrity and fair presentation of its published financial statements. The financial statements that follow have been prepared in accordance with generally accepted accounting principles and, as such, include amounts based on judgements and estimates made by management. The Company also prepared the other information included in the annual report and is responsible for its accuracy and consistency with the financial statements. The financial statements have been audited by the independent accounting firm, KPMG Peat Marwick LLP, which was given access to all financial records and related data, including minutes of all meetings of shareholders, the board of directors and committees of the board. The Company believes that all representations made to the independent auditors during their audit were valid and appropriate. KPMG Peat Marwick LLP's audit report is presented on the following page. Internal Control System The Company maintains a system of internal control over financial reporting and over safeguarding of assets against unauthorized acquisition, use or disposition which is designed to provide reasonable assurance to the Company's management and board of directors regarding the preparation of reliable published financial statements and such asset safeguarding. The system includes a documented organizational structure and division of responsibility, established policies and procedures (including a code of conduct) which are communicated throughout the Company, and the selection, training and development of employees. Internal auditors monitor the operation of the internal control system and report findings and recommendations to management and the board of directors, and corrective actions are taken to correct deficiencies if and as they are identified. The board, operating through its audit committee which is composed of directors who are not officers or employees of the Company, provides oversight to the financial reporting and asset safeguarding process. Even an effective internal control system, no matter how well designed, has inherent limitations -- including the possibility of the circumvention or overriding of controls -- and therefore can provide only reasonable assurance with respect to financial statement preparation and asset safeguarding. Further, because of changes in conditions, internal control system effectiveness may vary over time. The Company assessed its internal control system as of June 30, 1995 in relation to criteria for effective internal control over financial reporting described in "Internal Control -- Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, the Company believes that, as of June 30, 1995, its system of internal control over financial reporting and over safeguarding of assets against unauthorized acquisition, use or disposition met those criteria. /s/ Philip J. Dion ------------------------------------- Philip J. Dion Chairman and Chief Executive Officer /s/ John A. Spencer ------------------------------------- John A. Spencer Senior Vice President and Chief Financial Officer June 30, 1995 Independent Auditors' Report The Board of Directors and Shareholders Del Webb Corporation: We have audited the consolidated financial statements of Del Webb Corporation and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Del Webb Corporation and subsidiaries as of June 30, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 1995 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for income taxes effective July 1, 1992. KPMG Peat Marwick LLP Phoenix, Arizona August 18, 1995 DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 1995 and 1994 In Thousands -------------------------------------------------------------------------------- 1995 1994 -------------------------------------------------------------------------------- Assets -------------------------------------------------------------------------------- Real estate inventories (Notes 2, 5 and 11) $ 828,752 $ 662,613 Cash and short-term investments 18,900 6,474 Receivables (Note 3) 21,995 10,385 Property and equipment, net (Note 4) 29,326 36,773 Deferred income taxes (Note 6) -- 11,604 Other assets 26,077 30,575 -------------------------------------------------------------------------------- $ 925,050 $ 758,424 ================================================================================ Liabilities and Shareholders' Equity -------------------------------------------------------------------------------- Notes payable, senior and subordinated debt (Note 5) $ 491,258 $ 395,676 Subcontractor and trade accounts payable 76,421 45,443 Accrued liabilities and other payables 48,121 39,905 Home sale deposits 66,887 62,797 Income taxes payable (Note 6) 3,899 7,155 Deferred income taxes (Note 6) 5,197 -- Net liabilities of discontinued operations (Note 12) 3,925 6,124 -------------------------------------------------------------------------------- Total liabilities 695,708 557,100 -------------------------------------------------------------------------------- Shareholders' equity: Common stock, $.001 par value at June 30, 1995, without par value at June 30, 1994. Authorized 30,000,000 shares; issued 15,798,649 shares and 15,828,940 shares at June 30, 1995 and 1994, respectively (Notes 7, 8 and 14) 16 112,944 Additional paid-in capital (Notes 7 and 14) 121,059 8,333 Retained earnings (Note 5) 122,153 96,630 -------------------------------------------------------------------------------- 243,228 217,907 Less cost of common stock in treasury, 877,728 shares and 1,132,065 shares at June 30, 1995 and 1994, respectively (Note 14) (11,058) (14,600) Less deferred compensation (Note 8) (2,828) (1,983) -------------------------------------------------------------------------------- Total shareholders' equity 229,342 201,324 -------------------------------------------------------------------------------- $ 925,050 $ 758,424 ================================================================================ See accompanying notes to consolidated financial statements. DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Years ended June 30, 1995, 1994 and 1993 In Thousands Except Per Share Data ------------------------------------------------------------------------------- 1995 1994 1993 ------------------------------------------------------------------------------- Revenues (Note 10) $ 803,119 $ 510,061 $ 390,586 ------------------------------------------------------------------------------- Cost of sales (Note 10) 646,052 404,202 302,300 Selling, general and administrative expenses 113,235 79,673 62,566 Other expense, net -- -- 922 ------------------------------------------------------------------------------- Earnings from continuing operations before income taxes 43,832 26,186 24,798 Income taxes (Note 6) 15,341 9,165 7,935 ------------------------------------------------------------------------------- Earnings from continuing operations 28,491 17,021 16,863 Loss from discontinued operations (net of tax) (Notes 6 and 12) -- -- (12,810) Extraordinary gain from extinguishment of debt (net of tax) (Note 6) -- -- 458 Cumulative effect of accounting change (Note 6) -- -- 20,000 ------------------------------------------------------------------------------- Net earnings $ 28,491 $ 17,021 $ 24,511 =============================================================================== Weighted average shares outstanding 15,209 15,036 16,049 =============================================================================== Earnings (loss) per share: Continuing operations $ 1.87 $ 1.13 $ 1.05 Discontinued operations -- -- (.80) Extraordinary gain -- -- .03 Cumulative effect of accounting change -- -- 1.25 ------------------------------------------------------------------------------- Net earnings per share $ 1.87 $ 1.13 $ 1.53 =============================================================================== See accompanying notes to consolidated financial statements. DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Years ended June 30, 1995, 1994 and 1993
In Thousands ------------------------------------------------------------------------------------------------------------------------ Additional Total Common Paid-In Retained Treasury Deferred Shareholders' Stock Capital Earnings Stock Compensation Equity ------------------------------------------------------------------------------------------------------------------------ Balances at July 1, 1992 $ 112,059 $ 7,483 $ 61,230 $ (572) $ (1,585) $ 178,615 Shares issued for stock option and restricted stock plans (68,600 shares of common stock and 45,600 shares of treasury stock), net of amortization 1,230 536 - 248 (272) 1,742 Treasury stock acquired, 150,084 shares - - - (2,272) - (2,272) Cash dividends ($ .20 per share) - - (3,150) - - (3,150) Net earnings - - 24,511 - - 24,511 ------------------------------------------------------------------------------------------------------------------------ Balances at June 30, 1993 113,289 8,019 82,591 (2,596) (1,857) 199,446 Shares issued and retired for stock option and restricted stock plans (123,167 shares of treasury stock issued and 23,453 shares of common stock retired), net of amortization (345) 314 - 1,322 (126) 1,165 Treasury stock acquired, 1,046,751 shares - - - (13,326) - (13,326) Cash dividends ($ .20 per share) - - (2,982) - - (2,982) Net earnings - - 17,021 - - 17,021 ------------------------------------------------------------------------------------------------------------------------ Balances at June 30, 1994 112,944 8,333 96,630 (14,600) (1,983) 201,324 Shares issued and retired for stock option, restricted stock and retirement savings plans (254,781 shares of treasury stock issued and 30,291 shares of common stock retired), net of amortization (202) - - 3,550 (845) 2,503 Treasury stock acquired, 444 shares - - - (8) - (8) Change from common stock without par value to $.001 par value common stock (Note 7) (112,726) 112,726 - - - - Cash dividends ($ .20 per share) - - (2,968) - - (2,968) Net earnings - - 28,491 - - 28,491 ------------------------------------------------------------------------------------------------------------------------ Balances at June 30, 1995 $ 16 $ 121,059 $ 122,153 $(11,058) $ (2,828) $ 229,342 ======================================================================================================================== See accompanying notes to consolidated financial statements.
DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended June 30, 1995, 1994 and 1993 (In Thousands) 1995 1994 1993 ------------------------------------------------------------------------------- Cash flows from operating activities: Cash received from customers related to community home sales $ 588,526 $ 415,090 $ 324,986 Cash received from commercial land sales, net 1,599 3,730 945 Cash paid for costs related to community home construction (377,735) (275,079) (218,773) ------------------------------------------------------------------------------- Net cash provided by community sales activities 212,390 143,741 107,158 Cash paid for land acquisitions at operating communities (8,046) (5,212) (3,626) Cash paid for lot development at operating communities (62,612) (46,921) (34,563) Cash paid for amenity development at operating communities (29,683) (34,292) (28,389) ------------------------------------------------------------------------------- Net cash provided by operating communities 112,049 57,316 40,580 Cash paid for costs related to communities in the pre-operating stage (98,183) (101,469) (32,260) Cash received from customers related to conventional homebuilding 146,210 79,282 44,070 Cash paid for land, development, construction and other costs related to conventional homebuilding (152,696) (102,726) (53,483) Cash received from customers related to residential land development project 26,438 14,803 17,318 Cash paid for costs related to residential land development project (16,129) (11,660) (6,746) Cash paid for corporate activities (28,703) (22,056) (13,208) Interest paid (44,104) (27,258) (20,760) Cash received (paid) for income taxes (1,796) 759 (300) Net operating activities of discontinued operations (699) (2,376) (3,383) ------------------------------------------------------------------------------- Net cash used for operating activities (57,613) (115,385) (28,172) ------------------------------------------------------------------------------- Cash flows from investing activities: Purchases of property and equipment (13,256) (13,380) (4,033) Investments in life insurance policies (1,594) (2,511) (2,428) ------------------------------------------------------------------------------- Net cash used for investing activities (14,850) (15,891) (6,461) ------------------------------------------------------------------------------- Cash flows from financing activities: Borrowings 766,968 315,922 195,534 Repayments of debt (678,485) (192,206) (136,698) Purchases of treasury stock (8) (13,326) (2,272) Proceeds from exercise of common stock options 882 164 465 Dividends paid (2,968) (2,982) (3,150) Net financing activities of discontinued operations (1,500) (3,500) (1,400) ------------------------------------------------------------------------------- Net cash provided by financing activities 84,889 104,072 52,479 ------------------------------------------------------------------------------- Net increase (decrease) in cash and short-term investments 12,426 (27,204) 17,846 Cash and short-term investments at beginning of year 6,474 33,678 15,832 ------------------------------------------------------------------------------- Cash and short-term investments at end of year $ 18,900 $ 6,474 $ 33,678 =============================================================================== See accompanying notes to consolidated financial statements. DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Years ended June 30, 1995, 1994 and 1993 (In Thousands) 1995 1994 1993 ------------------------------------------------------------------------------- Reconciliation of net earnings to net cash used for operating activities: Net earnings $ 28,491 $ 17,021 $ 24,511 Amortization of common costs in cost of sales, excluding interest 188,081 110,478 90,911 Amortization of capitalized interest in cost of sales 31,205 18,003 14,513 Deferred compensation amortization 1,598 1,330 1,014 Depreciation and other amortization 5,243 3,698 2,528 Deferred income tax expense attributable to operating earnings 16,801 9,061 7,160 Loss from discontinued operations (net of tax) -- -- 12,810 Extraordinary gain from extinguishment of debt (net of tax) -- -- (458) Cumulative effect of accounting change -- -- (20,000) Net increase in home construction costs (42,566) (34,192) (19,980) Land acquisitions (39,332) (81,788) (25,721) Lot development (154,864) (89,983) (55,103) Amenity development (78,785) (62,621) (40,164) Pre-acquisition costs (2,770) (5,228) (1,933) Net change in other assets and liabilities (10,016) 1,212 (14,877) Net operating activities of discontinued operations (699) (2,376) (3,383) ------------------------------------------------------------------------------- Net cash used for operating activities $ (57,613) $(115,385) $ (28,172) =============================================================================== See accompanying notes to consolidated financial statements. DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1995, 1994 and 1993 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Principles of Consolidation --------------------------- The consolidated financial statements include the accounts of Del Webb Corporation and its Subsidiaries ("Company"). All significant intercompany transactions and accounts have been eliminated in consolidation. The Company's continuing operations include its communities, conventional homebuilding operations and residential land development project. The Company's communities are large-scale, master-planned residential communities at which the Company controls all phases of the master plan development process from land selection through the construction and sale of homes. Within its communities, the Company is the exclusive developer of homes. The Company's conventional homebuilding operations encompass the construction and sale of homes in subdivisions. The Company's residential land development project operations include the sale of individual land parcels and lots to other builders and developers for conventional housing and related commercial development. The Company's commercial land development projects are accounted for as discontinued operations. (b) Real Estate Inventories ----------------------- Real estate inventories include undeveloped land, partially improved land, amenities and homes on finished lots, in various stages of completion. These assets include direct construction costs for homes and common costs. Common costs include land, general and subdivision land development costs, model and vacation home costs in excess of normal direct construction costs, costs of community sales centers, costs of assets (such as golf courses and recreation centers) contributed to the community associations, costs of subsidizing the community associations, other costs (such as property taxes and pre-operating costs) and development period interest, all of which are capitalized. The capitalized costs and estimated future common costs are allocated, on a community by community basis, to residential and commercial lots based upon the estimated relative sales value that each lot has to the estimated aggregate sales value of all lots in the community. Cost of sales includes the direct construction costs of the home and an allocation of common costs. Sales commissions, advertising and other marketing expenses are included in selling, general and administrative expenses. The Company recognizes revenue at close of escrow. The Company reviews the valuation of its real estate inventories on a continual basis. For financial reporting purposes, real estate inventories not held for bulk sale must be carried at the lower of historical cost or estimated net realizable value. Real estate held for bulk sale must be carried at the lower of historical cost or estimated market value. Net realizable value differs from market value in that, among other things, market value is based on the price obtainable in a bulk cash sale at the present time, considers a potential purchaser's requirement for future profit and discounts the timing of expected cash receipts at a market rate of interest, whereas net realizable value is the price obtainable in the future for individual parcels as improved, net of disposal and holding costs (including interest at an estimated cost of funds rate), without provision for future profit and without discounting future cash receipts to present value. (c) Cash and Short-Term Investments ------------------------------- The Company's policy is to invest its cash in high-grade, income-producing short-term investments. Accordingly, uninvested cash balances are generally kept at minimum levels. Short-term investments are valued at the lower of cost or market and principally include overnight repurchase agreements, certificates of deposit and commercial paper with an original maturity of less than 90 days. (d) Depreciation ------------ Depreciation is computed using principally the straight-line method for financial statement purposes and accelerated methods for tax purposes, over the estimated useful lives of the assets. (e) Income Taxes ------------ Prior to July 1, 1992 the Company accounted for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 96, Accounting for Income Taxes. In fiscal 1993 the Company adopted SFAS No. 109, Accounting for Income Taxes. The cumulative effect of this change in accounting for income taxes of $20 million is reported in the consolidated statement of earnings for fiscal 1993. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in future years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of earnings as an adjustment to the effective income tax rate in the period that includes the enactment date. (f) Earnings per Share ------------------ Earnings per share is determined by dividing net earnings by the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares of 382,000, 219,000 and 292,000 included in the computation of earnings per share for fiscal 1995, 1994 and 1993, respectively, represent the effect of stock options. (g) Statements of Cash Flows ------------------------ In the Statements of Cash Flows, the Company defines operating communities as communities generating revenue through home closings. Communities in the pre-operating stage are those not yet generating home sales revenues. (h) Warranty Costs -------------- Estimated future warranty costs are charged to cost of sales when the revenues from home closings are recognized. (i) Financial Instruments --------------------- In the normal course of business, the Company invests in various financial assets and incurs various financial liabilities. The Company does not trade in derivative financial instruments, although it occasionally enters into agreements involving derivative financial instruments for purposes other than trading. At June 30, 1995 the Company had two financial instruments that are included within the definition of derivative financial instruments. These financial instruments are described below. The Company has a currency exchange agreement entered into with a major bank in 1986 simultaneously with the issuance outside of the United States of 50 million Subordinated Swiss Franc Bonds ($24 million) due February 1996. The agreement was entered into to eliminate the Company's exposure to foreign currency fluctuations. As of June 30, 1995 the outstanding Bonds and the currency exchange agreement have been reduced to 26.7 million Swiss Fancs ($12.8 million). The Company also has an interest rate swap agreement which calls for an interest rate conversion with a notional amount of $20 million. This swap agreement was entered into to manage the Company's interest rate risk. It requires fixed interest payments on the notional amount at a rate of 10.5 percent annually until February 1996. The Company receives semi-annual interest payments based on the six-month London interbank offered rate (LIBOR) until February 1996. As a result of this agreement, the Company incurred net interest of $1.0, $1.4 million and $1.4 million for the fiscal years ended June 30, 1995, 1994 and 1993, respectively. A one percent decrease (increase) in the LIBOR would have resulted in a $200,000 increase (decrease) in interest per year. The fair value estimates of financial instruments presented in note 5 have been determined by the Company using available market information and valuation methodologies deemed appropriate by the Company. Considerable judgement is required in interpreting market data to develop the estimates of fair value. Accordingly, these fair value estimates are not necessarily indicative of the amounts the Company might pay or receive in actual market transactions. Potential taxes and other transaction costs have not been considered in estimating fair value. As substantially all of the Company's assets (including real estate inventories, property and equipment and deferred income taxes) are not financial instruments, the disclosures in note 5 do not reflect the value of the Company as a whole. The fair values of the Company's publicly held debt are estimated based on the quoted bid prices for these debt instruments on June 30, 1995. The carrying amounts of the Company's remaining debt approximate the estimated fair values because they are at interest rates comparable to rates currently available to the Company for debt with similar terms and remaining maturities. The fair values of the Company's interest rate swap agreement and foreign currency exchange agreement are the amounts at which these off-balance sheet instruments could be settled, based on estimates obtainedfrom financial institutions. For all other financial instruments, the carrying amounts approximate the fair values because of the short maturity of these instruments. (2) REAL ESTATE INVENTORIES The components of real estate inventories are as follows: In Thousands at June 30, -------------------------------------------------------------------------------- 1995 1994 -------------------------------------------------------------------------------- Home construction costs $142,355 $ 99,789 Unamortized improvement and amenity costs 356,457 246,536 Unamortized capitalized interest 55,793 40,357 Land held for housing 220,297 210,700 Land held for future development or sale 53,850 65,231 -------------------------------------------------------------------------------- $828,752 $662,613 ================================================================================ At June 30, 1995, the Company had 366 completed homes (excluding models and vacation homes) and 388 homes under construction that were not subject to a sales contract. These completed homes and homes under construction represented $26.3 million and $10.3 million, respectively, of home construction costs at June 30, 1995. At June 30, 1994 the Company had 257 completed homes and 221 homes under construction (representing $16.9 million and $9.1 million, respectively, of home construction costs) that were not subject to a sales contract. Included in land held for future development or sale at June 30, 1995 were 184 acres of residential land, 325 acres of commercial land and 28 acres of worship sites that are currently being marketed for sale at the Company's communities and conventional homebuilding operations. Also included in land held for future development or sale at June 30, 1995 were 401 acres of residential land and 23 acres of commercial land at the Company's residential land development project. (3) RECEIVABLES Receivables are summarized as follows: In Thousands at June 30, -------------------------------------------------------------------------------- 1995 1994 -------------------------------------------------------------------------------- Escrow funds from home sales $ 7,089 $ 4,148 Note from sale of commercial building 2,665 2,739 Mortgages held for sale 3,617 1,456 Notes from sales Of land 1,708 244 Other 6,916 1,798 -------------------------------------------------------------------------------- $ 21,995 $ 10,385 ================================================================================ (4) PROPERTY AND EQUIPMENT, NET Property and equipment, stated at cost, and related accumulated depreciation are summarized as follows: In Thousands at June 30, -------------------------------------------------------------------------------- 1995 1994 -------------------------------------------------------------------------------- Buildings and improvements $ 9,422 $ 13,337 Equipment 35,267 28,602 Land and improvements 2,839 8,157 -------------------------------------------------------------------------------- 47,528 50,096 Less accumulated depreciation 18,202 13,323 -------------------------------------------------------------------------------- $ 29,326 $ 36,773 ================================================================================ At June 30, 1994 the Company classified the unamortized cost of its vacation homes (aggregating $16.6 million) as property and equipment as a result of its intent to operate the homes. In fiscal 1995 the Company decided to return to marketing the homes for sale as individual units. Accordingly, the homes were reclassified from property and equipment to real estate inventories. (5) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT Notes payable, senior and subordinated debt consists of the following: In Thousands at June 30, -------------------------------------------------------------------------------- 1995 1994 -------------------------------------------------------------------------------- 10 7/8% Senior Notes, net $ 96,787 $ 96,098 9 3/4% Senior Subordinated Debentures, net 96,847 96,436 9% Senior Subordinated Debentures, net 97,081 96,879 Subordinated Swiss Franc Bonds, net 12,745 12,704 Notes payable to banks under a revolving credit facility and short-term lines of credit 160,200 18,000 Real estate and other notes, variable interest rates from prime to prime plus 1% and fixed rates from 7% to 10.2%, interest payable quarterly, maturities to 2004 27,598 75,559 -------------------------------------------------------------------------------- $491,258 $395,676 ================================================================================ In April 1992 the Company completed a public offering of $100 million of Senior Notes, which are shown net of unamortized deferred financing costs and discount. The Notes are due on March 31, 2000 and have a stated interest rate of 10 percent per year. Interest is payable semi-annually on March 31 and September 30. The annual effective interest rate of the Notes, after giving effect to the amortization of deferred financing costs and discount, is 11.6 percent. The Notes may be redeemed by the Company after March 31, 1997 at 100 percent of the principal amount of the Notes redeemed, plus accrued and unpaid interest to the redemption date. In March 1993 the Company completed a public offering of $100 million of Senior Subordinated Debentures, which are shown net of unamortized deferred financing costs and discount. These Debentures are due on March 1, 2003 and have a stated interest rate of 9 3/4 percent per year. Interest is payable semi-annually on March 1 and September 1. The annual effective interest rate of the Debentures, after giving effect to the amortization of deferred financing costs and discount, is 10.3 percent. The Debentures may be redeemed by the Company on or after March 1, 1998, 1999 and 2000 at 104.875 percent, 102.4375 percent and 100 percent, respectively, of the principal amount of the Debentures redeemed, plus accrued and unpaid interest to the redemption date. In February 1994 the Company completed a public offering of $100 million of Senior Subordinated Debentures, which are shown net of unamortized deferred financing costs. These Debentures are due on February 15, 2006 and have a stated interest rate of 9 percent per year. Interest is payable semi-annually on February 15 and August 15. The annual effective interest rate of the Debentures, after giving effect to the amortization of deferred financing costs, is 9.3 percent. The Debentures may be redeemed by the Company on or after February 15, 1999, 2000, 2001, 2002 and 2003 at 104.500, 103.375, 102.250, 101.125 and 100 percent, respectively, of the principal amount of the Debentures redeemed, plus accrued and unpaid interest to the redemption date. In February 1986 the Company issued 50 million Subordinated Swiss Franc Bonds ($24 million) outside of the United States and simultaneously entered into a currency exchange agreement. The Bonds are due in February 1996 and are shown net of unamortized deferred financing costs. The annual effective interest rate of the Bonds, after giving effect to the amortization of deferred financing costs and the cost of the currency exchange agreement, is 12.5 percent. In March 1994 the Company established a $125 million senior unsecured revolving credit facility to replace a $50 million senior unsecured credit agreement and a $28 million revolving credit agreement for the development of one of the Company's active adult communities and to increase its borrowing capacity under credit facilities. At the same time, the Company also paid an $8.9 million term loan. In November 1994 the Company negotiated an amendment to the senior unsecured revolving credit facility to increase the amount of the facility from $125 million to $175 million. In June 1995 the facility was futher amended to increase the amount of the facility to $300 million. In connection with this amendment, the Company repaid the secured bank debt of its conventional homebuilding operations and reduced the amount of its short-term lines of credit from $20 million to $10 million. If the revolving credit facility is not subsequently amended, its capacity will begin declining in June 1997 through its maturity in December 1999. Borrowings under this facility bear interest at the prime rate or, if the Company selects, at the Eurodollar rate plus 1.95 percent. The senior unsecured revolving credit facility and the indentures for the Company's publicly-held debt contain covenants which, taken together and among other things, limit investments in unentitled land and unsold homes under construction, conventional homebuilding assets, dividends, stock repurchases, incurrence of indebtedness and certain acquisitions, and which could, depending on the circumstances, affect the Company's ability to borrow in the future. At June 30, 1995 the Company had $141.5 million and $8.3 million of unused borrowing capacity under the $300 million unsecured revolving credit facility and $10 million of short-term lines of credit, respectively. At June 30, 1995, under the most restrictive of the covenants in the Company's debt agreements, $16.9 million of the Company's retained earnings was available for payment of cash dividends and for the acquisition by the Company of its common stock. The estimated fair values at June 30, 1995 of the Company's Senior Notes, 9 3/4% Senior Subordinated Debentures, 9% Senior Subordinated Debentures and Subordinated Swiss Franc Bonds were $103.1 million, $96.6 million, $91.0 million and $23.2 million, respectively. The estimated fair value at June 30, 1995 of the interest rate swap agreement represented an unrealized loss of $0.8 million. The estimated fair value at June 30, 1995 of the foreign currency exchange agreement reflected an unrealized gain of $10.4 million, although this was offset by the increase in the fair value over the book value of the Subordinated Swiss Franc Bonds. The principal payment requirements on debt for the next five years ended June 30 are as follows: 1996 $ 28,323,000 1997 $ 9,205,000 1998 $ 566,000 1999 $ 99,018,000 2000 $ 157,355,000 (6) INCOME TAXES Total Income Tax Expense ------------------------ Total income tax expense was allocated as follows: In Thousands Years Ended June 30, ------------------------------------------------------------------------------- 1995 1994 1993 ------------------------------------------------------------------------------- Operating earnings $15,341 $ 9,165 $ 7,935 Discontinued operations -- -- (8,190) Extraordinary item -- -- 292 ------------------------------------------------------------------------------- Total income tax expense $15,341 $ 9,165 $ 37 =============================================================================== Components of Deferred Income Tax Expense Related to Operating Earnings ----------------------------------------------------------------------- The components of income tax expense related to operating earnings consist of: In Thousands Years Ended June 30, -------------------------------------------------------------------------------- 1995 1994 1993 -------------------------------------------------------------------------------- Current: Federal $ (3,336) $ 49 $ 167 State 1,876 55 608 -------------------------------------------------------------------------------- (1,460) 104 775 -------------------------------------------------------------------------------- Deferred: Federal 15,953 7,364 6,441 State 848 1,697 719 -------------------------------------------------------------------------------- 16,801 9,061 7,160 -------------------------------------------------------------------------------- Income tax expense $ 15,341 $ 9,165 $ 7,935 ================================================================================ Components of Deferred Income Tax Expense ----------------------------------------- The components of deferred income tax expense are as follows: In Thousands Years Ended June 30, ------------------------------------------------------------------------------- 1995 1994 1993 ------------------------------------------------------------------------------- Change in net operating loss carryforwards $ 15,164 $ (2,197) $ 3,446 Change in loss provisions for discontinued operations 3,556 (2,260) (3,597) Change in basis differences of real estate 9,721 18,076 (1,129) Deferred compensation (237) (1,356) (659) Amortization of short period loss 76 262 274 Accelerated depreciation (6,037) (2,973) 273 Change in deferred tax asset valuation allowance (2,744) (1,115) -- Other (2,698) 624 654 ------------------------------------------------------------------------------- Deferred income tax expense $ 16,801 $ 9,061 $ (738) =============================================================================== Included in deferred income tax expense for fiscal 1995 and 1994 are reductions in the deferred tax asset valuation allowance of $2.7 million and $1.1 million, respectively. These reductions resulted from additional years of operating earnings generated by the Company, which increased the portion of the gross deferred tax asset that the Company believed would more likely than not be realized. Deferred Income Taxes ---------------------- Deferred tax assets and liabilities have been recognized in the consolidated balance sheets due to temporary difference and carryforwards as follows: In Thousands at June 30, -------------------------------------------------------------------------------- 1995 1994 -------------------------------------------------------------------------------- Deferred tax assets: Net operating loss carryforwards $ -- $15,164 Tax credit carryforwards 4,649 3,158 Liabilities of discontinued operations, principally due to loss provisions 9,433 12,989 Property and equipment, principally due to differences in depreciation 11,469 5,432 State income taxes 2,948 1,789 Amortization of short period loss 486 562 Deferred compensation 4,287 4,050 Other loss provisions 4,519 1,544 Other 966 1,278 -------------------------------------------------------------------------------- 38,757 45,966 Valuation allowance 3,862 6,606 -------------------------------------------------------------------------------- 34,895 39,360 -------------------------------------------------------------------------------- Deferred tax liabilities: Real estate, principally due to basis differences 36,499 26,778 Receivables, principally due to valuation allowances -- 266 Other 3,593 712 -------------------------------------------------------------------------------- 40,092 27,756 -------------------------------------------------------------------------------- Net deferred income taxes $(5,197) $11,604 ================================================================================ Reconciliation of Operating Earnings Effective Income Tax Expense ----------------------------------------------------------------- Income tax expense attributable to operating earnings differs from the amounts computed using the federal statutory income tax rate as a result of the following: In Thousands Year Ended June 30, ------------------------------------------------------------------------------- 1995 1994 1993 ------------------------------------------------------------------------------- Expected tax at current federal statutory income tax rate $ 15,341 $ 9,165 $ 8,431 State income taxes, net of federal benefit 1,771 1,139 876 Changes in prior years' provisions due to the settlement of audits and resolution of issues 718 -- (1,043) Change in deferred tax asset valuation allowance (2,744) (1,115) -- Other 255 (24) (329) ------------------------------------------------------------------------------- Total income tax expense $ 15,341 $ 9,165 $ 7,935 =============================================================================== Carryforwards ------------- For federal income tax purposes, at June 30, 1995 the Company had tax credit carryforwards of $4.6 million that expire beginning in the year ending June 30, 1997. (7) REINCORPORATION In November 1994 the Company changed its state of incorporation from Arizona to Delaware. In connection with this reincorporation, the common stock changed from common stock without par value to common stock with a par value of $.001 per share, which resulted in a consolidated balance sheet reclassification within shareholders' equity from common stock to additional paid-in capital. There was no impact on total shareholders' equity as a result of the reincorporation. (8) COMMON STOCK RESERVED The Company has four stock option plans: the 1981 Stock Option Plan (under which no grants can be made subsequent to December 31, 1991), the 1986 Stock Option and Stock Appreciation Rights (SAR) Plan and the 1991 and 1993 Executive Long-Term Incentive Plans (1991 ELTIP and 1993 ELTIP, which cover both options and restricted stock grants). Options under each of these plans are granted to key employees to purchase shares of the Company's common stock at a price not less than the current market price at the date of the grant. The options are exercisable over a ten-year period from the date of the grant. In July 1991 the SAR component of the 1986 Stock Option Plan was eliminated and all outstanding stand alone SARs were converted into non-qualified stock options. For the 1981 and 1986 plans, 600,000 shares are authorized for grant. Shares authorized for grant under the 1991 ELTIP total 750,000. Shares authorized for grant under the 1993 ELTIP total 1,200,000, of which no more than 450,000 may be used for restricted stock grants. The Company has the 1991 Directors' Stock Plan, under which options may be granted to the Directors of the Company to purchase shares of the Company's common stock at a price not less than the current market price at the date of grant. Under this plan the Directors may elect to defer some or all of their annual retainers and receive restricted stock or stock options at prices that, when combined with the amounts of deferred retainers, equal the current market price at the date of the grant. Shares authorized under this plan total 75,000. The Company also has two restricted stock plans (the 1986 Restricted Stock Plan and the 1989 Restricted stock Plan) under which the Company's common stock is granted to key personnel under certain restrictions. For each plan, 175,000 shares are authorized for grant. Grants are issued at no cost to the employee. Activity in the stock option plans for the years ended June 30, 1995, 1994 and 1993 is summarized as follows:
Year Ended June 30, -------------------------------------------------------------------------------------------------------- Price Range 1995 1994 1993 -------------------------------------------------------------------------------------------------------- Options outstanding, beginning of year $5.63 - $17.69 1,248,019 1,002,218 862,400 Granted $9.89 - $17.69 325,720 276,548 181,352 Exercised $8.00 - $17.69 (72,785) (14,933) (41,534) Cancelled $8.00 - $17.69 (60,384) (15,814) - -------------------------------------------------------------------------------------------------------- Options outstanding, end of year $5.63 - $17.69 1,440,570 1,248,019 1,002,218 ======================================================================================================== Number of options exercisable at end of year 925,528 800,129 631,380 Number of options at end of year available for future option or restricted stock grants 753,627 1,175,364 344,332 --------------------------------------------------------------------------------------------------------
Shares granted, net of cancellations, under the 1986 and 1989 Restricted Stock Plans, the 1991 and 1993 ELTIPs and the Directors' Stock Plan during the years ended June 30, 1995, 1994 and 1993 aggregated 148,901 shares, 108,234 shares and 72,666 shares, respectively. At June 30, 1995 no shares were available for future grants under the 1986 Restricted Stock Plan or the 1989 Restricted Stock Plan. The Company recognized compensation expense of $1.6 million, $1.3 million and $1.0 million related to shares granted under the restricted stock plans for the years ended June 30, 1995, 1994 and 1993, respectively. (9) DEFINED CONTRIBUTION PLAN The Company sponsors a defined contribution retirement savings plan that covers substantially all employees of the Company after completion of six months of service. Company contributions to this plan, which include amounts based on a percentage of employee contributions as well as discretionary contributions, were $1.5 million, $1.2 million and $0.9 million for the years ended June 30, 1995, 1994 and 1993, respectively. (10) REVENUES AND COST OF SALES The components of revenues and cost of sales are: In Thousands Year Ended June 30, -------------------------------------------------------------------------------- 1995 1994 1993 -------------------------------------------------------------------------------- Revenues: Home sales - communities $620,012 $405,462 $324,817 Home sales - conventional homebuilding 144,469 79,992 44,456 Land sales and other 38,638 24,607 21,313 -------------------------------------------------------------------------------- $803,119 $510,061 $390,586 ================================================================================ Cost of sales: Home sales - communities $487,641 $317,844 $248,573 Home sales - conventional homebuilding 124,380 68,513 37,049 Land sales and other 34,031 17,845 16,678 -------------------------------------------------------------------------------- $646,052 $404,202 $302,300 ================================================================================ (11) INTEREST The following table shows the components of interest: In Thousands Year Ended June 30, -------------------------------------------------------------------------------- 1995 1994 1993 -------------------------------------------------------------------------------- Interest incurred $46,641 $33,677 $23,653 Less capitalized interest 46,641 33,677 23,653 -------------------------------------------------------------------------------- Interest expense -- -- -- ================================================================================ Amortization of capitalized interest included in cost of sales $31,205 $18,003 $14,513 ================================================================================ Unamortized capitalized interest included in real estate inventories at year end $55,793 $40,357 $24,683 ================================================================================ Interest income $ 581 $ 1,056 $ 987 ================================================================================ (12) DISCONTINUED OPERATIONS At June 30, 1995 the Company's discontinued operations consisted of two commercial land development projects in Arizona and Colorado. The components of net liabilities of discontinued operations are as follows: In Thousands at June 30, ------------------------------------------------------------------------------- 1995 1994 ------------------------------------------------------------------------------- Assets, primarily real estate $ 28,045 $ 28,826 Valuation allowances (27,855) (29,155) Real estate notes payable and other liabilities (4,115) (5,795) ------------------------------------------------------------------------------- Net liabilities of discontinued operations $ (3,925) $ (6,124) =============================================================================== In fiscal 1993 the Company recorded a non-cash loss provision for discontinued operations of $12.8 million, net of a tax benefit of $8.2 million, to reflect the change in carrying values of its two commercial land development projects from net realizable values to market values, net of holding and disposal costs, and to provide for the settlement of other matters. The principal payment requirements on real estate notes payable of discontinued operations are $1.1 million per year for each of the three years ending June 30, 1998 and $0.8 million for the year ending June 30, 1999. (13) CONTINGENT LIABILITIES AND COMMITMENTS The Company is a party to various legal proceedings arising in the ordinary course of business. While it is not feasible to predict the ultimate disposition of these matters, it is the opinion of management that their outcome will not have a material adverse effect on the financial condition of the Company. The Company has issued surety bonds, guarantees and standby letters of credit aggregating $154.9 million at June 30, 1995. The Company leases from third parties, under operating leases, office space, apartment units which it rents to prospective customers at its active adult communities, automobiles and certain other equipment. The leases are generally renewable at the Company's option for additional periods. Total rent expense incurred by the Company was $4.8 million, $3.7 million and $3.3 million for the years ended June 30, 1995, 1994 and 1993, respectively. Minimum lease payments to be made by the Company under non-cancellable lease agreements are as follows: 1996 $ 3,967,000 1997 3,513,000 1998 2,384,000 1999 1,393,000 2000 1,545,000 Later years 6,568,000 ------------ $ 19,370,000 ============ (14) SUBSEQUENT EVENT In August 1995 the Company publicly sold 2,474,900 shares of its treasury and authorized but unissued common stock. The net proceeds of approximately $45 million were used to repay a portion of the indebtedness outstanding under the Company's $300 million senior unsecured revolving credit facility. (15) QUARTERLY FINANCIAL INFORMATION (Unaudited) Quarterly financial information for the years ended June 30, 1995 and 1994 is presented below. The sum of the individual quarterly data may not equal the annual data due to rounding. In Thousands Except Per Share Data Three Months Ended -------------------------------------------------------------------------------- June 30, March 31, December 31, September 30, 1995 1995 1994 1994 -------------------------------------------------------------------------------- Revenues $ 268,796 $ 195,383 $ 176,058 $ 162,882 Net earnings 9,580 6,995 6,609 5,307 Net earnings per share .62 .46 .44 .35 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- June 30, March 31, December 31, September 30, 1994 1994 1993 1993 -------------------------------------------------------------------------------- Revenues $ 160,705 $ 136,259 $ 125,563 $ 87,534 Net earnings 6,385 4,587 4,215 1,834 Net earnings per share .43 .31 .28 .12 -------------------------------------------------------------------------------- DEL WEBB CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS Years ended June 30, 1995, 1994 and 1993
In Thousands ------------------------------------------------------------------------------------------------------------------------- Additions Additions Balance at Charged to Charged to Beginning of Costs and Other Accounts Balance at Classification Year Expenses Deductions End of Year ------------------------------------------------------------------------------------------------------------------------- 1995 ---- Reserve for residential land development project $ 6,738 $ 1,526 $ - $ - $ 8,264 Deferred tax asset valuation allowance 6,606 - - 2,744 3,862 Reserves for disposal costs of discontinued operations 29,155 - - 1,300 27,855 ------------------------------------------------------------------------------------------------------------------------ $ 42,499 $ 1,526 $ - $ 4,044 $ 39,981 ======================================================================================================================== 1994 ---- Reserve for residential land development project $ 7,710 $ - $ - $ 972 $ 6,738 Deferred tax asset valuation allowance 7,721 - - 1,115 6,606 Reserves for disposal costs of discontinued operations 32,314 - - 3,159 29,155 ------------------------------------------------------------------------------------------------------------------------ $ 47,745 $ - $ - $ 5,246 $ 42,499 ======================================================================================================================== 1993 ---- Reserve for residential land development project $ 8,840 $ - $ - $ 1,130 $ 7,710 Deferred tax asset valuation allowance - - 7,721 - 7,721 Reserves for disposal costs of discontinued operations 16,847 12,810 8,190 5,533 32,314 ------------------------------------------------------------------------------------------------------------------------ $ 25,687 $ 12,810 $ 15,911 $ 6,663 $ 47,745 ========================================================================================================================
DEL WEBB CORPORATION Report on Form 10-K For The Year Ended June 30, 1995 10-K EXHIBIT INDEX ------------------ NON-FINANCIAL STATEMENT EXHIBITS -------------------------------- Exhibit Number ------- 3.0 Amended and Restated Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 99.0 to Registrant's Report on Form 10-Q for the quarter ended September 30, 1994. 3.1 The Bylaws of the Registrant, incorporated by reference to Exhibit 99.1 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1994. 4.1 Indenture dated as of April 15, 1992 between Registrant and United States Trust Company of New York, as Trustee, defining the rights of holders of the 10 7/8% Senior Notes due 2000, incorporated by reference to Registration Statement No. 33-45703. 4.2 Indenture dated as of March 8, 1993 between Registrant and Fidelity Trust Company, New York, as Trustee, defining the rights of the holders of the 9 3/4% Senior Subordinated Debentures due 2003, incorporated by reference to Registration Statement No. 33-56898. 4.3 Indenture dated as of February 4, 1994, between Registrant and The Bank of New York, as Trustee, defining the rights of the holders of the 9% Senior Subordinated Debentures due 2006 incorporated by reference to Registration Statement No. 33-68732. 10.1 Compensation Agreement dated May 20, 1988, as amended January 12, 1989, between the Registrant and Frank D. Pankratz, incorporated by reference to Exhibit 10.4.6 to Registrant's Report on Form 10-K dated December 31, 1988, as amended by a letter dated December 18, 1991, incorporated by reference to Exhibit 10.1 to Registrant's Report on Form 10-K for the year ended June 30, 1992. 10.2 Employment Agreement dated May 18, 1988, as amended by a Letter Agreement dated January 20, 1989, and an Amendment Number Two dated May 17, 1989, between the Registrant and Philip J. Dion, incorporated by reference to Exhibit 10.2 to Registrant's Report on Form 10-K dated December 31, 1989; and Amendment Number Three dated August 17, 1993, incorporated by reference to Exhibit 10.2 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.3 Compensation Agreement dated July 1, 1989 between the Registrant and J. Dennis Wilkins, as amended by a letter dated December 18, 1991, incorporated by reference to Exhibit 10.3 to Registrant's Report on Form 10-K for the year ended June 30, 1992. 10.4 Compensation Agreement dated May 17, 1989, between the Registrant and Charles T. Roach, and a Letter Amendment to the Compensation Agreement dated December 18, 1991, incorporated by reference to Exhibit 10.4 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.5 Compensation Agreement dated October 20, 1992, between the Registrant and Joseph F. Contadino, incorporated by reference to Exhibit 10.5 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.6 Office Lease Agreement between Western Plaza Investors, L.P. and Registrant dated April 20, 1994 incorporated by reference to Registrant's Report on Form 10-K for the year ended June 30, 1994. 10.7 Del Webb Corporation Deferred Compensation Plan effective June 1, 1993, incorporated by reference to Exhibit 10.7 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.8 Key Executive Life Insurance Plan II dated April 1, 1992, incorporated by reference to Exhibit 10.8 to Registrant's Report on Form 10-K for the year ended June 30, 1992. 10.9 Key Executive Life Insurance Plan dated May 15, 1991, incorporated by reference to Exhibit 10.10 to Registrant's Report on Form 10-K for the year ended June 30, 1991. 10.10 Del Webb Corporation Executive Long-Term Incentive Plan adopted November 20, 1991, incorporated by reference to Registrant's Report on Form 10-K for the year ended June 30, 1992; and First Amendment to the Executive Long-Term Incentive Plan dated June 30, 1993, incorporated by reference to Exhibit 10.10 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.11 Del Webb Corporation 1993 Executive Long Term Incentive Plan dated March 17, 1994, incorporated by reference to Exhibit 10.11 to Registrant's Report on Form 10- K for the year ended June 30, 1994. 10.12 Del Webb Corporation Management Incentive Plan Fiscal 1994 (July 1, 1993 - June 30, 1994), incorporated by reference to Exhibit 10.11 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.13 Del Webb Corporation Supplemental Executive Retirement Plan No. 1, as amended and restated April 20, 1993, incorporated by reference to Exhibit 10.12 to Registrant's Report on Form 10-K for the year ended June 30, 1993; as amended by First Amendment to the Del Webb Corporation Supplemental Executive Retirement Plan No. 1 effective July 1, 1995. 10.14 Del Webb Corporation Director Stock Plan dated November 20, 1991, incorporated by reference to Exhibit 10.13 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.15 Amended and Restated Revolving Loan Agreement by and among Del Webb Corporation and Bank of America National Trust and Savings Association as Agent, and Bank One Arizona, NA, as Co-Agent, dated June 27, 1995. 10.16 Del Webb Corporation Supplemental Executive Retirement Plan No. 2, as amended and restated April 20, 1993, incorporated by reference to Exhibit 10.16 to Registrant's Report on Form 10-K for the year ended June 30, 1993; as amended by First Amendment to the Del Webb Corporation Supplemental Executive Retirement Plan No. 2 effective July 1, 1995. 10.17 Senior Officer Medical and Dental Reimbursement Plan, as amended and restated November 16, 1992, incorporated by reference to Exhibit 10.17 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.18 1981 Stock Option Plan, as amended January 29, 1987, incorporated by reference to Exhibit 10.18 of the Registrant's Report on Form 10-K for the year ended June 30, 1990; and the Third Amendment to the Del Webb Corporation 1981 Stock Option Plan dated June 30, 1993, incorporated by reference to Exhibit 10.18 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.19 1986 Stock Option and SAR Plan of the Del Webb Corporation, as amended January 27, 1987, incorporated by reference to Exhibit 10.19 of the Registrant's Report on Form 10-K for the year ended June 30, 1990; and the Second Amendment to the 1986 Stock Option and SAR Plan dated June 30, 1993, incorporated by reference to Exhibit 10.19 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.20 1986 Restricted Stock Plan of the Del Webb Corporation, incorporated by reference to Exhibit 10.20 of the Registrant's Report on Form 10-K for the year ended June 30, 1990; as amended by the First Amendment to the 1986 Restricted Stock Plan dated June 30, 1993, incorporated by reference to Exhibit 10.20 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.21 1989 Restricted Stock Plan of the Del Webb Corporation, incorporated by reference to Exhibit 10.21 of the Registrant's Report on Form 10-K for the year ended June 30, 1990; as amended by the First Amendment to the 1989 Restricted Stock Plan dated June 30, 1993, incorporated by reference to Exhibit 10.21 to Registrant's Report on Form 10-K for the year ended June 30, 1993. 10.22 Del Webb Corporation Retirement Savings Plan Amended and Restated effective January 1, 1995. 10.23 Del E. Webb Corporation Umbrella Trust dated June 11, 1987, as amended by Amendment Number One to the Del Webb Corporation Umbrella Trust dated February 8,1989, incorporated by reference to Exhibit 10.26 of the Registrant's Report on Form 10-K for the year ended June 30, 1990, and Amendment Number Two to Del Webb Corporation Umbrella Trust dated March 14, 1990, incorporated by reference to Exhibit 10.23 to Registrant's Report on Form 10-K for the year ended June 30, 1992. 10.24 Sample Directors and Officers Indemnification Agreement between Registrant and its directors and officers dated February 1, 1995 incorporated by reference to the Registrant's Report on Form 10-Q for the quarter ended March 31, 1995. 10.25 Del Webb Corporation 1995 Executive Long-Term Incentive Plan adopted July 13, 1995, subject to shareholder approval. 10.26 Del Webb Corporation 1995 Director Stock Plan adopted July 13, 1995, subject to shareholder approval. 10.27 Del Webb Corporation 1995 Executive Management Incentive Plan adopted July 13, 1995, subject to shareholder approval. 21.0 List of Active Subsidiaries and Associated Companies of Registrant. 23.0 Consent of Experts. 27.0 Financial Data Schedule. EX-10.13 2 FIRST AMENDMENT TO RETIRMENT PLAN NO. 1 FIRST AMENDMENT TO THE DEL WEBB CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN NO. 1 The Del Webb Corporation Supplemental Executive Retirement Plan No. 1 (the "Plan"), which was originally effective as of January 1, 1986, and was restated effective as of April 20, 1993, is hereby further amended as follows, effective as of July 1, 1995: 1. Section 2.1(a) of the Plan is amended by the addition of the following sentence to the end thereof: Any Participation Agreement in effect prior to the adoption of this amended and restated Plan shall continue in full force and effect until subsequently modified or replaced. 2. Section 4.2(b) of the Plan is amended in its entirety to read as follows: (b) High Average Compensation. "High Average Compensation" means the sum of the Participant's annual total of salary and incentive compensation, before reduction for deferred compensation and 401(k) contributions, in the five (5) calendar years out of the seven (7) consecutive calendar years of employment with the Employer in which such total is the highest divided by five (5). Where the actual (not annualized) compensation paid to a Participant during a partial calendar year is greater than the compensation paid to the Participant during a completed calendar year, such partial year may be utilized for purposes of this provision. Notwithstanding the above, incentive compensation payments made in July, 1991, for the period January 1, 1991, to June 30, 1991, shall not be included in the computations of High Average Compensation. 3. Section 4.5(d) of the Plan is amended in its entirety to read as follows: (d) Accelerated Distribution. Notwithstanding any other provision of the Plan, at any time after a Change in Control or any time following termination of employment, a Participant shall be entitled to receive, upon written request to the Committee, a lump sum distribution of all or a portion of the Actuarial Equivalent of the Participant's unpaid benefits under this Plan on the date on which the Committee receives the written request. Each accelerated distribution shall be subject to a penalty equal to ten percent (10%) of the amount that would otherwise be distributed and that amount shall be forfeited by the Participant. The amount payable under this section shall be paid in a lump sum within sixty-five (65) days following the receipt of the notice by the Committee from the Participant. In the event a Participant requests and obtains an accelerated distribution under this Section 4.5(d) and remains employed by the Employer, participation will cease and there will be no future benefit accruals under this plan. In the event of a Participant's death and subsequent benefit payments to the designated beneficiary, such beneficiary may request a distribution under this Section 4.5(d). 4. Article VIII is amended by adding the following new Section 8.3 to the end thereof: 8.3 Modifications for Particular Participants. In the exercise of its discretion, the Board may modify or supplement the provisions of this Plan as it applies to a particular Participant. No modification or supplement will be effective, however, unless it is reflected in the Participant's Participation Agreement, or provided for in a resolution duly adopted by the Board, or reflected in any other written document which is executed by an officer of the Company who has been specifically authorized to execute said written document pursuant to a resolution duly adopted by the Board. 5. Except as otherwise provided above, the provisions of the Plan, as amended and restated effective as of April 20, 1993, shall continue in full force and effect. IN WITNESS WHEREOF, Del Webb Corporation has caused this First Amendment to be executed by its duly authorized representative on this 13th day of July, 1995. DEL WEBB CORPORATION By: Robertson C. Jones --------------------------------- Its: Vice President --------------------------------- EX-10.15 3 EXHIBIT 10.15 REVOLVING LOAN AGREEMENT $300,000,000 REVOLVING CREDIT FACILITY AMENDED AND RESTATED REVOLVING LOAN AGREEMENT among DEL WEBB CORPORATION, THE BANKS NAMED HEREIN, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent, and BANK ONE, ARIZONA, NA, as Co-Agent Dated as of June 27, 1995 TABLE OF CONTENTS Page ---- Article 1 DEFINITIONS AND ACCOUNTING TERMS............................... 1 1.1 Defined Terms.................................................. 1 1.2 Use of Defined Terms........................................... 22 1.3 Accounting Terms............................................... 23 1.4 Rounding....................................................... 23 1.5 Exhibits and Schedules......................................... 23 1.6 References to "Borrower and its Subsidiaries".................. 23 1.7 Miscellaneous Terms............................................ 23 Article 2 LOANS.......................................................... 24 2.1 Loans-General.................................................. 24 2.2 Reference Rate Loans........................................... 25 2.3 Eurodollar Rate Loans.......................................... 25 2.4 Voluntary Reduction of Commitments............................. 26 2.5 Automatic Reduction of Commitments............................. 26 2.6 Optional Termination of Commitments............................ 26 2.7 Automatic Termination of Commitments........................... 26 2.8 Agent's Right to Assume Funds Available for Advances........... 26 2.9 Adjusting Purchase Payments.................................... 27 2.10 Substitute Credit Facility..................................... 27 2.11 Senior Debt.................................................... 27 2.12 Letters of Credit.............................................. 27 Article 3 PAYMENTS AND FEES.............................................. 32 3.1 Principal and Interest......................................... 32 3.2 Arrangement, Agency and Co-Agency Fees......................... 33 3.3 Underwriting Fee............................................... 33 3.4 Facility and Commitment Fees................................... 33 3.5 Increased Commitment Costs..................................... 34 3.6 Eurodollar Costs and Related Matters........................... 34 3.7 Late Payments.................................................. 37 3.8 Computation of Interest and Fees............................... 37 3.9 Non-Banking Days............................................... 38 3.10 Manner and Treatment of Payments............................... 38 3.11 Funding Sources................................................ 39 3.12 Failure to Charge Not Subsequent Waiver........................ 39 3.13 Agent's Right to Assume Payments Will be Made by Borrower...... 39 3.14 Fee Determination Detail....................................... 39 3.15 Survivability.................................................. 39 3.16 Accruals Under Original Loan Documents......................... 39 Article 4 REPRESENTATIONS AND WARRANTIES................................. 41 4.1 Existence and Qualification; Power; Compliance With Laws....... 41 4.2 Authority; Compliance With Other Agreements and Instruments and Government Regulations..................................... 41 4.3 No Governmental Approvals Required............................. 42 4.4 Subsidiaries................................................... 42 4.5 Financial Statements........................................... 42 4.6 No Other Liabilities; No Material Adverse Changes.............. 43 4.7 Title to Property.............................................. 43 4.8 Intangible Assets.............................................. 43 4.9 Public Utility Holding Company Act............................. 43 4.10 Litigation..................................................... 43 4.11 Binding Obligations............................................ 43 4.12 No Default..................................................... 44 4.13 ERISA.......................................................... 44 4.14 Regulations G, T, U and X; Investment Company Act.............. 44 4.15 Disclosure..................................................... 44 4.16 Tax Liability.................................................. 44 4.17 Strategic Plan................................................. 45 4.18 Hazardous Materials............................................ 45 Article 5 AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING REQUIREMENTS)........................................ 46 5.1 Payment of Taxes and Other Potential Liens..................... 46 5.2 Preservation of Existence...................................... 46 5.3 Maintenance of Properties...................................... 46 5.4 Maintenance of Insurance....................................... 46 5.5 Compliance With Laws........................................... 47 5.6 Inspection Rights.............................................. 47 5.7 Keeping of Records and Books of Account........................ 47 5.8 Compliance With Agreements..................................... 47 5.9 Use of Proceeds................................................ 47 5.10 New Guarantor Subsidiaries; Release of Certain Guaranties...... 47 5.11 Hazardous Materials Laws....................................... 47 5.12 Termination of GFB L/C......................................... 48 Article 6 NEGATIVE COVENANTS............................................. 49 6.1 Prepayment of Indebtedness..................................... 49 6.2 Payment of Subordinated Obligations............................ 49 6.3 Mergers and Sale of Assets..................................... 49 6.4 Hostile Tender Offers.......................................... 50 6.5 Distributions.................................................. 50 6.6 ERISA.......................................................... 50 6.7 Change in Nature of Business................................... 51 6.8 Liens.......................................................... 51 6.9 Indebtedness................................................... 52 6.10 Transactions with Affiliates................................... 53 6.11 Tangible Net Worth............................................. 53 6.12 Consolidated Fixed Charge Coverage............................. 53 6.13 Debt to Net Worth.............................................. 53 6.14 Adjusted Senior Debt to Net Worth.............................. 54 6.15 Liquidity...................................................... 54 6.16 Investments.................................................... 54 6.17 Unentitled Land................................................ 55 6.18 Unsold Homes in Production..................................... 55 6.19 Exempt Subsidiaries............................................ 56 6.20 Coventry Assets................................................ 56 Article 7 INFORMATION AND REPORTING REQUIREMENTS......................... 57 7.1 Financial and Business Information............................. 57 7.2 Compliance Certificates........................................ 59 Article 8 CONDITIONS..................................................... 60 8.1 Initial Advances, Etc.......................................... 60 8.2 Any Increasing Advance......................................... 61 8.3 Any Advance.................................................... 62 8.4 Return of Original Notes....................................... 62 Article 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT........... 63 9.1 Events of Default.............................................. 63 9.2 Remedies Upon Event of Default................................. 65 Article 10 THE AGENT...................................................... 67 10.1 Appointment and Authorization.................................. 67 10.2 Agent and Affiliates........................................... 67 10.3 Proportionate Interest in any Collateral....................... 67 10.4 Banks' Credit Decisions........................................ 67 10.5 Action by Agent................................................ 68 10.6 Liability of Agent............................................. 68 10.7 Indemnification................................................ 69 10.8 Successor Agent................................................ 70 10.9 No Obligations of Borrower..................................... 70 Article 11 MISCELLANEOUS.................................................. 71 11.1 Cumulative Remedies; No Waiver................................. 71 11.2 Amendments; Consents........................................... 71 11.3 Costs, Expenses and Taxes...................................... 71 11.4 Nature of Banks' Obligations................................... 72 11.5 Survival of Representations and Warranties..................... 73 11.6 Notices........................................................ 73 11.7 Execution of Loan Documents.................................... 73 11.8 Binding Effect; Assignment..................................... 73 11.9 Sharing of Setoffs............................................. 75 11.10 Indemnity by Borrower.......................................... 75 11.11 Nonliability of the Banks...................................... 76 11.12 No Third Parties Benefited..................................... 77 11.13 Further Assurances............................................. 77 11.14 Integration.................................................... 77 11.15 Governing Law.................................................. 78 11.16 Severability of Provisions..................................... 78 11.17 Headings....................................................... 78 11.18 Time of the Essence............................................ 78 11.19 Foreign Banks.................................................. 78 11.20 Hazardous Material Indemnity................................... 78 11.21 Reference to Arbitration....................................... 79 11.22 Confidentiality................................................ 80 11.23 Co-Agent....................................................... 80 AMENDED AND RESTATED REVOLVING LOAN AGREEMENT Dated as of June 27, 1995 This AMENDED AND RESTATED REVOLVING LOAN AGREEMENT ("Agreement") is entered into by and among Del Webb Corporation, a Delaware corporation ("Borrower"), each bank whose name is set forth on the signature pages of this Agreement and each lender which may hereafter become a party to this Agreement pursuant to Section 11.8 (collectively, the "Banks" and individually, a "Bank"), Bank of America National Trust and Savings Association, a national banking association, as Agent (the "Agent") and Bank One, Arizona, NA, as Co-Agent (the "Co-Agent"). This Agreement is intended by the parties hereto as an amendment and restatement of the Original Loan Agreement as of the effective date of this Agreement. Amounts outstanding and committed under the Original Loan Agreement and evidenced by the Original Notes shall, upon the effectiveness of this Agreement, be deemed to be outstanding and committed hereunder and evidenced by the Notes, subject, however, to all terms and conditions hereunder and under the other Loan Documents, including without limitation the allocation of the Commitments among the Banks as provided herein. In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: Article 1 DEFINITIONS AND ACCOUNTING TERMS -------------------------------- 1.1 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below: "Adjusted Commitments" means the Commitments as reduced by the Commitment Reduction Amount on the Commitment Reduction Date. "Adjusted Senior Debt" means, as of any date of determination, Senior Debt as of that date minus (to the extent included in Senior Debt, and without duplication) Non-Recourse Debt as of that date. "Adjusted Total Indebtedness" means, as of any date of determination, Total Indebtedness as of that date minus the aggregate outstanding principal balance (but not in excess of $20,000,000) of Non-Recourse Debt for wihich a corresponding Lien is permitted pursuant to Section 6.8(d). "Adjusting Purchase Payment(s)" has the meaning given that term in Section 2.9. "Advance" means any advance made or to be made by any Bank to Borrower as provided in Article 2, and includes each Reference Rate Advance and Eurodollar Rate Advance. "Affiliate" means, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (and the correlative terms, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided that, in any event, any Person that owns, directly or indirectly, 10% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation that has more than 100 record holders of such securities, or 10% or more of the partnership or other ownership interests of any other Person that has more than 100 record holders of such interests, will be deemed to control such corporation or other Person. "Agent" means Bank of America National Trust and Savings Association, when acting in its capacity as the Agent under any of the Loan Documents, or any successor Agent. "Agent's Office" means the Agent's address as set forth on the signature pages of this Agreement, or such other address as the Agent hereafter may designate by written notice to Borrower and the Banks. "Aggregate Effective Amount" means, as of any date of determination, the sum of (a) the aggregate drawable face amount of all Letters of Credit then outstanding plus (b) the aggregate amount paid by the Issuing Bank under Letters of Credit that has not yet been reimbursed to the Issuing Bank by Borrower pursuant to Section 2.12(d) or by way of Advances made pursuant to Section 2.12(e). "Agreement" means this Amended and Restated Revolving Loan Agreement, either as originally executed or as it may from time to time be supplemented, modified, amended, restated or extended. "Bank of America" means Bank of America National Trust and Savings Association. "Banking Day" means any Monday, Tuesday, Wednesday, Thursday or Friday, other than a day on which banks are authorized or required to be closed in Arizona, California, Massachusetts, New York, Texas or North Carolina. "Borrower" means Del Webb Corporation, a Delaware corporation, and its successors and permitted assigns. "Cancelled Debt Facilities" means the debt instruments and/or credit facilities identified on Schedule 1.1. "Capital Expenditure" means any expenditure that is considered a capital expenditure under Generally Accepted Accounting Principles, including any amount which is required to be treated as an asset subject to a Capital Lease Obligation. "Capital Lease Obligations" means all monetary obligations of a Person under any leasing or similar arrangement which, in accordance with Generally Accepted Accounting Principles, is classified as a capital lease. "Cash" means, when used in connection with any Person, all monetary and non-monetary items owned by that Person that are treated as cash in accordance with Generally Accepted Accounting Principles, consistently applied. "Cash Equivalents" means, when used in connection with any Person, that Person's Investments in: (a) Government Securities due within one year after the date of the making of the Investment; (b) readily marketable direct obligations of any State of the United States of America given on the date of such Investment a credit rating of at least Aa by Moody's Investors Service, Inc. or AA by Standard & Poor's Ratings Group, in each case due within one year from the making of the Investment; (c) certificates of deposit issued by, bank deposits in, Eurodollar deposits through, bankers' acceptances of, and repurchase agreements covering Government Securities executed by, any bank incorporated under the Laws of the United States of America or any State thereof and having on the date of such Investment combined capital, surplus and undivided profits of at least $250,000,000, or total assets of at least $5,000,000,000, in each case due within one year after the date of the making of the Investment; (d) certificates of deposit issued by, bank deposits in, Eurodollar deposits through, bankers' acceptances of, and repurchase agreements covering Government Securities executed by, any branch or office located in the United States of America of a bank incorporated under the Laws of any jurisdiction outside the United States of America having on the date of such Investment combined capital, surplus and undivided profits of at least $500,000,000, or total assets of at least $15,000,000,000 in each case due within one year after the date of the making of the Investment; (e) repurchase agreements covering Government Securities executed by a broker or dealer registered under Section 15(b) of the Securities Exchange Act of 1934, as amended, having on the date of the Investment capital of at least $100,000,000, due within 30 days after the date of the making of the Investment; provided that the maker of the Investment receives written confirmation of the transfer to it of record ownership of the Government Securities on the books of a registered broker or dealer, as soon as practicable after the making of the Investment; (f) readily marketable commercial paper of corporations doing business in and incorporated under the Laws of the United States of America or any State thereof or of any corporation that is the holding company for a bank described in clauses (c) or (d) above given on the date of such Investment a credit rating of at least P-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Ratings Group, in each case due within 90 days after the date of the making of the Investment; (g) "money market preferred stock" issued by a corporation incorporated under the Laws of the United States of America or any State thereof given on the date of such Investment a credit rating of at least Aa by Moody's Investors Service, Inc. and AA by Standard & Poor's Ratings Group, in each case having an investment period not exceeding 50 days; provided that (i) the amount of all such Investments issued by the same issuer does not exceed $5,000,000 and (ii) the aggregate amount of all such Investments does not exceed $15,000,000; and (h) a readily redeemable "money market mutual fund" sponsored by a bank described in clauses (c) or (d) hereof, or a registered broker or dealer described in clause (e) hereof, that has and maintains an investment policy limiting its investments primarily to instruments of the types described in clauses (a) through (g) hereof and having on the date of such Investment total assets of at least $1,000,000,000. "Cash Land Acquisition Costs" means, for any fiscal period, cash paid by Borrower and its Subsidiaries for land acquisitions during such fiscal period, calculated in a manner consistent with that used in the calculation of "Land acquisitions" as shown under the heading "Reconciliation of net earnings to net cash used for operating activities" in the financial statements delivered to Banks for the Fiscal Quarter ending September 30, 1993. "Certificate of a Responsible Official" means a certificate signed by a Responsible Official of the Person providing the certificate. "Change in Control" means any transaction or series of related transactions (a) in which any Unrelated Person or two or more Unrelated Persons acting in concert acquire beneficial ownership (within the meaning of Rule 13d-3(a)(1) under the Securities Exchange Act of 1934, as amended), directly or indirectly, of 50% or more of the Common Stock, (b) in which any such Unrelated Person or Unrelated Persons acting in concert acquire the concurrent beneficial ownership of 20% or more of the Common Stock subsequent to the Closing Date if, while they continue to hold such 20% ownership, (i) at the first election for the board of directors of Borrower subsequent to such acquisition, individuals who prior to such election were directors of Borrower cease for any reason (other than death or incapacity) to constitute 50% or more of the board of directors of Borrower or (ii) if the terms of all directors of Borrower do not expire at the date of such first election, then at the second election for the board of directors of Borrower subsequent to such acquisition, individuals who prior to such first election were directors of Borrower cease for any reason (other than death or incapacity) to constitute 50% or more of the board of directors of Borrower or (c) constituting a "change in control" or other similar occurrence under documentation evidencing or governing any Indebtedness of Borrower of $25,000,000 or more which results in an obligation of Borrower to prepay, purchase, offer to purchase, redeem or defease such Indebtedness. For purposes of the foregoing, the term "Unrelated Person" means any Person other than (a) a Subsidiary of Borrower or (b) an employee stock ownership plan or other employee benefit plan covering the employees of Borrower and its Subsidiaries. "Closing Date" means the time and Banking Day on which the conditions set forth in Section 8.1 are satisfied or waived. The Agent shall notify Borrower and the Banks of the date that is the Closing Date. "Co-Agent" means Bank One, Arizona, NA, when acting in its capacity as the Co-Agent under any of the Loan Documents, or any successor Co-Agent. "Code" means the Internal Revenue Code of 1986, as amended or replaced and as in effect from time to time. "Commitments" means, collectively, the Line A Commitment and the Line B Commitment. The respective Pro Rata Shares of the Banks with respect to the Commitments are set forth in Schedule 1.2. "Commitment Assignment and Acceptance" means a commitment assignment and acceptance substantially in the form of Exhibit A. "Commitment Reduction Amount" means the amount, determined as of the Commitment Reduction Date, equal to the Commitments on that day minus the sum of (a) the aggregate principal amount outstanding under the Notes on that day plus (b) the maximum additional principal amount, if any, that Borrower would be eligible to borrow hereunder on that day in accordance with the provisions of Section 8.2. "Commitment Reduction Date" means June 30, 1997. "Common Stock" means the common stock of Borrower or its successor by merger. "Compliance Certificate" means a certificate in the form of Exhibit B (or such modified form as the Agent may reasonably request), properly completed and signed by a Senior Officer of Borrower. "Consolidated Fixed Charge Coverage Ratio" means, with respect to any date of determination, the least of such value (a) as calculated in the manner specified for such term in the Indenture for the Public Senior Debt, (b) as calculated in the manner specified for such term in the Indenture for the Public 9-3/4% Senior Subordinated Debt and (c) as calculated in the manner specified for such term in the Indenture for the Public 9.00% Senior Subordinated Debt. In each case, such calculation shall be made in accordance with the terms of such indenture as were effective on the date of the certification specified in Section 8.1(a)(6) of the Original Loan Agreement. Should the manner of any such calculation become subject to dispute between Borrower and the Banks due to questions of interpretation of such indenture and the incorporation of such terms herein, the reasonable interpretation of the manner of calculation made by the Banks shall be binding on the parties with respect to Sections 8.2(c) and 8.2(d) unless and until the Agent shall have received written advice from the then current independent auditors of Borrower, in form reasonably acceptable to the Agent, stating their opinion as to the calculation of such amount. "Consolidated Total Assets" means, as of any date of determination, the amount of the consolidated total assets that should be reflected as such on a consolidated balance sheet of Borrower and its Subsidiaries on that date, prepared in accordance with Generally Accepted Accounting Principles, plus any amount by which such assets may have theretofore been written down to reflect a perceived decrease in market value other than customary depreciation or amortization. "Contractual Obligation" means, as to any Person, any provision of any outstanding security issued by that Person or of any material agreement, instrument or undertaking to which that Person is a party or by which it or any of its Property is bound. "Coventry Assets" means, as of any date of determination, the amount of the total assets that should be reflected on a consolidated balance sheet prepared solely for the Coventry Subsidiaries on that date, prepared in accordance with Generally Accepted Accounting Principles, plus any amount by which such assets may have theretofore been written down to reflect a perceived decrease in market value other than customary depreciation or amortization. "Coventry Homes Projects" means, as of any date of determination, all land purchase and home building projects of the Coventry Subsidiaries on that date. "Coventry Land Assets" means, as of any date of determination, the amount of the Land Assets that should be reflected on a consolidated balance sheet prepared solely for the Coventry Subsidiaries on that date, prepared in accordance with Generally Accepted Accounting Principles, plus any amount by which such assets may have theretofore been written down to reflect a perceived decrease in market value other than customary depreciation or amortization. "Coventry Subsidiaries" means Del Webb's Coventry Homes, Inc., Del Webb Homes, Inc. and Coventry of California, Inc., and their Subsidiaries from time to time which, on the date of this Agreement, are Del Webb's Coventry Homes Construction of Tucson Co., Del Webb's Coventry Homes of Tucson, Inc., Del Webb's Coventry Homes Construction Co., Trovas Company and Trovas Construction Co. Each Subsidiary of any Coventry Subsidiary from time to time shall be a Coventry Subsidiary. "Current Operating Projects" means collectively (a) Del Webb Construction, Inc.'s, Del E. Webb Development Co., L.P.'s and Del Webb Communities, Inc.'s approximately 6,575 acre residential community development located near Phoenix, Arizona and commonly known as Sun City West, (b) Del Webb Communities, Inc.'s approximately 1,000 acre residential community development located near Tucson, Arizona and commonly known as Sun City Tucson, (c) Del Webb Communities, Inc.'s approximately 1,892 acre residential community development located near Las Vegas, Nevada and commonly known as Sun City Las Vegas, (d) Del Webb California Corp.'s approximately 1,574 acre residential community development located near Palm Springs, California and commonly known as Sun City Palm Springs, (e) the Coventry Homes Projects, (f) Terravita Corp.'s and Terravita Homes Construction Co.'s approximately 803 acre master planned residential land development located in Scottsdale, Arizona, (g) Del E. Webb Foothill Corp.'s approximately 4,140 acre land development project located in Phoenix, Arizona, (h) Del Webb California Corp.'s approximately 1,200 acre residential community development located in Roseville, California and commonly known as Sun City Roseville, (i) Del Webb Home Construction Inc.'s approximately 4,000 acre (including interests in acres) residential community development located in Surprise, Arizona and commonly known as Sun City Grand, (j) Del E. Webb Development Co., L.P.'s approximately 5,300 acre residential community development located near Austin, Texas and commonly known as Sun City Georgetown, (k) Del Webb Communities, Inc.'s approximately 560 acre residential community development located in Henderson, Nevada and commonly known as Sun City MacDonald Ranch and (l) Del Webb Communities, Inc.'s approximately 5,500 acre residential community development located ead Island, South Carolina and commonly known as Sun City Hilton Head. "Current Operating Projects" shall mean such projects as they may be altered or expanded from time to time provided that any such expansion is on substantially adjacent real property and is operated as part of a single project. "Debtor Relief Laws" means the Bankruptcy Code of the United States of America, as amended from time to time, and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws from time to time in effect affecting the rights of creditors generally. "Default" means any event that, with the giving of any applicable notice or passage of time specified in Section 9.1, or both, would be an Event of Default. "Default Rate" means the interest rate prescribed in Section 3.7. "Designated Deposit Account" means a deposit account to be maintained by Borrower with Bank of America, as from time to time designated by Borrower by written notification to Bank of America. "Designated Eurodollar Market" means, with respect to any Eurodollar Rate Loan, (a) the London Eurodollar Market, or (b) if prime banks in the London Eurodollar Market are at the relevant time not accepting deposits of Dollars, the Cayman Islands Eurodollar Market or (c) if prime banks in the London and Cayman Islands Eurodollar Markets are at the relevant time not accepting deposits of Dollars, such other Eurodollar Market as may from time to time be selected by the Agent. "Disposition" means the sale, transfer or other disposition ("Transfer") of any asset of Borrower or any of its Subsidiaries other than (a) a Transfer constituting an Investment or a Distribution, (b) a Transfer of inventory or other assets in the ordinary course of business of Borrower or a Subsidiary on terms Borrower reasonably believes are fair market terms, (c) a Transfer of assets constituting all or part of the Spring Creek Project or Glen Harbor Project, (d) in the case of a residential community development being developed by Borrower (i) a Transfer of, or the payment for, common amenities and common areas made to or for the benefit of the community association of such development or (ii) a Transfer of, or the payment for, roads, sewers, utilities, and other on- and off-site improvements, infrastructure items and/or other assets associated with such development made to or for the benefit of a governmental entity or utility in connection with such development, in either such case provided that such disposition is reasonably necessary or appropriate for the development or betterment of such development and whether or not Borrower may at some future date receive total or partial reimbursement (with or without interest) of the cost (or value) of such Transfer or payment, or (e) a Transfer of the capital stock of a Subsidiary that holds solely the assets of the Spring Creek Project or the Glen Harbor Project. "Disqualified Stock" means any capital stock, warrants, options or other rights to acquire capital stock (but excluding any debt security which is convertible, or exchangeable, for capital stock), which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is or may be redeemable at the option of the holder thereof, in whole or in part. "Distribution" means, with respect to any shares of capital stock or any warrant or option to purchase an equity security or other equity security issued by a Person, (i) the retirement, redemption, purchase, or other acquisition for Cash or for Property (except capital stock that is not Disqualified Stock) by such Person of any such security, (ii) the declaration or (without duplication) payment by such Person of any dividend in Cash or in Property (except capital stock that is not Disqualified Stock) on or with respect to any such security, (iii) any Investment by such Person in the holder of 5% or more of any such security if a purpose of such Investment is to avoid characterization of the transaction as a Distribution and (iv) any other payment in Cash or Property (except capital stock that is not Disqualified Stock) by such Person constituting a distribution under applicable Laws with respect to such security. "Dollars" or "$" means United States dollars. "EBITDA" means, for any fiscal period, the sum of (a) Net Income for that period, without taking into account any extraordinary loss reflected in such Net Income, minus (b) any extraordinary gain reflected in such Net Income, plus (c) depreciation, amortization and all other non-cash expenses of Borrower and its Subsidiaries for that period, plus (d) Interest Expense for that period, plus (e) the aggregate amount of federal and state taxes on or measured by income of Borrower and its Subsidiaries for that period (whether or not payable during that period), in each case as determined in accordance with Generally Accepted Accounting Principles and, in the case of items (c), (d) and (e), only to the extent deducted in the determination of Net Income for that period. "Eligible Assignee" means any commercial bank having a combined capital and surplus of $100,000,000 or more that is (a) organized under the Laws of the United States of America or any State thereof or (b) organized under the Laws of any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of such a country, provided that (i) such bank is acting through a branch or agency located in the United States of America and (ii) is otherwise exempt from withholding of tax on interest and delivers Form 1001 or Form 4224 pursuant to Section 11.19 at the time of any assignment pursuant to Section 11.8. "ERISA" means the Employee Retirement Income Security Act of 1974, and any regulations issued pursuant thereto, as amended or replaced and as in effect from time to time. "Eurodollar Banking Day" means any Banking Day on which dealings in Dollar deposits are conducted by and among banks in the Designated Eurodollar Market. "Eurodollar Base Rate" means, with respect to any Eurodollar Rate Loan, the average of the interest rates per annum (rounded upward to the nearest 1/100 of 1%) at which deposits in Dollars are offered by the Eurodollar Reference Bank to prime banks in the Designated Eurodollar Market at or about 11:00 a.m., local time in the locale of the Designated Eurodollar Market, two (2) Eurodollar Banking Days before the first day of the applicable Eurodollar Period in an aggregate amount approximately equal to the amount of the Advance made by the Eurodollar Reference Bank with respect to such Eurodollar Rate Loan and for a period of time comparable to the number of days in the applicable Eurodollar Period. The determination of the Eurodollar Base Rate by the Agent shall be conclusive in the absence of manifest error. "Eurodollar Lending Office" means, as to each Bank, its office or branch so designated by written notice to Borrower and the Agent as its Eurodollar Lending Office. If no Eurodollar Lending Office is designated by a Bank, its Eurodollar Lending Office shall be its office at its address for purposes of notices hereunder. "Eurodollar Market" means a regular established market located outside the United States of America by and among banks for the solicitation, offer and acceptance of Dollar deposits in such banks. "Eurodollar Obligations" means eurocurrency liabilities, as defined in Regulation D. "Eurodollar Period" means, as to each Eurodollar Rate Loan, the period commencing on the date specified by Borrower pursuant to Section 2.1(b) and ending 1, 2, 3 or 6 months (or, with the written consent of all of the Banks, any other period) thereafter, as specified by Borrower in the applicable Request for Loan; provided that: (a) The first day of any Eurodollar Period shall be a Eurodollar Banking Day; (b) Any Eurodollar Period that would otherwise end on a day that is not a Eurodollar Banking Day shall be extended to the next succeeding Eurodollar Banking Day unless such Eurodollar Banking Day falls in another calendar month, in which case such Eurodollar Period shall end on the next preceding Eurodollar Banking Day; (c) No Eurodollar Period with respect to a Loan requested under the Line A Commitment or Line B Commitment, as applicable, shall extend beyond the next date on which such Commitment is to be reduced in accordance with Section 2.5 unless the principal amount of the corresponding Eurodollar Rate Loan plus the principal amount of all then outstanding Eurodollar Rate Loans under such Commitment having a Eurodollar Period ending after said reduction date is less than the amount to which such Commitment is expected to be reduced on said reduction date; and (d) No Eurodollar Period shall extend beyond the Maturity Date. "Eurodollar Rate" means, with respect to any Eurodollar Rate Loan, an interest rate per annum (rounded upward to the nearest 1/100 of one percent) determined pursuant to the following formula: Eurodollar Base Rate Eurodollar -------------------- Rate = 1.00 - Eurodollar Reserve Percentage "Eurodollar Rate Advance" means an Advance made hereunder and specified to be a Eurodollar Rate Advance in accordance with Article 2. "Eurodollar Rate Loan" means a Loan made hereunder and specified to be a Eurodollar Rate Loan in accordance with Article 2. "Eurodollar Reference Bank" means Bank of America. "Eurodollar Reserve Percentage" means, with respect to any Eurodollar Rate Loan, the maximum reserve percentage (expressed as a decimal, rounded upward to the nearest 1/100th of 1%) in effect on the date the Eurodollar Base Rate for that Eurodollar Rate Loan is determined (whether or not applicable to any Bank) under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities") having a term comparable to the Interest Period for such Eurodollar Rate Loan. The determination by the Agent of any applicable Eurodollar Reserve Percentage shall be conclusive in the absence of manifest error. "Event of Default" shall have the meaning provided in Section 9.1. "Exempt Subsidiary" means a Subsidiary of Borrower that is created after the Commitment Reduction Date (or that holds no material assets and engages in no business activities prior to the Commitment Reduction Date) and that has been (prior to the date such classification becomes relevant) designated as such in writing by Borrower to the Banks provided that no Subsidiary holding assets of any Current Operating Project may become or remain an Exempt Subsidiary and provided further that no Subsidiary holding real property that is (a) located within five (5) miles of a Current Operating Project and (b) part of a master planned residential community development, may become or remain an Exempt Subsidiary. "Federal Funds Rate" means, as of any date of determination, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such date opposite the caption "Federal Funds (Effective)". If for any relevant date such rate is not yet published in H.15(519), the rate for such date will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotations") for such date under the caption "Federal Funds Effective Rate". If on any relevant date the appropriate rate for such date is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such date will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that date by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. For purposes of this Agreement, any change in the Federal Funds Rate shall be effective as of the opening of business on the effective date of such change. "Fiscal Quarter" means the fiscal quarter of Borrower consisting of a three month fiscal period ending on each September 30, December 31, March 31 and June 30. "Fiscal Year" means the fiscal year of Borrower consisting of a twelve month fiscal period ending on each June 30. "Generally Accepted Accounting Principles" means, as of any date of determination, accounting principles (a) set forth as generally accepted in then currently effective Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) set forth as generally accepted in then currently effective Statements of the Financial Accounting Standards Board or (c) that are then approved by such other entity as may be approved by a significant segment of the accounting profession in the United States of America. The term "consistently applied," as used in connection therewith, means that the accounting principles applied are consistent in all material respects to those applied at prior dates or for prior periods. "Glen Harbor Project" means the approximately 416 acre industrial business park located in Glendale, Arizona held in joint venture by Del E. Webb Cactus Development Corp. and Del E. Webb Glen Harbor Development Corporation. "Government Securities" means readily marketable (a) direct full faith and credit obligations of the United States of America or obligations guaranteed by the full faith and credit of the United States of America and (b) obligations of an agency or instrumentality of, or corporation owned, controlled or sponsored by, the United States of America that are generally considered in the securities industry to be implicit obligations of the United States of America. "Governmental Agency" means (a) any international, foreign, federal, state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality or public body, or (c) any court or administrative tribunal. "Guarantor Subsidiary" means, as of any date of determination, each Subsidiary of Borrower (a) that had on the last day of the Fiscal Quarter then most recently ended total assets (determined in accordance with Generally Accepted Accounting Principles) of $2,000,000 or more; or (b) with respect to whose obligations any guaranty has been given by Borrower or any other Subsidiary. "Hazardous Materials" means substances defined as hazardous substances pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., or as hazardous, toxic or pollutant pursuant to the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq., the Hazardous Waste Control Law, California Health & Safety Code ss. 25100, et seq., or in any other applicable Hazardous Materials Law, in each case as such Laws are amended from time to time. "Hazardous Materials Laws" means all federal, state or local laws, ordinances, rules or regulations governing the disposal of Hazardous Materials applicable to any of the Real Property. "Indebtedness" means, as to any Person, without duplication, (a) indebtedness of such Person for borrowed money or for the deferred purchase price of Property or services (excluding trade and other accounts payable incurred in the ordinary course of business and in accordance with Borrower's or the Subsidiary's in question customary trade terms and further excluding obligations with respect to home-buyer deposits and obligations for local governmental assessments for local services based upon real property ownership), including any guaranty for any such indebtedness, (b) indebtedness of such Person of the nature described in clause (a) that is non-recourse to the credit of such Person but is secured by assets of such Person, to the extent of the value of such assets, (c) Capital Lease Obligations of such Person, (d) indebtedness of such Person arising under acceptance facilities or under facilities for the discount of accounts receivable of such Person but not contingent reimbursement obligations of such Person associated with surety bonds issued in the ordinary course of such Person's business and (e) any direct or contingent obligations of such Person under letters of credit issued for the account of such Person. "Intangible Assets" means assets that are considered intangible assets under Generally Accepted Accounting Principles, including customer lists, goodwill, computer software, copyrights, trade names, trademarks and patents. "Interest Differential" means, with respect to any prepayment of a Eurodollar Rate Loan on a day other than the last day of the applicable Interest Period and with respect to any failure to borrow a Eurodollar Rate Loan on the date or in the amount specified in any Request for Loan, (a) the per annum interest rate payable pursuant to Section 3.1(c) with respect to the Eurodollar Rate Loan minus (b) the Eurodollar Rate on, or as near as practicable to the date of the prepayment or failure to borrow for a Eurodollar Rate Loan commencing on such date and ending on the last day of the Interest Period of the Eurodollar Rate Loan so prepaid or which would have been borrowed on such date. "Interest Expense" means, with respect to any fiscal period, the sum of (a) all interest, fees, charges and related expenses paid or payable by Borrower and its Subsidiaries (without duplication) for that fiscal period to a lender or seller in connection with borrowed money or the deferred purchase price of assets that are considered "interest expense" under Generally Accepted Accounting Principles, plus (b) the portion of rent paid or payable (without duplication) by Borrower and its Subsidiaries for that fiscal period under Capital Lease Obligations that should be treated as interest in accordance with Financial Accounting Standards Board Statement No. 13, in each case determined on a consolidated basis in accordance with Generally Accepted Accounting Principles, consistently applied. "Interest Period" means, with respect to any Eurodollar Rate Loan, the related Eurodollar Period. "Investment" means, when used in connection with any Person, any investment by or of that Person, whether by means of purchase or other acquisition of stock or other securities of any other Person or by means of a loan, advance creating a debt, capital contribution, guaranty or other debt or equity participation or interest in any other Person, including any partnership and joint venture interests of such Person. Unless otherwise specified, the amount of any Investment shall be the amount actually invested (or fair value thereof), without adjustment for subsequent increases or decreases in the value of such Investment. Notwithstanding the foregoing, the provision of credit to support a surety bond issued to secure the performance of real estate development work in the ordinary course of Borrower's or its Subsidiaries' business, for the benefit of any Subsidiary of Borrower, shall not be considered an Investment, although the payment by a Person providing credit on such a surety bond shall be considered an Investment, nor shall any transaction which is excluded from the definition of Disposition by virtue of clause (d) thereof be considered an Investment. "Issuing Bank" means Bank of America. "Land Assets" means assets of a nature as have been historically included by Borrower in the line items "Unamortized improvement and amenity costs", "Unamortized capitalized interest", "Land held for housing" and "Land held for future development or sale" in the notes to its consolidated financial statements, provided that in any measurement of Land Assets, only 75% of the amount of assets in the category "Unamortized capitalized interest" shall be considered. "Laws" means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents. "Letters of Credit" means the standby letters of credit issued by the Issuing Bank under the Line A Commitment pursuant to Section 2.12, either as originally issued or as the same may be supplemented, modified, amended, renewed, extended or supplanted. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, claim, option, lien or charge of any kind, whether voluntarily incurred or arising by operation of Law or otherwise, affecting any Property, including any agreement to grant any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature of a security interest, and/or the filing of or agreement to give any financing statement (other than a precautionary financing statement with respect to a lease that is not in the nature of a security interest) under the Uniform Commercial Code or comparable Law of any jurisdiction with respect to any Property. "Line A Commitment" means, subject to Sections 2.4 and 2.5, $222,000,000. The respective Pro Rata Shares of the Banks with respect to the Line A Commitment are set forth in Schedule 1.2. "Line B Commitment" means, subject to Sections 2.4 and 2.5, $78,000,000. The respective Pro Rata Shares of the Banks with respect to the Line B Commitment are set forth in Schedule 1.2. "Line A Note" means a promissory note made by Borrower to a Bank evidencing the Advances under that Bank's Pro Rata Share of the Line A Commitment, substantially in the form of Exhibit C, either as originally executed or as the same may from time to time be supplemented, modified, amended, renewed, extended or supplanted. "Line B Note" means a promissory note made by Borrower to a Bank evidencing the Advances under that Bank's Pro Rata Share of the Line B Commitment, substantially in the form of Exhibit D, either as originally executed or as the same may from time to time be supplemented, modified, amended, renewed, extended or supplanted. "Loan" means the aggregate of the Advances made at any one time by the Banks pursuant to Article 2. "Loan Compliance Certificate" means a certification by a Senior Officer of Borrower or by C. Patrick Dempsey, as Assistant Treasurer of Borrower, in the form of Exhibit E, or such other form as may reasonably be required by the Agent from time to time, that is delivered in connection with a Request for Loan in accordance with Section 8.2(g). "Loan Documents" means, collectively, this Agreement, the Notes, the Subsidiary Guaranty, any Request for Loan, any Compliance Certificate and any other agreements of any type or nature hereafter executed and delivered by Borrower or any of its Subsidiaries or Affiliates to the Agent or to any Bank in any way relating to or in furtherance of this Agreement, in each case either as originally executed or as the same may from time to time be supplemented, modified, amended, restated, extended or supplanted. "Lot and Amenity Development Costs" means, for any fiscal period, cash paid by Borrower and its Subsidiaries for lot development and amenity development during such fiscal period, calculated in a manner consistent with that used in the calculation of "Lot development" and "Amenity development" as shown under the heading "Reconciliation of net earnings to net cash used for operating activities" in the financial statements delivered to Banks for the Fiscal Quarter ending September 30, 1993. "Majority Banks" means (a) as of any date of determination if a Commitment is then in effect, Banks having in the aggregate 66-2/3% or more of the Commitments then in effect and (b) as of any date of determination if the Commitments have then been terminated, Banks holding Notes evidencing in the aggregate 66-2/3% or more of the aggregate Indebtedness then evidenced by the Notes. "Margin Stock" means "margin stock" as such term is defined in Regulation G or U. "Material Adverse Effect" means any set of circumstances or events which (a) has or could reasonably be expected to have a material adverse effect upon the validity or enforceability of any material Loan Document, (b) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise) or business operations of Borrower and its Subsidiaries, taken as a whole, or (c) materially impairs or could reasonably be expected to materially impair the ability of Borrower and its Guarantor Subsidiaries, taken as a whole, to perform the Obligations. "Maturity Date" means December 31, 1999. "Monthly Interest Period" means the first calendar day of each month to the first calendar day of each succeeding month, calculated from, and including, the first calendar day of each month to, but not including, first calendar day of each succeeding month. "Monthly Payment Date" means the fifth Banking Day of each calendar month. "Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA. "Negative Pledge" means a Contractual Obligation that contains a covenant binding on Borrower or any of its Subsidiaries that prohibits Liens on any of its or their Property, other than (a) any such covenant contained in a Contractual Obligation granting a Lien permitted under Section 6.8 which affects only the Property that is the subject of such permitted Lien and (b) any such covenant that does not apply to Liens securing the Obligations. "Net Change in Housing Inventory" means, for any fiscal period, the net change in homes in production of Borrower and its Subsidiaries during such fiscal period, calculated in a manner consistent with that used in the calculation of "Net change in homes in production" as shown under the heading "Reconciliation of net earnings to net cash used for operating activities" in the financial statements delivered to Banks for the Fiscal Quarter ending September 30, 1993. "Net Income" means, with respect to any fiscal period, the consolidated net income of Borrower and its Subsidiaries for that period, determined in accordance with Generally Accepted Accounting Principles, consistently applied. "Non-Recourse Debt" means, as of any date of determination (without duplication), any Indebtedness of Borrower or any of its Subsidiaries on that date that is secured by a Lien on Property to the extent the liability for such Indebtedness, and interest thereon, is limited to the security of such Property, without the liability of any Person for any such deficiency. "Note" means any of the Line A Notes or Line B Notes. "Obligations" means all present and future obligations of every kind or nature of Borrower or any Party at any time and from time to time owed to the Agent or the Banks or any one or more of them, under any one or more of the Loan Documents, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or noncontingent, including obligations of performance as well as obligations of payment, and including interest that accrues after the commencement of any proceeding under any Debtor Relief Law by or against Borrower or any Subsidiary or Affiliate of Borrower. "Opinions of Counsel" means the favorable written legal opinions of (a) Robertson C. Jones and (b) Gibson, Dunn & Crutcher, counsel to Borrower and its Guarantor Subsidiaries, substantially in the form of Exhibits F-1 and F-2, respectively, together with copies of all factual certificates and legal opinions upon which such counsel has relied. "Original Loan Agreement" means that certain Revolving Loan Agreement, by and among Borrower, certain of the Banks and the Agent, dated as of March 11, 1994, as amended by (i) that certain First Amendment to Revolving Loan Agreement, dated as of July 1, 1994, (ii) that certain Second Amendment to Revolving Loan Agreement, dated as of August 10, 1994, (iii) that certain Third Amendment to Revolving Loan Agreement, dated as of November 29, 1994 and (iv) that certain Fourth Amendment to Revolving Loan Agreement, dated as of April 19, 1995, pursuant to which certain of the Banks agreed to make revolving loans to Borrower in the original aggregate principal amount of up to $175,000,000.00, as such Original Loan Agreement existed immediately prior to the effectiveness of this Agreement. "Original Loan Documents" mean the Original Loan Agreement and the Notes and the Subsidiary Guaranty delivered thereunder, as existing immediately prior to the effectiveness of this Agreement. "Original Notes" means those certain promissory notes delivered under the Original Loan Agreement, as existing immediately prior to the effectiveness of this Agreement. "Party" means any Person other than the Agent, the Co-Agent and the Banks, which now or hereafter is a party to any of the Loan Documents. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereof established under ERISA. "Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, which is subject to Title IV of ERISA and is maintained by Borrower or any of its Subsidiaries or to which Borrower or any of its Subsidiaries contributes or has an obligation to contribute. "Permitted Encumbrances" means: (a) inchoate Liens incident to construction or maintenance of Real Property; or Liens incident to construction or maintenance of Real Property now or hereafter filed of record for which adequate reserves have been set aside (or deposits made pursuant to applicable Law) and which are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that no such Real Property is subject to a material risk of loss or forfeiture; (b) Liens for taxes and assessments on Real Property which are not yet past due; or Liens for taxes and assessments on Real Property for which adequate reserves have been set aside and are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that no such Real Property is subject to a material risk of loss or forfeiture; (c) minor defects and irregularities in title to any Real Property which in the aggregate do not materially impair the fair market value or use of the Real Property for the purposes for which it is or may reasonably be expected to be held; (d) easements, exceptions, reservations, or other agreements of any nature that are reasonable and appropriate for the development of the Real Property of Borrower or a Subsidiary which in the aggregate do not materially burden or impair the fair market value or use of such Real Property (or the project to which it is related) for the purposes for which it is or may reasonably be expected to be held; (e) easements, dedications, assessment district or similar liens in connection with municipal financing and other similar encumbrances or charges, in each case reasonably necessary or appropriate for the development of Real Property of Borrower or a Subsidiary, and which are granted in the ordinary course of the business of such Borrower or Subsidiary, and which in the aggregate do not materially burden or impair the fair market value or use of such Real Property (or the project to which it is related) for the purposes for which it is or may reasonably be expected to be held; (f) easements, exceptions, reservations, or other agreements for the purpose of facilitating the joint or common use of property in or adjacent to a commercial Real Property project affecting Real Property which in the aggregate do not materially burden or impair the fair market value or use of such property for the purposes for which it is or may reasonably be expected to be held; (g) rights reserved to or vested in any Governmental Agency to control or regulate, or obligations or duties to any Governmental Agency with respect to, the use of any Real Property; (h) rights reserved to or vested in any Governmental Agency to control or regulate, or obligations or duties to any Governmental Agency with respect to, any right, power, franchise, grant, license, or permit; (i) present or future zoning laws and ordinances or other laws and ordinances restricting the occupancy, use, or enjoyment of Real Property; (j) statutory Liens, other than those described in clauses (a) or (b) above, arising in the ordinary course of business with respect to obligations which are not delinquent or are being contested in good faith, provided that, if delinquent, appropriate reserves have been set aside with respect thereto and no property is subject to a material risk of loss or forfeiture; (k) covenants, conditions, and restrictions affecting the use of Real Property which in the aggregate do not materially impair the fair market value or use of the Real Property for the purposes for which it is or may reasonably be expected to be held; (l) rights of tenants under leases and rental agreements covering Real Property entered into in the ordinary course of business of the Person owning such Real Property; (m) Liens consisting of pledges or deposits to secure obligations under workers' compensation laws or similar legislation, including Liens of judgments thereunder which are not currently dischargeable; (n) Liens consisting of pledges or deposits of property to secure performance in connection with operating leases made in the ordinary course of business to which Borrower or a Subsidiary is a party as lessee, provided the aggregate value of all such pledges and deposits in connection with any such lease does not at any time exceed 20% of the annual fixed rentals payable under such lease; (o) Liens consisting of deposits of property to secure bids made with respect to, or performance of, contracts (other than contracts creating or evidencing an extension of credit to the depositor) in the ordinary course of business; (p) Liens consisting of any right of offset, or statutory bankers' lien, on bank deposit accounts maintained in the ordinary course of business so long as such bank deposit accounts are not established or maintained for the purpose of providing such right of offset or bankers' lien; (q) Liens consisting of deposits of property to secure statutory obligations of Borrower or a Subsidiary of Borrower in the ordinary course of its business; (r) Liens, other than Liens for which the underlying obligation calls for the payment of money, that were in existence with respect to a parcel of Real Property prior to its acquisition by Borrower or one of its Subsidiaries and that do not materially impair the intended use of such Real Property; (s) Liens created by or resulting from any litigation or legal proceeding involving Borrower or a Subsidiary of Borrower in the ordinary course of its business which is currently being contested in good faith by appropriate proceedings, provided that adequate reserves have been set aside and no material property is subject to a material risk of loss or forfeiture; (t) other non-consensual Liens incurred in the ordinary course of business but not in connection with an extension of credit, which do not in the aggregate, when taken together with all other Liens, materially impair the value or use of the Property of Borrower and its Subsidiaries, taken as a whole; and (u) an interest, including an option, held by a Person under a contract to purchase Real Property, the sale of which is not prohibited under this Agreement. "Person" means an individual or any entity, whether trustee, corporation, general partnership, limited partnership, joint stock company, trust, estate, unincorporated organization, business association, firm, joint venture, Governmental Agency, or otherwise. "Plant Expenditures" means, for any fiscal period, Borrower and its Subsidiaries' aggregate cash expenditures made during such fiscal period for the acquisition of furniture, fixtures and equipment. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Pro Rata Share" means, with respect to each Bank, the percentage of the Commitments set forth opposite the name of that Bank on Schedule 1.2. "Public 9.00% Senior Subordinated Debt" means the Indebtedness outstanding under Borrower's Indenture, dated February 11, 1994 with respect to $100,000,000 of 9.00% Senior Subordinated Debentures due 2006. "Public 9-3/4% Senior Subordinated Debt" means the Indebtedness outstanding under Borrower's Indenture, dated March 8, 1993 with respect to $100,000,000 of 9-3/4% Senior Subordinated Debentures due 2003. "Public Senior Debt" means the Indebtedness outstanding under Borrower's Indenture, dated April 15, 1992, with respect to $100,000,000 of 10-7/8% Senior Notes due 2000. "Quarterly Payment Date" means the fifth Banking Day of each January, April, July and October. "Quarterly Period" means a period from the Closing Date until the earlier of the next following June 30 or September 30 and each subsequent three (3) month period commencing on the first calendar day of each April, July, October and January thereafter. "Real Property" means, as of any date of determination, all real property then or theretofore owned, leased or occupied by Borrower or any of its Subsidiaries. "Reference Rate" means the rate of interest publicly announced from time to time by Bank of America as its "reference rate." It is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in the Reference Rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Reference Rate Advance" means an Advance made hereunder and specified to be a Reference Rate Advance in accordance with Article 2. "Reference Rate Loan" means a Loan made hereunder and specified to be a Reference Rate Loan in accordance with Article 2. "Regulation D" means Regulation D, as at any time amended, of the Board of Governors of the Federal Reserve System, or any other regulation in substance substituted therefor. "Regulations G, T, U and X" means Regulations G, T, U and X, as at any time amended, of the Board of Governors of the Federal Reserve System, or any other regulations in substance substituted therefor. "Request for Letter of Credit" means a Request for Loan accompanied by a written request for a Letter of Credit substantially in the form of Exhibit G, signed by a Responsible Official of Borrower, on behalf of Borrower, and properly completed to provide all information required to be included therein. "Request for Loan" means a written request for a Loan substantially in the form of Exhibit H, signed by a Responsible Official of Borrower, on behalf of Borrower, and properly completed to provide all information required to be included therein. "Requirement of Law" means, as to any Person, the articles or certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any Law, or judgment, award, decree, writ or determination of a Governmental Agency, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Responsible Official" means (a) when used with reference to a Person other than an individual, any corporate officer of such Person, general partner of such Person, corporate officer of a corporate general partner of such Person, or corporate officer of a corporate general partner of a partnership that is a general partner of such Person, or any other responsible official thereof duly acting on behalf thereof, and (b) when used with reference to a Person who is an individual, such Person. Any document or certificate hereunder that is signed or executed by a Responsible Official of another Person shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such other Person. "Senior Debt" means, as of any date of determination, Total Indebtedness as of that date, other than Subordinated Obligations. "Senior Officer" means Borrower's (a) chief executive officer, (b) president, (c) chief financial officer, (d) treasurer or (e) vice president and controller. "Special Eurodollar Circumstance" means the adoption, on or after the date of this Agreement, of any Law or interpretation, or any change therein or thereof, or any change in the interpretation or administration thereof by any Governmental Agency, central bank or comparable authority charged with the interpretation or administration thereof, or compliance by any Bank or its Eurodollar Lending Office with any request or directive (whether or not having the force of Law) of any such Governmental Agency, central bank or comparable authority, or the existence or occurrence of circumstances affecting the Designated Eurodollar Market generally that are beyond the reasonable control of the Banks. "Specified Charges" means, as of the end of any Fiscal Quarter, the sum of (a) Plant Expenditures for the four (4) Fiscal Quarters then ending plus (b) Total Development Expenditures as of such date plus (c) Interest Expense for the four (4) Fiscal Quarters then ending plus (d) the aggregate amount of federal and state taxes on or measured by income of Borrower and its Subsidiaries paid in Cash during the four (4) Fiscal Quarters then ending. "Spring Creek Project" means the approximately 473 acre mixed use/industrial park in Colorado Springs, Colorado held by Del E. Webb Spring Creek Corporation. "Stockholders' Equity" means, as of any date of determination and with respect to any Person, the consolidated stockholders' equity of the Person as of that date determined in accordance with Generally Accepted Accounting Principles; provided that there shall be excluded from Stockholders' Equity any amount attributable to Disqualified Stock. "Strategic Plan" means Borrower's 1995 Strategic Plan, delivered to the Agent by Borrower under letter dated March 8, 1995. "Subordinated Obligations" means, as of any date of determination (without duplication), (a) the Public 9-3/4% Senior Subordinated Debt outstanding as of such date, (b) the Public 9.00% Senior Subordinated Debt outstanding as of such date, (c) the Swiss Franc Debt outstanding as of such date and (d) any other Indebtedness of Borrower or any of its Subsidiaries on that date which has been subordinated in right of payment to the Obligations in a manner reasonably satisfactory to the Banks and contains such other protective terms with respect to senior debt (such as payment blockage) as the Banks may reasonably require. Subordination provisions and protective terms with respect to senior debt under Indebtedness issued publicly or pursuant to Securities and Exchange Commission Rule 144A shall be deemed to be acceptable to the Banks if they include all of those protections given to "Designated Senior Debt", as that term is used in the Indentures for the Public 9-3/4% Senior Subordinated Debt and the Public 9.00% Senior Subordinated Debt. "Subsidiary" means, as of any date of determination and with respect to any Person, any corporation or partnership (whether or not, in either case, characterized as such or as a "joint venture"), whether now existing or hereafter organized or acquired: (a) in the case of a corporation, of which a majority of the securities having ordinary voting power for the election of directors or other governing body (other than securities having such power only by reason of the happening of a contingency) are at the time beneficially owned by such Person and/or one or more Subsidiaries of such Person, or (b) in the case of a partnership, of which a majority of the partnership or other ownership interests are at the time beneficially owned by such Person and/or one or more of its Subsidiaries. "Subsidiary Guaranty" means the continuing guaranty of the Obligations to be executed and delivered by the Guarantor Subsidiaries pursuant to Section 8.1(a)(3), in the form of Exhibit I, either as originally executed or as it may from time to time be supplemented, modified, amended, extended or supplemented. "Substituted Credit Facilities" means (a) the Senior Credit Agreement between Borrower and the Valley National Bank of Arizona, as agent for certain lenders, dated July 17, 1989, as amended, and (b) the Revolving Loan Agreement between Del Webb Communities Inc. and First Interstate Bank of Nevada, as agent for certain lenders, dated June 23, 1988, as amended. "Swiss Franc Debt" means the Indebtedness outstanding under Borrower's Public Bond Issue Agreement, dated January 28, 1986, re Swiss Francs 50'000'000 6-1/8% Subordinated Swiss Franc Bonds due 1996 and the related Currency Exchange Agreement, dated January 28, 1986, between Manufacturers Hanover Trust Company and Borrower. "Tangible Net Worth" means, as of any date of determination, the Stockholders' Equity of Borrower and its Subsidiaries on that date minus the aggregate Intangible Assets (not including the value of any intangible deferred tax assets that have been included in the calculation of Intangible Assets for this purpose) of Borrower and its Subsidiaries on that date. "Total Development Expenditures" means, as of the last day of any four (4) Fiscal Quarter period, Net Change in Housing Inventory plus Lot and Amenity Development Costs plus Cash Land Acquisition Costs for such four (4) Fiscal Quarter period, but in no event less than zero. "Total Indebtedness" means, as of any date of determination (without duplication), all Indebtedness of Borrower or any of its Subsidiaries on that date. "to the best knowledge of" means, when modifying a representation, warranty or other statement of any Person, that the fact or situation described therein is known by the Person (or, in the case of a Person other than a natural Person, known by a Responsible Official of that Person) making the representation, warranty or other statement, or with the exercise of reasonable due diligence under the circumstances (in accordance with the standard of what a reasonable Person in similar circumstances would have done) should have been known by the Person (or, in the case of a Person other than a natural Person, should have been known by a Responsible Official of that Person). "type", when used with respect to any Loan or Advance, means the designation of whether such Loan or Advance is a Reference Rate Loan or Advance, or a Eurodollar Rate Loan or Advance. "Unentitled Land" means Real Property (other than Real Property used and reasonably necessary for the general corporate and administrative purposes of Borrower and its Subsidiaries) that does not meet all of the following conditions: (a) its intended use is permissible under the applicable General Plan, (b) its intended use is permissible under the applicable Specific Plan, development agreement or by applicable zoning, (c) the environmental impact report for the intended use, if required, has been certified by the applicable Governmental Agency, (d) the time to file any challenge to the environmental impact report under the California Environmental Quality Act has passed without such a lawsuit being filed or such a lawsuit has been finally resolved successfully, and (e) in states other than California, a status comparable to each of the foregoing, to the extent required, has been met under applicable local Laws. "Unsold Home" means a housing unit owned by Borrower or a Guarantor Subsidiary with respect to which construction has begun (measured by the laying of a foundation for such housing unit) and for which a sales contract has not been entered into with, and a cash deposit received from, a consumer purchaser of such housing unit. 1.2 Use of Defined Terms. Any defined term used in the plural shall refer to all members of the relevant class, and any defined term used in the singular shall refer to any one or more of the members of the relevant class. 1.3 Accounting Terms. All accounting terms not specifically defined in this Agreement shall be construed in conformity with, and all financial data required to be submitted by this Agreement shall be prepared in conformity with, Generally Accepted Accounting Principles applied on a consistent basis, except as otherwise specifically prescribed herein. In the event that Generally Accepted Accounting Principles change during the term of this Agreement such that the covenants contained in Sections 6.11 through 6.15 would then be calculated in a different manner or with different components, (a) Borrower and the Banks agree to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating Borrower's financial condition to substantially the same criteria as were effective prior to such change in Generally Accepted Accounting Principles and (b) Borrower shall be deemed to be in compliance with the covenants contained in the aforesaid Sections during the 90 day period following any such change in Generally Accepted Accounting Principles if and to the extent that Borrower would have been in compliance therewith under Generally Accepted Accounting Principles as in effect immediately prior to such change. 1.4 Rounding. Any financial ratios required to be maintained or achieved by Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed in this Agreement and rounding the result up or down to the nearest number (with a round-up if there is no nearest number) to the number of places by which such ratio is expressed in this Agreement. 1.5 Exhibits and Schedules. All Exhibits and Schedules to this Agreement, either as originally existing or as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference. A matter disclosed on any Schedule shall be deemed disclosed on all Schedules. 1.6 References to "Borrower and its Subsidiaries". Any reference herein to "Borrower and its Subsidiaries" or the like shall refer solely to Borrower during such times, if any, as Borrower shall have no Subsidiaries. 1.7 Miscellaneous Terms. The term "or" is disjunctive; the term "and" is conjunctive. The term "shall" is mandatory; the term "may" is permissive. Masculine terms also apply to females; feminine terms also apply to males. The term "including" is by way of example and not limitation. Unless otherwise specified, reference to any document or agreement shall mean such document or agreement as it may be amended or restated from time to time. Article 2 LOANS ----- 2.1 Loans-General. (a) Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from the Closing Date through and including the Banking Day prior to the Maturity Date, each Bank shall, pro rata according to that Bank's Pro Rata Share of the then applicable Commitments, make Advances to Borrower in such amounts as Borrower may request that do not exceed in the aggregate at any one time outstanding the amount of that Bank's Pro Rata Share of the Commitments; provided that, giving effect to the Loan of which such Advance is a part, (i) the then outstanding principal indebtedness evidenced by the Line A Notes plus the Aggregate Effective Amount shall not exceed the Line A Commitment and (ii) the then outstanding principal indebtedness evidenced by the Line B Notes shall not exceed the Line B Commitment. Subject to the limitations set forth herein, Borrower may borrow, repay and reborrow under the Commitments without premium or penalty. (b) Subject to the next sentence, each Loan shall be made pursuant to a Request for Loan which shall specify the requested (i) date of such Loan, (ii) type of Loan, (iii) amount of such Loan, (iv) in the case of a Eurodollar Rate Loan, the Interest Period for such Loan and (v) whether such Loan is to be made under the Line A or Line B Commitment. Unless the Agent has notified, in its sole and absolute discretion, Borrower to the contrary, a Eurodollar Rate Loan (but not a Reference Rate Loan) may be requested by telephone by a Responsible Official of Borrower, in which case Borrower shall confirm such request by promptly delivering a Request for Loan in person or by telecopier conforming to the preceding sentence to the Agent. Borrower and the Agent may enter into a memorandum of understanding setting forth specific procedures for such telephonic requests; if the Agent complies with such procedures (or if no such memorandum is entered into), Agent shall incur no liability whatsoever hereunder in acting upon any telephonic request for loan purportedly made by a Responsible Official of Borrower, which hereby agrees to indemnify the Agent from any loss, cost, expense or liability as a result of so acting. (c) Promptly following receipt of a Request for Loan, the Agent shall notify each Bank by telephone or telecopier (and if by telephone, promptly confirmed by telecopier) of the date and type of the Loan, the applicable Interest Period, the applicable Commitment, and that Bank's Pro Rata Share of the Loan. Not later than 11:00 a.m., San Francisco time, on the date specified for any Loan (which must be a Banking Day), each Bank shall make its Pro Rata Share of the Loan in immediately available funds available to the Agent at the Agent's Office. Upon satisfaction or waiver of the applicable conditions set forth in Article 8, all Advances shall be credited on that date in immediately available funds to the Designated Deposit Account. (d) Unless the Majority Banks otherwise consent, each Reference Rate Loan shall be an integral multiple of $1,000,000 and shall be not less than $1,000,000 and each Eurodollar Loan shall be an integral multiple of $1,000,000 and shall be not less than $10,000,000. (e) The Advances made by each Bank shall be evidenced by that Bank's Line A Note or Line B Note, as applicable. (f) A Request for Loan shall be irrevocable upon the Agent's first notification thereof. (g) If no Request for Loan (or telephonic request for loan referred to in the second sentence of Section 2.1(b), if applicable) has been made within the requisite notice periods set forth in Sections 2.2 or 2.3 in connection with a Loan which, if made and giving effect to the application of the proceeds thereof, would not increase the outstanding principal Indebtedness evidenced by the Line A Notes or Line B Notes, as applicable, then Borrower shall be deemed to have requested, as of the date upon which the related then outstanding Loan is due pursuant to Section 3.1(e)(i), a Reference Rate Loan under the Line A Commitment or Line B Commitment, as applicable, in an amount equal to the amount necessary to cause the outstanding principal Indebtedness evidenced by the Notes to remain the same and the Banks shall make the Advances necessary to make such Loan notwithstanding Sections 2.1(b) and 2.2. (h) If a Loan is to be made on the same date that another Loan is due and payable, Borrower or the Banks, as the case may be, shall make available to the Agent the net amount of funds giving effect to both such Loans and the effect for purposes of this Agreement shall be the same as if separate transfers of funds had been made with respect to each such Loan, provided that no such netting of payments shall be made of a Loan under the Line A Commitment against the repayment of a Loan under the Line B Commitment. 2.2 Reference Rate Loans. Each request by Borrower for a Reference Rate Loan shall be made pursuant to a Request for Loan, with a concurrent telephone notification, received by the Agent, at the Agent's Office (and such additional office of the Agent as it may designate from time to time), not later than 1:00 p.m. San Francisco time, at least one (1) Banking Day before the date of the requested Reference Rate Loan. All Loans shall constitute Reference Rate Loans unless properly designated or redesignated as a Eurodollar Rate Loan pursuant to Section 2.3. 2.3 Eurodollar Rate Loans. (a) Each request by Borrower for a Eurodollar Rate Loan shall be made pursuant to a Request for Loan (or telephonic or other request for loan referred to in the second sentence of Section 2.1(b), if applicable) received by the Agent, at the Agent's Office (and such additional office of the Agent as it may designate from time to time), not later than 9:00 a.m., San Francisco time, at least three (3) Eurodollar Banking Days before the first day of the applicable Eurodollar Period. (b) On the date which is two (2) Eurodollar Banking Days before the first day of the applicable Eurodollar Period, the Agent shall confirm its determination of the applicable Eurodollar Rate (which determination shall be conclusive in the absence of manifest error) and promptly shall give notice of the same to Borrower and the Banks by telephone or telecopier (and if by telephone, promptly confirmed by telecopier). (c) Unless the Agent and the Majority Banks otherwise consent, no more than four (4) Eurodollar Rate Loans shall be outstanding at any one time. (d) Unless the Agent and the Majority Banks otherwise consent, no Eurodollar Rate Loan may be requested during the existence of a Default or Event of Default. (e) Nothing contained herein shall require any Bank to fund any Eurodollar Rate Advance in the Designated Eurodollar Market. 2.4 Voluntary Reduction of Commitments. Borrower shall have the right, at any time and from time to time, without penalty or charge, upon at least three (3) Banking Days prior written notice by a Responsible Official of Borrower to the Agent, voluntarily to reduce, permanently and irrevocably, in aggregate principal amounts in an integral multiple of $1,000,000 but not less than $5,000,000, or to terminate, all of the then undisbursed portion of the Line A Commitment or Line B Commitment, provided that any such reduction or termination shall be accompanied by payment of all accrued and unpaid commitment fees with respect to the portion of the Commitments being reduced or terminated. The Agent shall promptly notify the Banks of any reduction of a Commitment under this Section 2.4. 2.5 Automatic Reduction of Commitments. The Commitments shall automatically reduce on the Commitment Reduction Date by an amount equal to the Commitment Reduction Amount and shall further automatically reduce at the close of business on each Quarterly Payment Date following the Commitment Reduction Date by 10% of the Adjusted Commitments. For purposes of this Section 2.5, the Line A Commitment shall first be reduced to zero, and thereafter the Line B Commitment shall be reduced. 2.6 Optional Termination of Commitments. Following the occurrence of a Change in Control, the Majority Banks may in their sole and absolute discretion elect, at any time until sixty (60) days immediately subsequent to the later of (a) such occurrence and (b) receipt of Borrower's written notice to the Agent of such occurrence, to terminate the Commitments, in which case the Commitments shall be terminated and reduced to zero effective on the date of such election. 2.7 Automatic Termination of Commitments. The Commitments shall automatically terminate and be reduced to zero upon the occurrence of a Disposition consisting of (a) all or substantially all of the assets of Borrower, or (b) all or substantially all of the capital stock of any Guarantor Subsidiary (except a Guarantor Subsidiary holding solely the assets of the Glen Harbor Project or the Spring Creek Project), or (c) all or substantially all of the assets of any Guarantor Subsidiary (not including those assets constituting the Glen Harbor Project or Spring Creek Project). 2.8 Agent's Right to Assume Funds Available for Advances. Unless the Agent shall have been notified by any Bank no later than the Banking Day or Eurodollar Banking Day, as applicable, prior to the funding by the Agent of any Loan that such Bank does not intend to make available to the Agent such Bank's portion of the total amount of such Loan, the Agent may assume that such Bank has made such amount available to the Agent on the date of the Loan and the Agent may, in reliance upon such assumption, make available to Borrower a corresponding amount. If the Agent has made funds available to Borrower based on such assumption and such corresponding amount is not in fact made available to the Agent by such Bank, the Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent promptly shall notify Borrower and Borrower shall pay such corresponding amount to the Agent. The Agent also shall be entitled to recover from such Bank interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to Borrower to the date such corresponding amount is recovered by the Agent, at a rate per annum equal to the daily Federal Funds Rate. Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its share of the Commitments or to prejudice any rights which the Agent or Borrower may have against any Bank as a result of any default by such Bank hereunder. 2.9 Adjusting Purchase Payments. Principal amounts outstanding under the Line A Commitment or the Line B Commitment of the Original Loan Agreement on the effective date of this Agreement (the "Carryover Principal Balance") remain outstanding under the Line A Commitment or Line B Commitment, as applicable, hereunder. Concurrently with the effectiveness of this Agreement and the making of the initial Loan as provided in Section 8.1, the Banks agree to purchase and sell undivided interests in the Carryover Principal Balance by making or receiving Adjusting Purchase Payments as specified in Schedule 2.9 (the "Adjusting Purchase Payment(s)") so that the Carryover Principal Balance will be properly allocated and owing to the Banks under the Notes in accordance with the Pro-Rata Shares specified in Schedule 1.2. Each Bank making an Adjusting Purchase Payment shall deliver it to the Agent together with its funding of its initial Advance, and the Agent shall forward such Adjusting Purchase Payments to the Banks entitled thereto promptly after receipt in accordance with the allocations specified in Schedule 2.9. On the effective date of this Agreement, in addition to any other Advances that may be made, each Bank shall be deemed as having made an Advance in the amount of its Pro-Rata Share of the Carryover Principal Balance. 2.10 Substitute Credit Facility. Borrower hereby requests, and the parties hereto agree, that the Line B Commitment constitutes a restatement of the Line B Commitment under the Original Loan Agreement and, as such, shall be made available as and shall be designated as a Substitute Credit Facility (as that term is defined in the Indenture evidencing the Public Senior Debt) with respect to the Substituted Credit Facilities. 2.11 Senior Debt. Without limitation, all outstanding principal and interest under the Notes constitutes "Senior Debt", as that term is defined in the Indenture for the Public 9-3/4% Senior Subordinated Debt, the Indenture for the Public 9.00% Senior Subordinated Debt and the Public Bond Issue Agreement for the Swiss Franc Debt. 2.12 Letters of Credit. (a) Subject to the terms and conditions hereof, at any time and from time to time from the Closing Date through the Maturity Date, the Issuing Bank shall issue such Letters of Credit under the Line A Commitment as Borrower may request by a Request for Letter of Credit; provided that (i) giving effect to all such Letters of Credit, the sum of (A) the aggregate principal amount outstanding under the Line A Notes plus (B) the Aggregate Effective Amount does not exceed the then applicable Line A Commitment and (ii) the Aggregate Effective Amount shall not exceed $5,000,000. Each Letter of Credit shall be in a form acceptable to the Issuing Bank. The expiry date of any Letter of Credit shall not extend more than one (1) year beyond its issuance date (unless otherwise agreed by the Issuing Bank) nor, in any event, beyond the Maturity Date. A Request for Letter of Credit shall be irrevocable absent the consent of the Issuing Bank. (b) Each Request for Letter of Credit shall be submitted to the Issuing Bank, with a copy to the Agent, at least five (5) Banking Days prior to the date upon which the related Letter of Credit is proposed to be issued. The Agent shall promptly notify the Issuing Bank whether such Request for Letter of Credit, and the issuance of a Letter of Credit pursuant thereto, conforms to the requirements of this Agreement. Upon receipt of favorable notice from the Agent, and promptly after issuing each Letter of Credit, the Issuing Bank shall promptly notify the Agent, and the Agent shall promptly notify the Banks, of the amount and terms thereof. (c) Upon the issuance of a Letter of Credit, each Bank shall be deemed to have purchased a participation in such Letter of Credit from the Issuing Bank in a proportion of the total equal to that Bank's Pro Rata Share. Without limiting the scope and nature of each Bank's participation in any Letter of Credit, to the extent that the Issuing Bank has not been reimbursed by Borrower for any payment required to be made by the Issuing Bank under any Letter of Credit, each Bank shall, pro rata according to its Pro Rata Share, reimburse the Issuing Bank through the Agent promptly upon demand for the amount of such payment. The obligation of each Bank to so reimburse the Issuing Bank shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of Borrower to reimburse the Issuing Bank for the amount of any payment made by the Issuing Bank under any Letter of Credit together with interest as hereinafter provided. Each Bank that has reimbursed the Issuing Bank pursuant to this Section 2.12(c) for its Pro-Rata Share of any payment made by the Issuing Bank under a Letter of Credit shall thereupon acquire a pro-rata participation, to the extent of such reimbursement, in the claim of the Issuing Bank against Borrower under Section 2.12(d) and shall share, in accordance with that pro-rata participation, in any payment made by Borrower with respect to such claim. (d) Borrower agrees to pay to the Issuing Bank through the Agent an amount equal to any payment made by the Issuing Bank with respect to each Letter of Credit no later than one (1) Banking Day after demand made by the Issuing Bank therefor, together with interest on such amount from the date of any payment made by the Issuing Bank. Interest on such amount shall accrue at the Reference Rate until the second Banking Day following the payment made by the Issuing Bank with respect to the Letter of Credit, and at the Default Rate thereafter. The principal amount of any such payment by Borrower shall be used to reimburse the Issuing Bank for the payment made by it under the Letter of Credit. Should Borrower request a Loan under the Line A Commitment for the purpose of making such payment and make written request to the Agent to pay the proceeds of the Loan directly to the Issuing Bank, then the amount to be so paid shall be deducted from the Aggregate Effective Amount for purposes of Section 2.1(a) in connection with such Request for Loan. (e) If Borrower fails to make the payment required by Section 2.12(d) within the time period therein set forth, in lieu of the reimbursement to the Issuing Bank under Section 2.12(c) the Issuing Bank may (but is not required to), without notice to or the consent of Borrower, instruct the Agent to cause Advances to be made by the Banks under the Line A Commitment in an aggregate amount equal to the amount paid by the Issuing Bank with respect to that Letter of Credit and, for this purpose, the conditions precedent set forth in Articles 2 and 8 shall not apply. The proceeds of such Advances shall be paid to the Issuing Bank to reimburse it for the payment made by it under the Letter of Credit. (f) The issuance of any supplement, modification, amendment, renewal, or extension to or of any Letter of Credit shall be subject to such preconditions as the Issuing Bank may establish. (g) The obligation of Borrower to pay to the Issuing Bank the amount of any payment made by the Issuing Bank under any Letter of Credit shall be absolute, unconditional, and irrevocable, subject only to performance by the Issuing Bank of its obligations to Borrower under California Uniform Commercial Code Section 5109. Without limiting the foregoing, subject to California Uniform Commercial Code Section 5109, Borrower's obligations shall not be affected by any of the following circumstances: (1) any lack of validity or enforceability of the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto; (2) any amendment or waiver of or any consent to departure from the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, with the consent of Borrower; (3) the existence of any claim, setoff, defense, or other rights which Borrower may have at any time against the Issuing Bank, the Agent, the Co-Agent or any Bank, any beneficiary of the Letter of Credit (or any persons or entities for whom any such beneficiary may be acting) or any other Person, whether in connection with the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, or any unrelated transactions; (4) any demand, statement, or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever so long as any such document appeared to comply with the terms of the Letter of Credit; (5) payment by the Issuing Bank in good faith under the Letter of Credit against presentation of a draft or any accompanying document which does not strictly comply with the terms of the Letter of Credit; (6) the existence, character, quality, quantity, condition, packing, value or delivery of any property purported to be represented by documents presented in connection with any Letter of Credit or for any difference between any such property and the character, quality, quantity, condition, or value of such property as described in such documents; (7) the time, place, manner, order or contents of shipments or deliveries of property as described in documents presented in connection with any Letter of Credit or the existence, nature and extent of any insurance relative thereto; (8) the solvency or financial responsibility of any party issuing any documents in connection with a Letter of Credit; (9) any failure or delay in notice of shipments or arrival of any property; (10) any error in the transmission of any message relating to a Letter of Credit not caused by the Issuing Bank, or any delay or interruption in any such message; (11) any error, neglect or default of any correspondent of the Issuing Bank in connection with a Letter of Credit; (12) any consequence arising from acts of God, war, insurrection, civil unrest, disturbances, labor disputes, emergency conditions or other causes beyond the control of the Issuing Bank; (13) so long as the Issuing Bank in good faith determines that the contract or document appears to comply with the terms of the Letter of Credit, the form, accuracy, genuineness or legal effect of any contract or document referred to in any document submitted to the Issuing Bank in connection with a Letter of Credit; and (14) where the Issuing Bank has acted in good faith and observed general banking usage, any other circumstances whatsoever. (h) The Issuing Bank shall be entitled to the protection accorded to the Agent pursuant to Section 10.7. (i) The Uniform Code of Practice for Documentary Credits, as published in its most current version by the International Chamber of Commerce, shall be deemed a part of this Section and shall apply to all Letters of Credit to the extent not inconsistent with applicable Law. (j) Concurrently with the issuance of each Letter of Credit, Borrower shall pay a letter of credit origination fee to the Issuing Bank, for the sole account of the Issuing Bank, in an amount established from time to time by the Issuing Bank. Borrower shall also pay to the Agent for the ratable account of the Banks in accordance with their Pro Rata Shares, a standby letter of credit fee in an amount equal to 1.25% per annum times the face amount of such Letter of Credit, which fee shall be payable quarterly in arrears on each Quarterly Payment Date after the issuance of the Letter of Credit and on the termination or expiration of such Letter of Credit. The Agent shall promptly make available to the Banks in immediately available funds, pro-rata according to their Pro Rata Shares, the standby letter of credit fees which are for the account of the Banks. Borrower shall also pay transfer fees, check fees, foreign currency exchange fees and costs, and such other fees as the Issuing Bank normally charges in connection with standby letters of credit and activity pursuant thereto, which fees shall be solely for the account of the Issuing Bank. (k) To the extent of any inconsistency between the provisions of this Agreement regarding Letters of Credit and those of Exhibit G, the provisions of this Agreement shall govern, provided that the grant of additional (though not contrary) rights or remedies to the Issuing Bank under Exhibit G shall not be construed as inconsistent with the provisions of this Agreement. Article 3 PAYMENTS AND FEES ----------------- 3.1 Principal and Interest. (a) Interest shall be payable on the outstanding daily unpaid principal amount of each Advance from the date thereof until payment in full is made and shall accrue and be payable at the rates set forth or provided for herein before and after default, before and after maturity, before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law, with interest on overdue interest to bear interest at the Default Rate to the fullest extent permitted by applicable Laws. (b) Unless previously paid as provided in this Agreement, interest accrued during each Monthly Interest Period on each Reference Rate Loan shall be due and payable on the next succeeding Monthly Payment Date and on the Maturity Date. Except as otherwise provided in Section 3.7, the unpaid principal amount of any Reference Rate Loan shall bear interest at a fluctuating rate per annum equal to the Reference Rate. Each change in the interest rate under this Section 3.1(b) due to a change in the Reference Rate shall take effect simultaneously with the corresponding change in the Reference Rate. (c) Unless previously paid as provided in this Agreement, interest accrued during each Monthly Interest Period on each Eurodollar Rate Loan shall be due and payable on the next succeeding Monthly Payment Date and on the Maturity Date. Except as otherwise provided in Sections 3.1(d) and 3.7, the unpaid principal amount of any Eurodollar Rate Loan shall bear interest at a rate per annum equal to the Eurodollar Rate for that Eurodollar Rate Loan plus 1.95%. (d) During the existence of a Default or Event of Default, the Majority Banks may determine that any or all then outstanding Eurodollar Rate Loans shall be converted to Reference Rate Loans. Such conversion shall be effective upon notice to Borrower from the Majority Banks (or from the Agent on behalf of the Majority Banks) and shall continue so long as such Default or Event of Default continues to exist. (e) If not sooner paid, the principal Indebtedness evidenced by the Notes shall be payable as follows: (i) the principal amount of each Eurodollar Rate Loan shall be payable on the last day of the Interest Period for such Loan; (ii) the amount, if any, by which (A) the outstanding principal Indebtedness evidenced by the Line A Notes plus the Aggregate Effective Amount at any time exceeds the Line A Commitment or (B) the outstanding principal Indebtedness evidenced by the Line B Notes at any time exceeds the Line B Commitment, shall be payable immediately, and shall be applied to the applicable Notes or, if no amount is then outstanding under the applicable Notes, shall be applied and held in a manner specified in Section 9.2(a)(2); and (iii) the principal Indebtedness evidenced by the Notes shall in any event be payable on the Maturity Date. (f) The principal Indebtedness under the Notes may, at any time and from time to time, voluntarily be paid or prepaid in whole or in part without premium or penalty, except that with respect to any voluntary prepayment under this Section 3.1(f), (i) any partial prepayment shall be in an integral multiple of $1,000,000, (ii) the Agent shall have received written notice of any prepayment by 9:00 a.m. San Francisco time on a Banking Day on the date of prepayment in the case of a Reference Rate Loan, and three (3) Banking Days, in the case of a Eurodollar Rate Loan, before the date of prepayment, which notice shall identify the date and amount of the prepayment and the Loan(s) being prepaid, and (iii) any payment or prepayment of all or any part of any Eurodollar Rate Loan on a day other than the last day of the applicable Interest Period shall be subject to Section 3.6(d). 3.2 Arrangement, Agency and Co-Agency Fees. Borrower shall pay to Bank of America arrangement and agency fees in amounts heretofore agreed upon in one or more letter agreements between Borrower and Bank of America. Such fees are solely for the account of Bank of America and are fully earned and nonrefundable upon the applicable due dates. Borrower shall pay to the Co-Agent co-agency fees in amounts heretofore agreed upon by letter agreement between Borrower and the Co-Agent. Such fees are solely for the account of the Co-Agent and are fully earned and nonrefundable upon the applicable due dates. 3.3 Underwriting Fee. On the Closing Date, Borrower shall pay to the Agent, for the account of the Banks, allocated as indicated on Schedule 3.3 hereof, an underwriting fee equal to $156,250 (0.125% of $125,000,000). This underwriting fee is fully earned on the Closing Date and is nonrefundable. 3.4 Facility and Commitment Fees. (a) Facility Fee. From and after the Closing Date, Borrower shall pay to the Agent, for the respective accounts of the Banks, pro rata according to their Pro Rata Shares of the Commitments, a facility fee equal to 0.125% per annum times the average daily amount of the Commitments. The facility fee shall be payable quarterly in arrears on each Quarterly Payment Date and on the Maturity Date. (b) Commitment Fees. From and after the Closing Date, Borrower shall pay to the Agent, for the respective accounts of the Banks, pro rata according to their Pro Rata Shares of the Commitments, a commitment fee equal to the following indicated percentage per annum times the average daily amount by which the Commitments exceed the sum of the aggregate principal Indebtedness evidenced by the Notes plus the Aggregate Effective Amount. The commitment fee shall be payable quarterly in arrears on each Quarterly Payment Date and on the Maturity Date. For such days that the aggregate principal indebtedness evidenced by the Notes plus the Aggregate Effective Amount exceeds 66% of the Commitments. 0.1875% For such days that the aggregate principal indebtedness evidenced by the Notes plus the Aggregate Effective Amount is less than or equal to 66% but greater than 33% of the Commitments. 0.2500% For such days that the aggregate principal indebtedness evidenced by the Notes plus the Aggregate Effective Amount is equal to or less than 33% of the Commitments. 0.3250% 3.5 Increased Commitment Costs. If any Bank shall determine that the introduction after the Closing Date of any applicable law, rule, regulation or guideline regarding capital adequacy, or any change therein or any change in the interpretation or administration thereof by any central bank or other Governmental Agency charged with the interpretation or administration thereof, or compliance by such Bank (or its Eurodollar Lending Office) or any corporation controlling the Bank, with any request, guidelines or directive regarding capital adequacy (whether or not having the force of law) of any such central bank or other authority, affects or would affect the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) determines that the amount of such capital is increased, or the rate of return on capital is reduced, as a consequence of its obligations under this Agreement, then, within five (5) Banking Days after demand of such Bank, Borrower shall pay to such Bank, from time to time as specified by such Bank, additional amounts sufficient to compensate such Bank in light of such circumstances, to the extent reasonably allocable to such obligations under this Agreement. Each Bank agrees to endeavor promptly to notify Borrower of any event of which it has actual knowledge, occurring after the Closing Date, which will cause it to make a demand hereunder. 3.6 Eurodollar Costs and Related Matters. (a) If, after the date hereof, the existence or occurrence of any Special Eurodollar Circumstance: (1) shall subject any Bank or its Eurodollar Lending Office to any tax, duty or other charge or cost with respect to any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans or its obligation to make Eurodollar Rate Advances, or shall change the basis of taxation of payments to any Bank of the principal of or interest on any Eurodollar Rate Advance or any other amounts due under this Agreement in respect of any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans or its obligation to make Eurodollar Rate Advances, excluding, in the case of each Bank, the Agent, and each Eligible Assignee, and any Affiliate or Eurodollar Lending Office thereof, (i) taxes imposed on or measured in whole or in part by its overall net income, gross income or gross receipts or capital and franchise taxes imposed on it, by (A) any jurisdiction (or political subdivision thereof) in which it is organized or maintains its principal office or Eurodollar Lending Office or (B) any jurisdiction (or political subdivision thereof) in which it is "doing business" (unless it would not be doing business in such jurisdiction (or political subdivision thereof) absent the transactions contemplated hereby), (ii) any withholding taxes or other taxes based on gross income imposed by the United States of America (other than withholding taxes and taxes based on gross income resulting from or attributable to any change in any law, rule or regulation or any change in the interpretation or administration of any law, rule or regulation by any Governmental Agency after the date of this Agreement) or (iii) any withholding taxes or other taxes based on gross income imposed by the United States of America for any period with respect to which it has failed to provide Borrower with the appropriate form or forms required by Section 11.19, to the extent such forms are then required by applicable Laws; (2) shall impose, modify or deem applicable any reserve not applicable or deemed applicable on the date hereof (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System, but excluding the Eurodollar Reserve Percentage taken into account in calculating the Eurodollar Rate), special deposit, capital or similar requirements against assets of, deposits with or for the account of, or credit extended by, any Bank or its Eurodollar Lending Office; or (3) shall impose on any Bank or its Eurodollar Lending Office or the Designated Eurodollar Market any other condition affecting any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans, its obligation to make Eurodollar Rate Advances or this Agreement, or shall otherwise affect any of the same; and the result of any of the foregoing, as determined by such Bank, increases the cost to such Bank or its Eurodollar Lending Office of making or maintaining any Eurodollar Rate Advance or in respect of any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans or its obligation to make Eurodollar Rate Advances or reduces the amount of any sum received or receivable by such Bank or its Eurodollar Lending Office with respect to any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans or its obligation to make Eurodollar Rate Advances (assuming such Bank's Eurodollar Lending Office had funded 100% of its Eurodollar Rate Advance in the Designated Eurodollar Market), then, within five (5) Banking Days after demand by such Bank (with a copy to the Agent), Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction (determined as though such Bank's Eurodollar Lending Office had funded 100% of its Eurodollar Rate Advance in the Designated Eurodollar Market). Borrower hereby indemnifies each Bank against, and agrees to hold each Bank harmless from and reimburse such Bank within five (5) Banking Days after demand for (without duplication) all costs, expenses, claims, penalties, liabilities, losses, legal fees and damages incurred or sustained by each Bank in connection with this Agreement, or any of the rights, obligations or transactions provided for or contemplated herein, as a result of the existence or occurrence of any Special Eurodollar Circumstance. A statement of any Bank claiming compensation under this subsection and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. Each Bank agrees to endeavor promptly to notify Borrower of any event of which it has actual knowledge, occurring after the Closing Date, which will entitle such Bank to compensation pursuant to this Section, and agrees to designate a different Eurodollar Lending Office if such designation will avoid the need for or reduce the amount of such compensation and will not, in the judgment of such Bank, otherwise be materially disadvantageous to such Bank. If any Bank claims compensation under this Section, Borrower may at any time, upon at least four (4) Eurodollar Banking Days' prior notice to the Agent and such Bank and upon payment in full of the amounts provided for in this Section through the date of such payment plus any prepayment fee required by Section 3.6(d), pay in full the affected Eurodollar Rate Advances of such Bank or request that such Eurodollar Rate Advances be converted to Reference Rate Advances. (b) If, after the date hereof, the existence or occurrence of any Special Eurodollar Circumstance shall, in the opinion of any Bank, make it unlawful, impossible or impracticable for such Bank or its Eurodollar Lending Office to make, maintain or fund its portion of any Eurodollar Rate Loan, or materially restrict the authority of such Bank to purchase or sell, or to take deposits of, Dollars in the Designated Eurodollar Market, or to determine or charge interest rates based upon the Eurodollar Rate, and such Bank shall so notify the Agent, then such Bank's obligation to make Eurodollar Rate Advances shall be suspended for the duration of such illegality, impossibility or impracticability and the Agent forthwith shall give notice thereof to the other Banks and Borrower. Upon receipt of such notice, the outstanding principal amount of such Bank's Eurodollar Rate Advances, together with accrued interest thereon, automatically shall be converted to Reference Rate Advances with Interest Periods corresponding to the Eurodollar Loans of which such Eurodollar Rate Advances were a part on either (1) the last day of the Eurodollar Period(s) applicable to such Eurodollar Rate Advances if such Bank may lawfully continue to maintain and fund such Eurodollar Rate Advances to such day(s) or (2) immediately if such Bank may not lawfully continue to fund and maintain such Eurodollar Rate Advances to such day(s), provided that in such event the conversion shall not be subject to payment of a prepayment fee under Section 3.6(d). Each Bank agrees to endeavor promptly to notify Borrower of any event of which it has actual knowledge, occurring after the Closing Date, which will cause that Bank to notify the Agent under this Section 3.6(b), and agrees to designate a different Eurodollar Lending Office if such designation will avoid the need for such notice and will not, in the judgment of such Bank, otherwise be disadvantageous to such Bank. In the event that any Bank is unable, for the reasons set forth above, to make, maintain or fund its portion of any Eurodollar Rate Loan, such Bank shall fund such amount as a Reference Rate Advance for the same period of time, and such amount shall be treated in all respects as a Reference Rate Advance. Any Bank whose obligation to make Eurodollar Rate Advances has been suspended under this Section 3.6(b) shall promptly notify the Agent and Borrower of the cessation of the Special Eurodollar Circumstance which gave rise to such suspension. (c) If, with respect to any proposed Eurodollar Rate Loan: (1) the Agent reasonably determines that, by reason of circumstances affecting the Designated Eurodollar Market generally that are beyond the reasonable control of the Banks, deposits in Dollars (in the applicable amounts) are not being offered to any Bank in the Designated Eurodollar Market for the applicable Eurodollar Period; or (2) the Majority Banks advise the Agent that the Eurodollar Rate as determined by the Agent (i) does not represent the effective pricing to such Banks for deposits in Dollars in the Designated Eurodollar Market in the relevant amount for the applicable Eurodollar Period, or (ii) will not adequately and fairly reflect the cost to such Banks of making the applicable Eurodollar Rate Advances; then the Agent forthwith shall give notice thereof to Borrower and the Banks, whereupon until the Agent notifies Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of the Banks to make any future Eurodollar Rate Advances shall be suspended. If at the time of such notice there is then pending a Request for Loan that specifies a Eurodollar Rate Loan, such Request for Loan shall be deemed to specify a Reference Rate Loan. (d) Upon payment or prepayment of any Eurodollar Rate Advance, (other than as the result of a conversion required under Section 3.6(b)), on a day other than the last day in the applicable Eurodollar Period (whether voluntarily, involuntarily, by reason of acceleration, or otherwise), or upon the failure of Borrower (for a reason other than the failure of a Bank to make an Advance) to borrow on the date or in the amount specified for a Eurodollar Rate Loan in any Request for Loan, Borrower shall pay to the appropriate Bank within five (5) Banking Days after demand a prepayment fee or failure to borrow fee, as the case may be, (determined as though 100% of the Eurodollar Rate Advance had been funded in the Designated Eurodollar Market) equal to the sum of: (1) principal amount of the Eurodollar Rate Advance prepaid or not borrowed, as the case may be, times [number of days between the date of prepayment or failure to borrow, as applicable, and the last day in the applicable Eurodollar Period], divided by 360, times the applicable Interest Differential (provided that the product of the foregoing formula must be a positive number); plus (2) all out-of-pocket expenses incurred by the Bank reasonably attributable to such payment, prepayment or failure to borrow. Each Bank's determination of the amount of any prepayment fee payable under this Section 3.6(d) shall be conclusive in the absence of manifest error. 3.7 Late Payments. If any installment of principal or interest or any fee or cost or other amount payable under any Loan Document to the Agent or any Bank is not paid when due, it shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the sum of the Reference Rate plus 3%, to the fullest extent permitted by applicable Laws. Accrued and unpaid interest on past due amounts (including, without limitation, interest on past due interest) shall be compounded monthly, on the last day of each calendar month, to the fullest extent permitted by applicable Laws. 3.8 Computation of Interest and Fees. Computation of interest on Eurodollar Rate Loans, Reference Rate Loans and all fees under this Agreement shall be calculated on the basis of a year of 360 days and the actual number of days elapsed. Borrower acknowledges that such latter calculation method will result in a higher yield to the Banks than a method based on a year of 365 or 366 days. Interest shall accrue on each Loan for the day on which the Loan is made. Interest shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, except that any Loan that is repaid on the same day on which it is made shall bear interest for one day. 3.9 Non-Banking Days. If any payment to be made by Borrower or any other Party under any Loan Document shall come due on a day other than a Banking Day, payment shall instead be considered due on the next succeeding Banking Day and the extension of time shall be reflected in computing interest and fees. 3.10 Manner and Treatment of Payments. (a) Each payment hereunder (except payments pursuant to Sections 3.5, 3.6, 11.3, 11.10 and 11.20) or on the Notes or under any other Loan Document shall be made to the Agent, at the Agent's Office, for the account of each of the Banks or the Agent, as the case may be, in immediately available funds (for which evidence may be given by notification of a Fed Funds reference number) not later than 11:00 a.m., San Francisco time, on the day of payment (which must be a Banking Day). All payments received after 11:00 a.m., San Francisco time, on any Banking Day, shall be deemed received on the next succeeding Banking Day. The amount of all payments received by the Agent for the account of each Bank shall be immediately paid by the Agent to the applicable Bank in immediately available funds and, if such payment was received by the Agent by 11:00 a.m., San Francisco time, on a Banking Day and not so made available to the account of a Bank on that Banking Day, the Agent shall reimburse that Bank for the cost to such Bank of funding the amount of such payment at the Federal Funds Rate. All payments shall be made in lawful money of the United States of America. (b) Each payment or prepayment on account of any Loan shall be applied pro rata according to the outstanding Advances made by each Bank comprising such Loan. (c) Each payment of any amount payable by Borrower or any other Party under this Agreement or any other Loan Document shall be made free and clear of, and without reduction by reason of, any taxes, assessments or other charges imposed by any Governmental Agency, central bank or comparable authority, excluding, in the case of each Bank, the Agent, the Co-Agent and each Eligible Assignee, and any Affiliate or Eurodollar Lending Office thereof, (i) taxes imposed on or measured in whole or in part by its overall net income, gross income or gross receipts or capital and franchise taxes imposed on it, by (A) any jurisdiction (or political subdivision thereof) in which it is organized or maintains its principal office or Eurodollar Lending Office or (B) any jurisdiction (or political subdivision thereof) in which it is "doing business" (unless it would not be doing business in such jurisdiction (or political subdivision thereof) absent the transactions contemplated hereby), (ii) any withholding taxes or other taxes based on gross income imposed by the United States of America (other than withholding taxes and taxes based on gross income resulting from or attributable to any change in any law, rule or regulation or any change in the interpretation or administration of any law, rule or regulation by any Governmental Agency after the date of this Agreement) or (iii) any withholding taxes or other taxes based on gross income imposed by the United States of America for any period with respect to which it has failed to provide Borrower with the appropriate form or forms required by Section 11.19, to the extent such forms are then required by applicable Laws, (all such non-excluded taxes, assessments or other charges being hereinafter referred to as "Taxes"). To the extent that Borrower is obligated by applicable Laws to make any deduction or withholding on account of Taxes from any amount payable to any Bank under this Agreement, Borrower shall (i) make such deduction or withholding and pay the same to the relevant Governmental Agency and (ii) pay such additional amount to that Bank as is necessary to result in that Bank's receiving a net after-Tax amount equal to the amount to which that Bank would have been entitled under this Agreement absent such deduction or withholding. If and when receipt of such payment results in an excess payment or credit to that Bank on account of such Taxes, that Bank shall promptly refund such excess to Borrower. 3.11 Funding Sources. Nothing in this Agreement shall be deemed to obligate any Bank to obtain the funds for any Loan or Advance in any particular place or manner or to constitute a representation by any Bank that it has obtained or will obtain the funds for any Loan or Advance in any particular place or manner. 3.12 Failure to Charge Not Subsequent Waiver. Any decision by the Agent or any Bank not to require payment of any interest (including interest arising under Section 3.7), fee, cost or other amount payable under any Loan Document, or to calculate any amount payable by a particular method, on any occasion shall in no way limit or be deemed a waiver of the Agent's or such Bank's right to require full payment of any interest (including interest arising under Section 3.7), fee, cost or other amount payable under any Loan Document, or to calculate an amount payable by another method that is not inconsistent with this Agreement, on any other or subsequent occasion. 3.13 Agent's Right to Assume Payments Will be Made by Borrower. Unless the Agent shall have been notified by Borrower prior to the date on which any payment to be made by Borrower hereunder is due that Borrower does not intend to remit such payment, the Agent may, in its discretion, assume that Borrower has remitted such payment when so due and the Agent may, in its discretion and in reliance upon such assumption, make available to each Bank on such payment date an amount equal to such Bank's share of such assumed payment. If Borrower has not in fact remitted such payment to the Agent, each Bank shall forthwith on demand repay to the Agent the amount of such assumed payment made available to such Bank, together with interest thereon in respect of each day from and including the date such amount was made available by the Agent to such Bank to the date such amount is repaid to the Agent at the Federal Funds Rate. 3.14 Fee Determination Detail. The Agent, and any Bank, shall provide reasonable detail to Borrower regarding the manner in which the amount of any payment to the Agent and the Banks, or that Bank, under Article 3 has been determined, concurrently with demand for such payment. 3.15 Survivability. All of Borrower's obligations under Sections 3.5 and 3.6 shall survive for ninety (90) days following the date on which the Commitments are terminated and all Loans hereunder are fully paid. Following such termination and repayment, and the expiration of any bankruptcy preference or similar period, each Bank shall cancel and return its Notes to Borrower. 3.16 Accruals Under Original Loan Documents. (a) The accrual of interest and fees payable by Borrower under the Original Loan Documents shall be calculated as provided therein through the effective date of this Agreement. Such fees include, without limitation, those specified in Sections 3.2, 3.3 and 3.4 of the Original Loan Agreement. All such accrued interest and fees through the effective date of this Agreement shall, notwithstanding any provision of the Original Loan Documents or hereunder to the contrary, be due on the effective date of this Agreement and shall be payable immediately upon submission of an invoice therefor to Borrower by the Agent. Upon receipt by the Agent, all such amounts shall be promptly distributed by the Agent in accordance with the terms of the Original Loan Documents. (b) To the extent that Borrower has prepaid a Facility Fee under Section 3.3 of the Original Loan Agreement applicable to a period of time following the Closing Date (and in place of the remedies specified in the last sentence of such Section), Borrower shall be credited for such prepayment against the first Facility Fee payment owing after the Closing Date pursuant to Section 3.4(a) of this Agreement. The shares of such first Facility Fee payment paid by the Agent to the Banks shall be adjusted to reflect the shares of the prepayment credit that are applicable to certain of the Banks. Article 4 REPRESENTATIONS AND WARRANTIES ------------------------------ Borrower represents and warrants to the Banks, as of the date hereof and as of the Closing Date, that: 4.1 Existence and Qualification; Power; Compliance With Laws. Borrower is a corporation duly formed, validly existing and in good standing under the Laws of Delaware. Borrower is duly qualified or registered to transact business and is in good standing in each other jurisdiction in which the conduct of its business or the ownership or leasing of its Properties makes such qualification or registration necessary, except where the failure so to qualify or register and to be in good standing would not constitute a Material Adverse Effect. Borrower has all requisite corporate power and authority to conduct its business, to own and lease its Properties and to execute and deliver each Loan Document to which it is a Party and to perform its Obligations. All outstanding shares of capital stock of Borrower are duly authorized, validly issued, fully paid, non-assessable and no holder thereof has any enforceable right of rescission under any applicable state or federal securities Laws. Borrower is in compliance with all Laws and other legal requirements applicable to its business, has obtained all authorizations, consents, approvals, orders, licenses and permits from, and has accomplished all filings, registrations and qualifications with, or obtained exemptions from any of the foregoing from, any Governmental Agency that are necessary for the transaction of its business, except where the failure so to comply, file, register, qualify or obtain exemptions does not constitute a Material Adverse Effect. 4.2 Authority; Compliance With Other Agreements and Instruments and Government Regulations. The execution, delivery and performance by Borrower and each Guarantor Subsidiary of the Loan Documents to which it is a Party have been duly authorized by all necessary corporate and/or partnership action, and do not and will not: (a) Require any consent or approval not heretofore obtained of any partner, director, stockholder, security holder or creditor of such Party; (b) Violate or conflict with any provision of such Party's charter, articles of incorporation or bylaws, as applicable; (c) Result in or require the creation or imposition of any Lien upon or with respect to any Property now owned or leased or hereafter acquired by such Party; (d) Violate any Requirement of Law applicable to such Party, subject to obtaining the authorizations from, or filings with, the Governmental Agencies described in Schedule 4.3; (e) Result in a breach of or constitute a default under, or cause or permit the acceleration of any obligation owed under, any indenture or loan or credit agreement or any other Contractual Obligation to which such Party is a party or by which such Party or any of its Property is bound or affected; and none of Borrower or any Guarantor Subsidiary is in violation of, or default under, any Requirement of Law or Contractual Obligation, or any indenture, loan or credit agreement described in Section 4.2(e), in any respect that constitutes a Material Adverse Effect. 4.3 No Governmental Approvals Required. Except as set forth in Schedule 4.3 or previously obtained or made, no authorization, consent, approval, order, license or permit from, or filing, registration or qualification with, any Governmental Agency is or will be required to authorize or permit under applicable Laws the execution, delivery and performance by Borrower and the Guarantor Subsidiaries of the Loan Documents to which it is a Party. All authorizations from, or filings with, any Governmental Agency described in Schedule 4.3 will be accomplished as of the Closing Date or such other date as is specified in Schedule 4.3. 4.4 Subsidiaries. (a) Schedule 4.4 hereto correctly sets forth the names, form of legal entity, number of shares of capital stock issued and outstanding, number of shares owned by Borrower or a Subsidiary (specifying such owner) and jurisdictions of organization of all Subsidiaries and specifies which thereof, as of the Closing Date, are Guarantor Subsidiaries. Except as described in Schedule 4.4, Borrower does not own any capital stock, equity interest or debt security which is convertible, or exchangeable, for capital stock or equity interests in any Person. Unless otherwise indicated in Schedule 4.4, all of the outstanding shares of capital stock, or all of the units of equity interest, as the case may be, of each Subsidiary are owned of record and beneficially by Borrower, there are no outstanding options, warrants or other rights to purchase capital stock of any such Subsidiary, and all such shares or equity interests so owned are duly authorized, validly issued, fully paid, non-assessable, and were issued in compliance with all applicable state and federal securities and other Laws, and are free and clear of all Liens, except for Permitted Encumbrances. (b) Each Subsidiary is a corporation or limited partnership duly formed, validly existing and in good standing under the Laws of its jurisdiction of organization, is duly qualified to do business as a foreign organization and is in good standing as such in each jurisdiction in which the conduct of its business or the ownership or leasing of its properties makes such qualification necessary (except where the failure to be so duly qualified and in good standing does not constitute a Material Adverse Effect), and has all requisite power and authority to conduct its business and to own and lease its Properties. (c) Each Subsidiary is in compliance with all Laws and other requirements applicable to its business and has obtained all authorizations, consents, approvals, orders, licenses, and permits from, and each such Subsidiary has accomplished all filings, registrations, and qualifications with, or obtained exemptions from any of the foregoing from, any Governmental Agency that are necessary for the transaction of its business, except where the failure to be in such compliance, obtain such authorizations, consents, approvals, orders, licenses, and permits, accomplish such filings, registrations, and qualifications, or obtain such exemptions, does not constitute a Material Adverse Effect. 4.5 Financial Statements. Borrower has furnished to the Banks (a) the audited consolidated financial statements of Borrower and its Subsidiaries for the Fiscal Year ended June 30, 1994 and (b) the unaudited consolidated financial statements of Borrower and its Subsidiaries for the Fiscal Quarter ended March 31, 1995. The financial statements described in clauses (a) and (b) fairly present in all material respects the financial condition, results of operations and changes in financial position of Borrower and its Subsidiaries as of such dates and for such periods, in conformity with Generally Accepted Accounting Principles, consistently applied. 4.6 No Other Liabilities; No Material Adverse Changes. Borrower and its Subsidiaries do not have any material liability or material contingent liability not reflected or disclosed in the financial statements described in Section 4.5(b), other than liabilities and contingent liabilities arising in the ordinary course of business since the date of such financial statements. Neither Borrower nor any of its Subsidiaries has, as of the Closing Date, any Indebtedness other than under the Loan Documents or as described on Schedule 4.6. As of the Closing Date, no circumstance or event has occurred that constitutes a Material Adverse Effect since June 30, 1994, or, as of any date subsequent to the Closing Date, since the Closing Date. 4.7 Title to Property. Borrower and its Subsidiaries have valid title to the Property reflected in the financial statements described in Section 4.5(b), other than immaterial items of Property and Property subsequently sold or disposed of in the ordinary course of business, free and clear of all Liens, other than Liens described in Schedule 6.8 or otherwise permitted by Section 6.8. Schedule 6.8 identifies, without limitation, all Liens on Property of Borrower or any of its Subsidiaries securing an obligation to pay money. 4.8 Intangible Assets. Borrower and its Guarantor Subsidiaries own, or possess the right to use to the extent necessary in their respective businesses, all material trademarks, trade names, copyrights, patents, patent rights, computer software, licenses and other Intangible Assets that are used in the conduct of their businesses as now operated, and no such Intangible Asset, to the best knowledge of Borrower, conflicts with the valid trademark, trade name, copyright, patent, patent right or Intangible Asset of any other Person to the extent that such conflict constitutes a Material Adverse Effect. 4.9 Public Utility Holding Company Act. Neither Borrower nor any Subsidiary is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.10 Litigation. Except for (a) any matter fully covered as to subject matter and amount (subject to applicable deductibles and retentions) by insurance for which the insurance carrier has not asserted lack of subject matter coverage or reserved its right to do so, (b) any matter, or series of related matters, involving a claim against Borrower or any of its Subsidiaries of less than $1,000,000, (c) matters of an administrative nature not involving a claim or charge against Borrower or any of its Subsidiaries and (d) matters set forth in Schedule 4.10, there are no actions, suits, proceedings or investigations pending as to which Borrower or any of its Subsidiaries have been served or have received notice or, to the best knowledge of Borrower, threatened against or affecting Borrower or any of its Subsidiaries or any Property of any of them before any Governmental Agency. 4.11 Binding Obligations. Each of the Loan Documents to which Borrower or any of its Guarantor Subsidiaries is a Party will, when executed and delivered by such Party, constitute the legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as enforcement may be limited by Debtor Relief Laws or equitable principles relating to the granting of specific performance and other equitable remedies as a matter of judicial discretion. 4.12 No Default. No event has occurred and is continuing that is a Default or Event of Default. 4.13 ERISA. (a) With respect to each Pension Plan: (i) such Pension Plan complies in all material respects with ERISA and any other applicable Laws to the extent that noncompliance could reasonably be expected to have a Material Adverse Effect; (ii) such Pension Plan has not incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA) that could reasonably be expected to have a Material Adverse Effect; (iii) no "reportable event" (as defined in Section 4043 of ERISA) has occurred that could reasonably be expected to have a Material Adverse Effect; and (iv) neither Borrower nor any of its Subsidiaries has engaged in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code) that could reasonably be expected to have a Material Adverse Effect. (b) Neither Borrower nor any of its Subsidiaries has incurred or expects to incur any withdrawal liability to any Multiemployer Plan that could reasonably be expected to have a Material Adverse Effect. 4.14 Regulations G. T. U and X; Investment Company Act. No part of the proceeds of any Loan hereunder will be used to purchase or carry, or to extend credit to others for the purpose of purchasing or carrying, any Margin Stock in violation of Regulations G, T, U and X. Neither Borrower nor any of its Subsidiaries is or is required to be registered as an "investment company" under the Investment Company Act of 1940. 4.15 Disclosure. No written statement made by a Senior Officer to the Agent or any Bank in connection with this Agreement, or in connection with any Loan, as of the date thereof contained any untrue statement of a material fact or omitted a material fact necessary to make the statement made not misleading in light of all the circumstances existing at the date the statement was made. 4.16 Tax Liability. Borrower and its Subsidiaries have filed all tax returns which are required to be filed, and have paid, or made provision for the payment of, all taxes with respect to the periods, Property or transactions covered by said returns, or pursuant to any assessment received by Borrower or any of its Subsidiaries, except (a) such taxes, if any, as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been established and maintained and (b) immaterial taxes so long as no material item or portion of Property of Borrower or any of its Subsidiaries is in jeopardy of being seized, levied upon or forfeited. 4.17 Strategic Plan. The Strategic Plan was prepared in accordance with Borrower's customary procedures therefor and, in the case of the first year's budget, was approved by Borrower's board of directors and, in the case of subsequent years, represents the final version thereof for such years that was reviewed by Borrower's board of directors. 4.18 Hazardous Materials. To the best knowledge of Borrower, no condition exists that violates any Hazardous Material Law affecting any Real Property except for such violations that would not individually or in the aggregate have a Meterial Adverse Effect. No Real Property now owned by Borrower or any of its Subsidiaries, or any portion thereof, is or has been utilized by Borrower or any of its Subsidiaries as a site for the manufacture of any Hazardous Materials. To the extent that any Hazardous Materials are used, generated or stored by Borrower or any of its Subsidiaries on any Real Property, or transported from such Real Property by Borrower or any of its Subsidiaries, such use, generation, storage and transportation are in compliance in all material respects with all Hazardous Materials Laws. Article 5 AFFIRMATIVE COVENANTS --------------------- (OTHER THAN INFORMATION AND -------------------------- REPORTING REQUIREMENTS) ---------------------- So long as any Advance remains unpaid, or any other Obligation remains unpaid or unperformed, or any portion of a Commitment remains in force, Borrower shall, and shall cause each of its Subsidiaries to, unless the Agent (with the written approval of the Majority Banks) otherwise consents: 5.1 Payment of Taxes and Other Potential Liens. Pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon any of them, upon their respective Property or any part thereof and upon their respective income or profits or any part thereof, except that Borrower and its Subsidiaries shall not be required to pay or cause to be paid (a) any tax, assessment, charge or levy that is not yet past due, or is being contested in good faith by appropriate proceedings so long as the relevant entity has established and maintains adequate reserves for the payment of the same or (b) any immaterial tax, assessment, governmental charge or levy so long as (i) no material item or portion of Property of Borrower and any of its Subsidiaries, taken as a whole, is in jeopardy of being seized, levied upon or forfeited and (ii) the failure to make such payment would not constitute a Material Adverse Effect. 5.2 Preservation of Existence. Preserve and maintain their respective existences in the jurisdiction of their formation and all material authorizations, rights, franchises, privileges, consents, approvals, orders, licenses, permits, or registrations from any Governmental Agency that are necessary for the transaction of their respective business ("Authorizations"), except where the failure to so preserve and maintain the existence of any Subsidiary and such Authorizations would not constitute a Material Adverse Effect and except that a merger permitted by Section 6.3 shall not constitute a violation of this covenant; and qualify and remain qualified to transact business in each jurisdiction in which such qualification is necessary in view of their respective business or the ownership or leasing of their respective Properties except where the failure to so qualify or remain qualified would not constitute a Material Adverse Effect. 5.3 Maintenance of Properties. Maintain, preserve and protect all of their then owned respective depreciable Properties in good order and condition, subject to wear and tear in the ordinary course of business, and not permit any waste of their respective Properties, except that the failure to maintain, preserve and protect a particular item of depreciable Property that is not of significant value, either intrinsically or to the operations of Borrower and its Subsidiaries, taken as a whole, shall not constitute a violation of this covenant. 5.4 Maintenance of Insurance. Maintain liability, casualty and other insurance (subject to customary deductibles and retentions) with responsible insurance companies in such amounts and against such risks as is carried by responsible companies engaged in similar businesses and owning similar assets in the general areas in which Borrower and its Subsidiaries operate. 5.5 Compliance With Laws. Comply, within the time period, if any, given for such compliance by the relevant Governmental Agency or Agencies with enforcement authority, with all Requirements of Law noncompliance with which constitutes a Material Adverse Effect, except that Borrower and its Subsidiaries need not comply with a Requirement of Law then being contested by any of them in good faith by appropriate proceedings. 5.6 Inspection Rights. Upon reasonable notice, at any time during regular business hours and as often as requested (but not so as to materially interfere with the business of Borrower or any of its Subsidiaries), permit the Agent or any Bank, or any authorized employee, agent or representative thereof, to examine, audit and make copies and abstracts from the records and books of account of, and to visit and inspect the Properties of, Borrower and its Subsidiaries and to discuss the affairs, finances and accounts of Borrower and its Subsidiaries with any of their officers, key employees or accountants and, upon request, furnish promptly to the Agent or any Bank true copies of all financial information made available to the board of directors or audit committee of the board of directors of Borrower. 5.7 Keeping of Records and Books of Account. Keep adequate records and books of account reflecting all financial transactions in conformity with Generally Accepted Accounting Principles, consistently applied, and in material conformity with all applicable requirements of any Governmental Agency having regulatory jurisdiction over Borrower or any of its Subsidiaries. 5.8 Compliance With Agreements. Promptly and fully comply with all Contractual Obligations under all material agreements, indentures, leases and/or instruments to which any one or more of them is a party, whether such material agreements, indentures, leases or instruments are with a Bank or another Person, except for any such Contractual Obligations (a) the performance of which would cause a Default or (b) then being contested by any of them in good faith by appropriate proceedings or if the failure to comply with such agreements, indentures, leases or instruments does not constitute a Material Adverse Effect. 5.9 Use of Proceeds. Use the proceeds of Loans solely for (a) retirement of outstanding Indebtedness under the Substituted Credit Facilities and the Cancelled Debt Facilities and (b) general working capital and corporate purposes of Borrower and its Subsidiaries, provided that in no event shall the proceeds of a Loan under the Line A Commitment be used to repay an outstanding Loan under the Line B Commitment. 5.10 New Guarantor Subsidiaries; Release of Certain Guaranties. Cause each of its Subsidiaries which hereafter becomes a Guarantor Subsidiary to immediately execute and deliver to the Agent an instrument of joinder of the Subsidiary Guaranty. Should the stock of a Subsidiary holding only the assets of the Glen Harbor Project or the Spring Creek Project be transferred or such a Subsidiary be disposed of by merger in accordance herewith to an entity that is not an Affiliate of Borrower, then, subject to receipt of reaffirmations of other Guarantor Subsidiaries and such other documentation as the Agent may reasonably request, the Banks will release such Subsidiary from the Subsidiary Guaranty. 5.11 Hazardous Materials Laws. Keep and maintain all Real Property and each portion thereof in compliance in all material respects with all applicable Hazardous Materials Laws and promptly notify the Agent in writing of (a) any and all material enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened in writing by a Governmental Agency pursuant to any applicable Hazardous Materials Laws, (b) any and all material claims made or threatened in writing by any Person against Borrower relating to damage, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Materials and (c) discovery by any Senior Officer of Borrower of any material occurrence or condition on any real property adjoining or in the vicinity of such Real Property that could reasonably be expected to cause such Real Property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of such Real Property under any applicable Hazardous Materials Laws. 5.12 Termination of GFB L/C. Cause, within sixty (60) days following the Closing Date, the GFB L/C (as defined in Section 8.1(a)(8)) to be terminated and cause any collateral security for the reimbursement obligation with respect thereto to be released. Article 6 NEGATIVE COVENANTS ------------------ So long as any Advance remains unpaid, or any other Obligation remains unpaid or unperformed, or any portion of a Commitment remains in force, Borrower shall not, and shall not permit any of its Subsidiaries to, unless the Agent (with the written approval of the Majority Banks or, if required by Section 11.2, of all of the Banks) otherwise consents: 6.1 Prepayment of Indebtedness. Pay any principal or interest on any Indebtedness of Borrower or any of its Subsidiaries (other than Indebtedness under the Notes) prior to the date when due, or make any payment or deposit with any Person that has the effect of providing for the satisfaction of any Indebtedness of Borrower or any of its Subsidiaries prior to the date when due, in each case if an Event of Default then exists or would result therefrom. 6.2 Payment of Subordinated Obligations. Pay any (a) principal (including sinking fund payments) or any other amount (other than scheduled interest payments) with respect to any Subordinated Obligation except the Swiss Franc Debt and as expressly permitted in the last sentence of this Section 6.2, or (b) scheduled interest on any Subordinated Obligation, if an Event of Default described in Sections 9.1(a) or 9.1(b) then exists or would result therefrom; provided, however, that this Section 6.2 is in no way in limitation of any additional rights the Banks may have to block payments with respect to any Subordinated Obligation. In addition to the Swiss Franc Debt, the principal amount of Subordinated Obligations may be prepaid or redeemed but only (A) if (i) an Event of Default does not then exist and would not result therefrom and (ii) Borrower has not received written notice from the Agent or a Bank that a Default has occurred and such Default remains uncured; and (B) to the extent of an amount equal to the sum of (x) the net cash proceeds from the issuance by Borrower of its capital stock (that is not Disqualified Stock) after January 1, 1994 plus (y) the following percentages of new cash Subordinated Obligation borrowings by Borrower after January 1, 1994, provided that such borrowings have a maturity no earlier than one (1) year after the Maturity Date. Principal Amount Percentage Borrowed in Cash ---------- ---------------- -0- first $50,000,000 50% next $50,000,000 100% amounts over $100,000,000 6.3 Mergers and Sale of Assets. (a) Merge or consolidate with or into any Person, except mergers and consolidations of a Subsidiary of Borrower (other than a Coventry Subsidiary or an Exempt Subsidiary) into Borrower or a Guarantor Subsidiary (other than a Coventry Subsidiary or an Exempt Subsidiary) with, if applicable, Borrower as the surviving entity, provided that Borrower and each of its Subsidiaries has executed such amendments to the Loan Documents as the Agent may reasonably determine are appropriate as a result of such merger. This Section 6.3(a) shall not restrict a merger implemented solely to effect a Disposition specified in clause (e) of the definition of "Disposition." (b) Make any Disposition of its Property other than the sale of Property for cash and/or other Property which in the aggregate have the fair equivalent value to the Property sold; provided, however, that no Property shall be sold by way of Disposition (nor shall there be any related sales of Property) if the value of the Property sold is in excess of $5,000,000. (c) Notwithstanding the foregoing provisions of this Section 6.3 or any other provision of this Agreement, the following Transfers of Property (including Cash) for reasonably equivalent value are not restricted: (i) by and among Borrower and any of its wholly-owned Subsidiaries that are not Coventry Subsidiaries or Exempt Subsidiaries; or (ii) by and among the Coventry Subsidiaries; or (iii) by and among the Exempt Subsidiaries. Notwithstanding the foregoing provisions of this Section 6.3 or any other provision of this Agreement, Transfers of Property (including Cash) by any directly or indirectly wholly-owned Subsidiary of Borrower to its parent corporation(s) are not restricted. 6.4 Hostile Tender Offers. Make any offer to purchase or acquire, or consummate a purchase or acquisition of, 5% or more of the capital stock of any corporation or other business entity if the board of directors or management of such corporation or business entity has notified Borrower that it opposes such offer or purchase and such notice has not been withdrawn or superseded. 6.5 Distributions. As to Borrower and any Subsidiaries of Borrower which are not wholly-owned Subsidiaries of Borrower, make any Distribution, whether from capital, income or otherwise, and whether in Cash or other Property, unless (a) such Distribution could have been made on the last day of the most recently ended Fiscal Quarter without causing a violation of Section 6.11 as of such last day of such Fiscal Quarter and (b) in the case of a Distribution by Borrower (i) an Event of Default does not then exist and would not result therefrom and (ii) Borrower has not theretofore received written notice from the Agent or a Bank that a Default has occurred and such Default remains uncured, provided however that a Distribution may be made if such Distribution constitutes a dividend on capital stock of Borrower that was otherwise permissible to be made at the time it was declared payable by Borrower's board of directors and that is in fact paid within 60 days after such declaration. 6.6 ERISA. (a) At any time, permit any Pension Plan to: (i) engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code); (ii) fail to comply with ERISA or any other applicable Laws to the extent that noncompliance could reasonably be expected to have a Material Adverse Effect; (iii) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA); or (iv) terminate in any manner, which, with respect to each event listed above, could reasonably be expected to result in a Material Adverse Effect. (b) Withdraw, completely or partially, from any Multiemployer Plan if to do so could reasonably be expected to result in a Material Adverse Effect. 6.7 Change in Nature of Business. Make any material change in the nature of the business of Borrower and its Subsidiaries, taken as a whole. In addition, Borrower shall not (except through a Subsidiary) engage, in any material respect, in business activities other than acting as a holding company for its Subsidiaries. In addition, no Coventry Subsidiary shall engage, in any material respect, in business activities other than conventional single-family residential home development and related activities (not to include age-restricted planned community residential development). 6.8 Liens. Create, incur, assume or suffer to exist any Lien of any nature upon or with respect to any of their respective Properties, whether now owned or hereafter acquired, except: (a) Permitted Encumbrances; (b) Liens that may exist from time to time under the Loan Documents; (c) existing Liens disclosed in Schedule 6.8 and any renewals or extensions thereof; provided that the obligations secured or benefited thereby are not increased; (d) Liens on Real Property acquired (whether before or after the Closing Date) by Borrower or any of its Subsidiaries that (i) except as permitted by clause (iii) of this Section 6.8(d), secure solely purchase money indebtedness with respect to the Real Property, (ii) secure solely Non-Recourse Debt and (iii) encumbered the Real Property at the time of or in connection with its acquisition by Borrower or its Subsidiary or were placed thereon to refinance or borrow an amount up to the purchase price within 90 days after the acquisition; (e) One or more Liens on Property of Coventry Subsidiaries that, in each case, (i) secures solely Indebtedness of such Coventry Subsidiaries that was incurred for the acquisition, development and/or construction of the liened Property, or the refinancing thereof up to the amount of the original borrowing, (ii) secures solely Indebtedness for which the lender has recourse solely against such Coventry Subsidiaries and the secured assets and not Borrower or any other Subsidiary of Borrower, (iii) covers only Property that has a cost basis (calculated by adding the acquisition cost to the cost of any capital improvements to the Property) to Borrower and its Subsidiaries of not more than 150% of the principal of the secured Indebtedness and (iv) was created after the Commitment Reduction Date; and (f) One or more Liens on Property of Exempt Subsidiaries that, in each case, (i) secures solely Indebtedness of such Exempt Subsidiaries that was incurred for the acquisition, development and/or construction of the liened Property, or the refinancing thereof up to the amount of the original borrowing, (ii) secures solely Non-Recourse Debt and (iii) was created after the Commitment Reduction Date. 6.9 Indebtedness. Create, incur or assume any Indebtedness (other than accrual of interest) except the following but only if a Default or Event of Default does not then exist and would not result therefrom and only if such Indebtedness is otherwise permissible under the Indenture for the Public Senior Debt (as in existence on the date of this Agreement): (a) Non-Recourse Debt for which the corresponding Lien is otherwise permissible under Section 6.8(d) or 6.8(f), provided that such Indebtedness is in compliance with the requirements of such Section, (b) Indebtedness of a Coventry Subsidiary for which a corresponding Lien is otherwise permissible under Section 6.8(e), provided that all such Indebtedness is in compliance with the requirements of such Section and provided further that the aggregate principal amount of all such Indebtedness does not, on any date of determination, exceed the total amount by which the Commitments have been reduced through that date pursuant to Section 2.5, (c) Indebtedness incurred pursuant to commitments and proposed commitments therefor that are identified on Schedule 6.9 (including replacements of such commitments), but only to the maximum amount available shown on such Schedule, (d) Indebtedness that constitutes Subordinated Obligations so long as no principal repayment (or any nature of reserve therefor) is due until at least one (1) year after the Maturity Date, (e) Indebtedness outstanding under the Notes, (f) Indebtedness constituting a refinancing on not materially less favorable terms of Indebtedness permitted under this Section 6.9, (g) Indebtedness constituting reimbursement obligations incurred with respect to standby letters of credit issued in the ordinary course of Borrower's and its Subsidiaries real estate development business, (h) Indebtedness by and among Borrower and its Subsidiaries, so long as such Indebtedness is not otherwise restricted hereunder (such as under Section 6.16(d) with respect to certain Investments), (i) Unsecured Indebtedness incurred by Borrower (and any guaranty of such Indebtedness by a Subsidiary), provided that any such unsecured Indebtedness having an initial maturity of one (1) year or less and outstanding under either a working capital facility or a bid line of credit shall be limited to an aggregate principal amount outstanding at any one time of $25,000,000 and, provided further, that a guaranty of any such unsecured Indebtedness by one or more Subsidiaries shall be permissible only if such unsecured Indebtedness constitutes a loan of money (or a reimbursement obligation under a letter of credit) and only if the credit instrument evidencing such unsecured Indebtedness expressly states that the funds loaned thereunder are being made available to Borrower solely for the general working capital and corporate purposes of Borrower and its Subsidiaries, without any portion thereof being required to be used for any particular purpose, and (j) A guaranty of the Public Senior Debt by a Guarantor Subsidiary. 6.10 Transactions with Affiliates. After into any transaction of any kind with any Affiliate of Borrower other than (a) salary, bonus, employee stock option and other compensation arrangements and indemnification arrangements with directors or officers in the ordinary course of business, (b) transactions between or among Borrower and its Guarantor Subsidiaries (other than Coventry Subsidiaries or Exempt Subsidiaries), (c) Investments in Subsidiaries specifically permitted in Sections 6.16(d)(ii) and (iii) and (d) transactions on overall terms at least as favorable to Borrower and its Guarantor Subsidiaries as would be the case in an arm's-length transaction between unrelated parties of equal bargaining power. 6.11 Tangible Net Worth. Permit Tangible Net Worth, as of the last day of any Fiscal Quarter ending on or after June 30, 1995, to be less than the sum of (a) $200,000,000 plus (b) an amount equal to 75% of the cumulative Net Income earned in all Fiscal Quarters ending after December 31, 1994 (with no deduction for a net loss in any such Fiscal Quarter), plus (c) an amount equal to 50% of the aggregate cumulative increases in Stockholders' Equity after December 31, 1994 by reason of the issuance and sale of capital stock by Borrower (including upon any conversion or exchange of debt securities of Borrower into such capital stock). 6.12 Consolidated Fixed Charge Coverage. Permit the Consolidated Fixed Charge Coverage Ratio, as of the last day of any Fiscal Quarter ending on or after June 30, 1995, to be less than 1.75:1.00. 6.13 Debt to Net Worth. Permit the ratio of (a) Adjusted Total Indebtedness to (b) Tangible Net Worth, each as of any Fiscal Quarter ending on or after June 30, 1995, to be greater than the ratio set forth below opposite the period during which such Fiscal Quarter ends: Period Ratio ------ ----- June 30, 1995 through March 31, 1996 2.75:1.00 April 1, 1996 through March 31, 1997 2.35:1.00 April 1, 1997 and thereafter 2.15:1.00 6.14 Adjusted Senior Debt to Net Worth. Permit the ratio of Adjusted Senior Debt to Tangible Net Worth, each as of any Fiscal Quarter ending on or after June 30, 1995, to be greater than the ratio set forth below opposite the period during which such Fiscal Quarter ends: Period Ratio ------ ----- June 30, 1995 through March 31, 1996 1.90:1.00 April 1, 1996 through March 31, 1997 1.70:1.00 April 1, 1997 through March 31, 1998 1.50:1.00 April 1, 1998 and thereafter 1.25:1.00 6.15 Liquidity. Permit, as of the last day of any Fiscal Year, beginning June 30, 1995, the ratio of EBITDA for such Fiscal Year to Specified Charges for such Fiscal Year to be less than (a) 0.50:1.00 for the Fiscal Year ending June 30, 1995 or (b) 0.75:1.00 for the Fiscal Years ending June 30, 1996 or thereafter, provided that any such failing shall not constitute an Event of Default under Section 9.1(c) unless and until Borrower shall also permit, as of the last day of the immediately succeeding Fiscal Quarter, the ratio of EBITDA for the four (4) Fiscal Quarter period then ending to Specified Charges for such four (4) Fiscal Quarter period to also be less than said specified ratio. 6.16 Investments. Make or suffer to exist any Investment, other than: (a) Investments in existence on the Closing Date and disclosed on Schedule 6.16; (b) Investments consisting of Cash and Cash Equivalents; (c) Investments consisting of or evidencing the extension of credit to customers of Borrower and its Subsidiaries in the ordinary course of business and any Investments received in satisfaction or partial satisfaction thereof; (d) Investments of Borrower in any of its Subsidiaries and Investments of any Subsidiary in Borrower or another Subsidiary provided that (i) the book value of Investments in Subsidiaries that engage in activities other than the acquisition, development, construction or financing of residential real estate as a material portion of their business activities shall not exceed, in the aggregate at any date of determination, more than 10% of Tangible Net Worth as of the end of the then most recently ended Fiscal Quarter (ii) the book value of Investments in Subsidiaries that are not Guarantor Subsidiaries shall not exceed, in the aggregate at any date of determination, $5,000,000; and (iii) at no time shall the aggregate cumulative dollar amount of Investments (net of cumulative cash payments made by Exempt Subsidiaries to Borrower and its wholly-owned Subsidiaries which are not Coventry Subsidiaries or Exempt Subsidiaries on account of such Investments) in all Exempt Subsidiaries exceed the lesser of (A) $35,000,000 or (B) 50% of the cumulative amount of Net Income (giving account to any net loss), as of the most recently ended Fiscal Quarter, from and after the Fiscal Quarter beginning January 1, 1996. All references to "Investments" in clauses (i) through (iii) shall specifically include guaranties, as provided in the definition of "Investments". The termination or release (in whole or in part) of any such guaranty that is treated as an Investment (in the absence of payment thereunder) shall thereupon result in a corresponding reduction in the measured amount of such Investment; (e) Investments received in connection with the settlement of a bona fide dispute with another Person; and (f) Investments representing all or a portion of the sales price for Property sold to another Person. (g) Investments (i) consisting of readily marketable securities actively traded on a public exchange or (ii) in Persons (other than Subsidiaries), each of which Persons does not, as a material portion of its business, engage in activities other than those related to the acquisition, development, construction or financing of residential real estate, provided that (A) the cumulative dollar amount of Investments under clause (i) (net of cumulative cash payments in respect of such Investments) shall at no time exceed $2,000,000 and (B) the cumulative dollar amount of Investments under clauses (i) and (ii) (net of cumulative cash payments in respect of such Investments) shall at no time exceed $10,000,000. 6.17 Unentitled Land. (a) Permit the total amount of Borrower's and its Subsidiaries' Cash investment in Unentitled Land that (i) is part of Current Operating Projects other than Coventry Homes Projects or (ii) is part of a Coventry Homes Project for which home sale closings have commenced (including in either case, without limitation, all Cash expenditures reasonably allocated to the acquisition, development, maintenance and holding of such Unentitled Land) to exceed 25% of Tangible Net Worth at any time on or after June 30, 1995; or (b) Permit the total amount of Borrower's and its Subsidiaries Cash investment in Unentitled Land that (i) is not part of Current Operating Projects or (ii) is part of a Coventry Homes Project for which home sale closings have not yet commenced (including in either case, without limitation, all Cash expenditures reasonably allocated to the acquisition, development, maintenance and holding of such Unentitled Land) to exceed 10% of Tangible Net Worth at any time on or after June 30, 1995. 6.18 Unsold Homes in Production. For any two (2) consecutive Fiscal Quarters, beginning with the Fiscal Quarter ending March 31, 1995: (a) Permit the number of Unsold Homes (other than (i) Unsold Homes that are part of the Coventry Homes Projects, (ii) Unsold Homes included in development projects with respect to which, on the date of determination, 12 months has not elapsed since the closing of the sale of the first housing unit, (iii) Unsold Homes that are held by an Exempt Subsidiary if such Unsold Home has been pledged to secure financing described in Section 6.8(f) and (iv) Unsold Homes within any Current Operating Project that are then being used as sales models or as vacation apartments for marketing purposes (collectively, "Excluded Unsold Homes")), as of the end of such Fiscal Quarters to exceed the applicable percentage shown below of the number of housing unit sale closings of Borrower and its Guarantor Subsidiaries (other than sale closings of housing units that are Excluded Unsold Homes) that occurred in the twelve (12) months immediately prior to each such Fiscal Quarter end: Applicable Any Fiscal Quarter Ending Percentage ------------------------- ---------- September 30th 35% December 31st 35% March 31st 30% June 30th 25%; or (b) Permit the number of Unsold Homes that are part of the Coventry Homes Projects as of the end of such Fiscal Quarters to exceed 25% of the number of housing unit sale closings in the Coventry Homes Projects that occurred in the twelve (12) months immediately prior to each such Fiscal Quarter end. 6.19 Exempt Subsidiaries. Permit any Exempt Subsidiary to hold an ownership interest in any Subsidiary that is not also an Exempt Subsidiary. 6.20 Coventry Assets. Permit, as of the last day of any Fiscal Quarter, beginning June 30, 1995, the ratio of Coventry Assets to Consolidated Total Assets to be greater than 0.20:1.00 or the ratio of Coventry Land Assets to Consolidated Total Assets to be greater than 0.15:1.00. Article 7 INFORMATION AND REPORTING REQUIREMENTS -------------------------------------- 7.1 Financial and Business Information. So long as any Advance remains unpaid, or any other Obligation remains unpaid or unperformed, or any portion of a Commitment remains in force, Borrower shall, unless the Agent (with the written approval of the Majority Banks) otherwise consents, deliver to the Agent and the Banks, at Borrower's sole expense: (a) As soon as practicable, and in any event within 60 days after the end of each Fiscal Quarter (other than the fourth Fiscal Quarter in any Fiscal Year), (i) the consolidated balance sheet of Borrower and its Subsidiaries as at the end of such Fiscal Quarter and the consolidated statement of operations for each Fiscal Quarter, and its statement of cash flows for the portion of the Fiscal Year ended with such Fiscal Quarter and (ii) the consolidating (in accordance with past consolidating practices of Borrower) balance sheets and statements of operations as at and for the portion of the Fiscal Year ended with such Fiscal Quarter, all in reasonable detail. Such financial statements shall be certified by a Senior Officer of Borrower as fairly presenting the financial condition, results of operations and cash flows of Borrower and its Subsidiaries in accordance with Generally Accepted Accounting Principles (other than footnote disclosures), consistently applied, as at such date and for such periods, subject only to normal year-end accruals and audit adjustments; (b) As soon as practicable, and in any event within 120 days after the end of each Fiscal Year (including the Fiscal Year ending June 30, 1995), (i) the consolidated balance sheet of Borrower and its Subsidiaries as at the end of such Fiscal Year and the consolidated statements of operations, shareholders' equity and cash flows, in each case of Borrower and its Subsidiaries for such Fiscal Year and (ii) consolidating (in accordance with past consolidating practices of Borrower) balance sheets and statements of operations, in each case as at and for the Fiscal Year, all in reasonable detail. In the case of clause (i), such financial statements shall be prepared in accordance with Generally Accepted Accounting Principles, consistently applied, and such consolidated balance sheet and consolidated statements shall be accompanied by a report and opinion of KPMG Peat Marwick or other independent public accountants of recognized standing selected by Borrower and reasonably satisfactory to the Majority Banks, which report and opinion shall be prepared in accordance with generally accepted auditing standards as at such date, and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any other qualification or exception reasonably determined by the Majority Banks in their good faith business judgment to be adverse to the interests of the Banks. Such accountants' report and opinion shall be accompanied by a certificate stating that, in making the examination pursuant to generally accepted auditing standards necessary for the certification of such financial statements and such report, such accountants have obtained no knowledge of any Default or, if, in the opinion of such accountants, any such Default shall exist, stating the nature and status of such Default, and stating that such accountants have reviewed Borrower's financial calculations as at the end of such Fiscal Year (which shall accompany such certificate) under Sections 6.11 through 6.15, have read such Sections (including the definitions of all defined terms used therein) and that nothing has come to the attention of such accountants in the course of such examination that would cause them to believe that the same were not calculated by Borrower in the manner prescribed by this Agreement. In the case of clause (ii), such financial statements shall be certified by a Senior Officer of Borrower as fairly presenting the financial condition, results of operations and cash flows of Borrower and its Subsidiaries in accordance with Generally Accepted Accounting Principles (other than footnote disclosures), consistently applied, as at such date and for such periods; (c) As soon as practicable, and in any event within 60 days after the commencement of each Fiscal Year (including the Fiscal Year beginning July 1, 1995), a budget by Fiscal Quarter for that Fiscal Year and a strategic plan by Fiscal Year for the three Fiscal Years following the budgeted year, including for the Fiscal Year just commenced, projected consolidated balance sheets, statements of operations and statements of cash flow and, for the next three succeeding Fiscal Years, projected consolidated condensed balance sheets and statements of operations and cash flow, of Borrower and its Subsidiaries, all in reasonable detail; (d) Promptly after request by the Agent or any Bank, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of Borrower by independent accountants in connection with the accounts or books of Borrower or any of its Subsidiaries, or any audit of any of them; (e) Promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the shareholders of Borrower, and copies of all annual, regular, periodic and special reports and registration statements which Borrower may file or be required to file with the Securities and Exchange Commission under Sections 13 or 15(d) of the Securities Exchange Act of 1934 and not otherwise required to be delivered to the Banks pursuant to other provisions of this Section 7.1; (f) Except as prohibited by Law, promptly after request by the Agent or any Bank, copies of any other report or other document that was filed by Borrower or any of its Subsidiaries with any Governmental Agency; (g) Promptly upon a Senior Officer becoming aware, and in any event within five (5) Banking Days after becoming aware, of the occurrence of any (i) "reportable event" (as such term is defined in Section 4043 of ERISA) or (ii) "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) in connection with any Pension Plan or any trust created thereunder, telephonic notice specifying the nature thereof, and, no more than five (5) Banking Days after such telephonic notice, written notice again specifying the nature thereof and specifying what action Borrower or any of its Subsidiaries is taking or proposes to take with respect thereto, and, when known, any action taken by the Internal Revenue Service with respect thereto; (h) As soon as practicable, and in any event within two Banking Days after a Senior Officer becomes aware of the existence of any condition or event which constitutes a Default, telephonic notice specifying the nature and period of existence thereof, and, no more than two Banking Days after such telephonic notice, written notice again specifying the nature and period of existence thereof and specifying what action Borrower or any of its Subsidiaries are taking or propose to take with respect thereto; (i) Promptly upon a Senior Officer becoming aware that (i) any Person commenced a legal proceeding with respect to a claim against Borrower or any of its Subsidiaries that is $500,000 or more in excess of the amount thereof that is fully covered by insurance, (ii) any creditor or lessor under a written credit agreement or material lease has asserted a default thereunder on the part of Borrower or any of its Subsidiaries, (iii) any Person commenced a legal proceeding with respect to a claim against Borrower or any of its Subsidiaries under a contract that is not a credit agreement or material lease in excess of $500,000 or which otherwise may reasonably be expected to result in a Material Adverse Effect, or (iv) any labor union has notified Borrower of its intent to strike Borrower or any of its Subsidiaries on a date certain and such strike would involve more than 100 employees of Borrower and its Subsidiaries, a written notice describing the pertinent facts relating thereto and what action Borrower or its Subsidiaries are taking or propose to take with respect thereto; (j) No later than 7 days prior to its creation, written notice of any Lien to be created pursuant to Section 6.8(e) or (f), together with a reasonably detailed description of such Lien and the Indebtedness to be secured thereby; and (k) Such other data and information as from time to time may be reasonably requested by the Agent, any Bank (through the Agent) or the Majority Banks. 7.2 Compliance Certificates. So long as any Advance remains unpaid, or any other Obligation remains unpaid or unperformed, or any portion of a Commitment remains outstanding, Borrower shall deliver to the Agent and the Banks, at Borrower's sole expense, concurrently with the financial statements required pursuant to Sections 7.1(a) and 7.1(b), a Compliance Certificate signed by a Senior Officer. Article 8 CONDITIONS ---------- 8.1 Initial Advances, Etc. The effectiveness of this Agreement as an amendment and restatement of the Original Loan Agreement, and the effectiveness of the other Loan Documents as amendments and restatements of the other Original Loan Documents, and the obligation of each Bank to make the initial Advance to be made by it and, if applicable, to make or accept an Adjusting Purchase Payment, and the obligation of the Issuing Bank to issue any Letter of Credit are subject to the following conditions precedent, each of which must be satisfied unless all of the Banks, in their sole and absolute discretion, shall agree otherwise: (a) The Agent shall have received all of the following, each of which shall be originals unless otherwise specified, each properly executed by a Responsible Official of each party thereto, each dated as of the Closing Date and each in form and substance satisfactory to the Agent and its legal counsel (unless otherwise specified or, in the case of the date of any of the following, unless the Agent otherwise agrees or directs): (1) at least one (1) executed counterpart of this Agreement, together with arrangements satisfactory to the Agent for additional executed counterparts, sufficient in number for distribution to the Banks and Borrower; (2) a Line A Note and a Line B Note executed by Borrower in favor of each Bank, each such Note in a principal amount equal to that Bank's Pro Rata Share of the applicable Commitment; (3) the Subsidiary Guaranty executed by each Guarantor Subsidiary; (4) with respect to Borrower and each Guarantor Subsidiary, such documentation as may be required to establish the due organization, valid existence and good standing of Borrower and each such Subsidiary, its qualification to engage in business in each material jurisdiction in which it is engaged in business or required to be so qualified, its authority to execute, deliver and perform any Loan Documents to which it is a Party, the identity, authority and capacity of each Responsible Official thereof authorized to act on its behalf, including certified copies of articles of incorporation and amendments thereto, bylaws and amendments thereto, certificates of good standing and/or qualification to engage in business, tax clearance certificates, certificates of corporate resolutions, incumbency certificates, Certificates of Responsible Officials, and the like; (5) the Opinions of Counsel; (6) a Certificate of a Responsible Official certifying that the attached copies of (i) the Indenture for the Public Senior Debt, (ii) the Indenture for the Public 9-3/4% Senior Subordinated Debt, (iii) the Public Bond Issue Agreement for the Swiss Franc Debt and (iv) the Indenture for the Public 9.00% Senior Subordinated Debt are true, current and complete copies; (7) a Certificate of a Responsible Official signed by a Senior Officer certifying that the conditions specified in Sections 8.1(a)(8), 8.1(d) and 8.1(e) have been satisfied; (8) evidence that: (i) all indebtedness outstanding under the Cancelled Debt Facilities is being repaid with proceeds of the initial Advances, with the exception of the reimbursement obligation under a letter of credit in the approximate amount of $609,000 outstanding under Guaranty Federal Bank's facility designated "Coventry Homes - PHX - Land Acquisition Loan" (the "GFB L/C"); (ii) all further credit availability (and any commitment therefor) under the Cancelled Debt Facilities is being terminated concurrently with the initial Advances; and (iii) all collateral security for and with respect to the Cancelled Debt Facilities (except as may secure the reimbursement obligation under the GFB L/C) will be released promptly following the initial Advances, such evidence may consist of payoff and collateral release demand letters from applicable lenders and, if requested by the Agent, the delivery of collateral release documents to the Agent or the creation of satisfactory escrow arrangements for the payoff and release of liens with respect to Cancelled Debt Facilities; and (9) such other assurances, certificates, documents, consents or opinions as the Agent reasonably may require. (b) The fees payable pursuant to Sections 3.2 and 3.3 shall have been paid and any accrued interest and fees under the Original Loan Documents shall have been paid as specified in Section 3.16. (c) The reasonable costs and expenses of the Agent in connection with the preparation of the Loan Documents payable pursuant to Section 11.3, and invoiced to Borrower prior to the Closing Date, shall have been paid. (d) The representations and warranties of Borrower contained in Article 4 shall be true and correct. (e) Borrower and any other Parties shall be in compliance with all the terms and provisions of the Loan Documents, and giving effect to the initial Advance no Default or Event of Default shall have occurred and be continuing. (f) The Consolidated Fixed Charge Coverage Ratio shall be no less than 3.00:1.00. 8.2 Any Increasing Advance. The obligation of each Bank to make any Advance which would increase the principal amount outstanding under the Notes and the obligation of the Issuing Bank to issue a Letter of Credit are subject to the following conditions precedent: (a) except (i) for representations and warranties which expressly speak as of a particular date or are no longer true and correct as a result of a change which is permitted by this Agreement or (ii) as disclosed by Borrower and approved in writing by the Majority Banks, the representations and warranties contained in Article 4 (other than Sections 4.4(a), 4.6 (first sentence), and 4.10), shall be true and complete on and as of the date of the Advance as though made on that date; (b) other than matters described in Schedule 4.10 or not required as of the Closing Date to be therein described, there shall not be then pending or threatened any action, suit, proceeding or investigation against or affecting Borrower or any of its Subsidiaries or any Property of any of them before any Governmental Agency that constitutes a Material Adverse Effect; (c) the Consolidated Fixed Charge Coverage Ratio shall be no less than 2.25:1.00; (d) in the case of any Letter of Credit or any Advance with respect to the Line A Commitment, the Consolidated Fixed Charge Coverage Ratio shall be no less than 3.00:1.00; (e) the Agent shall have timely received a Request for Loan in compliance with Article 2 (or telephonic or other request for loan referred to in the second sentence of Section 2.1(b), if applicable) and the Issuing Bank shall, in the case of a Letter of Credit, have received a Request for Letter of Credit in compliance with Article 2; (f) the Agent shall have received, in form and substance satisfactory to the Agent, such other assurances, certificates, documents or consents related to the foregoing as the Agent or Majority Banks reasonably may require; and (g) the Agent shall have received, concurrently with the corresponding Request for Loan (or, if applicable, the telephonic notice thereof, under Section 2.1(b)), a fully and accurately completed Loan Compliance Certificate, dated the date the Loan is to be made, and, on the date of the Loan, Borrower and its Subsidiaries shall be in compliance with all requirements specified thereon with respect to the nature and amount of the requested Loan. 8.3 Any Advance. The obligation of each Bank to make any Advance is subject to the condition precedent that, except as provided for in Section 2.1(g), the Agent shall have timely received a Request for Loan in compliance with Article 2 (or telephonic or other request for loan referred to in the second sentence of Section 2.1(b), if applicable). 8.4 Return of Original Notes. Upon the effectiveness of this Agreement, including the delivery by Borrower of all documents required under Section 8.1, the Banks holding the Original Notes shall return them to Borrower, in each case marked "Cancelled and Replaced." Article 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT ---------------------------------------------------- 9.1 Events of Default. The existence or occurrence of any one or more of the following events, whatever the reason therefor and under any circumstances whatsoever, shall constitute an Event of Default: (a) Borrower fails to pay any principal Indebtedness on any Note on the date when due or fails to pay to the Issuing Bank the amount drawn under any Letter of Credit as required under Section 2.12(d); or (b) Borrower fails to pay any interest on any Note, or any fees under Sections 3.2, 3.3 or 3.4 or any portion thereof, within five (5) Banking Days after the date when due; or fails to pay any other fee or amount payable to the Banks under any Loan Document, or any portion thereof, within five (5) Banking Days after written notice of such failure; or (c) Borrower fails to comply with any of the covenants contained in Sections 5.2, 5.9, 6.1, 6.2, 6.3, 6.4, 6.5, 6.7, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.18, or 7.1(h), and, in the case of Sections 6.4, 6.7 or 6.16 only, ten (10) days have elapsed without cure after either a Senior Officer of Borrower has actual knowledge of such failing or the Agent shall have given Borrower notice of such failing; or (d) Borrower, any of its Guarantor Subsidiaries or any other Party fails to perform or observe any other covenant or agreement (not specified in clauses (a), (b) or (c) above) contained in any Loan Document on its part to be performed or observed within ten (10) days after the giving of notice by the Agent on behalf of the Majority Banks of such Default; or (e) Any representation or warranty of Borrower or any of its Subsidiaries made in any Loan Document, or in any certificate or other writing delivered by Borrower pursuant to any Loan Document, proves to have been incorrect when made or reaffirmed in any material respect; or (f) Borrower or any of its Guarantor Subsidiaries (i) fails to pay the principal, or any principal installment, of any present or future Indebtedness for borrowed money of $1,500,000 or more (other than Non-Recourse Debt specified in Section 6.8(d)), or any guaranty of present or future Indebtedness for borrowed money of $1,500,000 or more, on its part to be paid, when due (or within any stated grace period), whether at the stated maturity, upon acceleration, by reason of required prepayment or otherwise or (ii) fails to perform or observe any other term, covenant or agreement on its part to be performed or observed, or suffers any event to occur, in connection with any present or future indebtedness for borrowed money of $1,500,000 or more (other than Non-Recourse Debt specified in Section 6.8(d)), or of any guaranty of present or future indebtedness for borrowed money of $1,500,000 or more, if as a result of such failure or sufferance any holder or holders thereof (or an agent or trustee on its or their behalf) has the right to declare such indebtedness due before the date on which it otherwise would become due; or (g) Any event occurs which gives the holder or holders of any Subordinated Obligation (or an agent or trustee on its or their behalf) the right to declare such indebtedness due before the date on which it otherwise would become due, or the right to require the issuer thereof to redeem or purchase, or offer to redeem or purchase, all or any portion of any Subordinated Obligation; or (h) Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of the Banks or satisfaction in full of all the Obligations ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect which, in any such event in the reasonable opinion of the Majority Banks, is materially adverse to the interests of the Banks; or any Party thereto denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind same; or (i) A final judgment against Borrower or any of its Guarantor Subsidiaries is entered for the payment of money in excess of $1,000,000 and, absent procurement of a stay of execution, such judgment remains unsatisfied for thirty (30) calendar days after the date of entry of judgment, or in any event later than five (5) days prior to the date of any proposed sale thereunder; or any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the Property of any such Person and is not released, vacated or fully bonded within thirty (30) calendar days after its issue or levy; or (j) Borrower or any of its Guarantor Subsidiaries (other than a Guarantor Subsidiary that holds as its principal assets the Spring Creek Project or the Glen Harbor Project) institutes or consents to the institution of any proceeding under a Debtor Relief Law relating to it or to all or any part of its Property, or is unable or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any part of its Property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of that Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under a Debtor Relief Law relating to any such Person or to all or any part of its Property is instituted without the consent of that Person and continues undismissed or unstayed for sixty (60) calendar days; or (k) The occurrence of an Event of Default (as such term is or may hereafter be specifically defined in any other Loan Document) under any other Loan Document; or (l) Any determination is made by a court of competent jurisdiction that the Public 9-3/4% Senior Subordinated Debt, the Public 9.00% Senior Subordinated Debt, the Swiss Franc Debt or any other Subordinated Obligation is not subordinated in accordance with its terms to the principal or interest under the Notes; or (m) Any Pension Plan maintained by Borrower or any of its Subsidiaries is determined to have a material "accumulated funding deficiency" as that term is defined in Section 302 of ERISA and the result is a Material Adverse Effect. 9.2 Remedies Upon Event of Default. Without limiting any other rights or remedies of the Agent or the Banks provided for elsewhere in this Agreement, or the Loan Documents, or by applicable Law, or in equity, or otherwise: (a) Upon the occurrence, and during the continuance, of any Event of Default other than an Event of Default described in Section 9.1(j): (1) the commitment to make Advances and all other obligations of the Agent or the Banks and all rights of Borrower and any other Parties under the Loan Documents shall be suspended without notice to or demand upon Borrower, which are expressly waived by Borrower, except that all of the Banks or the Majority Banks (as the case may be, in accordance with Section 11.2) may waive an Event of Default or, without waiving, determine, upon terms and conditions satisfactory to the Banks or Majority Banks, as the case may be, to reinstate the Commitments and make further Advances, which waiver or determination shall apply equally to, and shall be binding upon, all the Banks; (2) the Issuing Bank may, with the approval of the Majority Banks, demand immediate payment by Borrower of an amount equal to the aggregate drawable face amount of all then outstanding Letters of Credit to be held by the Issuing Bank in an interest-bearing cash collateral account as collateral hereunder, and Borrower hereby grants to the Agent, on behalf of the Banks, a security interest in such funds and any such account to secure the Obligations; and (3) the Majority Banks may request the Agent to, and the Agent thereupon shall, terminate the Commitments and/or declare all or any part of the unpaid principal of all Notes, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by Borrower. (b) Upon the occurrence of any Event of Default described in Section 9.1(j): (1) the commitment to make Advances and all other obligations of the Agent or the Banks and all rights of Borrower and any other Parties under the Loan Documents shall terminate without notice to or demand upon Borrower, which are expressly waived by Borrower; (2) an amount equal to the aggregate drawable face amount of all then outstanding Letters of Credit shall be immediately due and payable to the Issuing Bank without notice to or demand upon Borrower, which are expressly waived by Borrower, to be held by the Issuing Bank in an interest-bearing cash collateral account as collateral hereunder, and Borrower hereby grants to the Agent, on behalf of the Banks, a security interest in such funds and any such account to secure the Obligations; and (3) the unpaid principal of all Notes, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents shall be forthwith due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by Borrower. (c) Upon the occurrence of any Event of Default, the Agent or (but only upon directive of the Majority Banks) any of the Banks, without notice to (except as expressly provided for in any Loan Document) or demand upon Borrower, which are expressly waived by Borrower (except as to notices expressly provided for in any Loan Document), may proceed to protect, exercise and enforce the rights and remedies of the Agent and the Banks under the Loan Documents against Borrower and any other Party and such other rights and remedies as are provided by Law or equity. (d) The order and manner in which the Banks' rights and remedies are to be exercised shall be determined by the Majority Banks in their sole discretion, and all payments received by the Agent and the Banks, or any of them, shall be applied first to the costs and expenses (including attorneys' fees and disbursements and the allocated costs of attorneys employed by the Agent) of the Agent and of the Banks, and thereafter paid pro rata to the Banks in the same proportions that the aggregate Obligations owed to each Bank under the Loan Documents bear to the aggregate Obligations owed under the Loan Documents to all the Banks, without priority or preference among the Banks. Regardless of how each Bank may treat payments for the purpose of its own accounting, for the purpose of computing Borrower's Obligations hereunder and under the Notes, payments shall be applied first, to the costs and expenses of the Agent and the Banks, as set forth above, second, to the payment of accrued and unpaid interest due under any Loan Documents to and including the date of such application (ratably, and without duplication, according to the accrued and unpaid interest due under each of the Loan Documents), and third, to the payment of all other amounts (including principal and fees) then owing to the Agent or the Banks under the Loan Documents. No application of payments will cure any Event of Default, or prevent acceleration, or continued acceleration, of amounts payable under the Loan Documents, or prevent the exercise, or continued exercise, of rights or remedies of the Banks hereunder or thereunder or at Law or in equity. Article 10 THE AGENT --------- 10.1 Appointment and Authorization. Subject to Section 10.8, each Bank hereby irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof or are reasonably incidental, as determined by the Agent, thereto. This appointment and authorization is intended solely for the purpose of facilitating the servicing of the Loans and does not constitute appointment of the Agent as trustee for any Bank or as representative of any Bank for any other purpose and, except as specifically set forth in the Loan Documents to the contrary, the Agent shall take such action and exercise such powers only in an administrative and ministerial capacity. 10.2 Agent and Affiliates. Bank of America (and each successor Agent) has the same rights and powers under the Loan Documents as any other Bank and may exercise the same as though it was not the Agent, and the term "Bank" or "Banks" includes Bank of America in its individual capacity. Bank of America (and each successor Agent) and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with Borrower, any Subsidiary thereof, or any Affiliate of Borrower or any Subsidiary thereof, as if it was not the Agent and without any duty to account therefor to the Banks. Bank of America (and each successor Agent) need not account to any other Bank for any monies received by it for reimbursement of its costs and expenses as Agent hereunder, or (except as expressly provided elsewhere herein) for any monies received by it in its capacity as a Bank hereunder. The Agent shall not be deemed to hold a fiduciary relationship with any Bank and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Agent. 10.3 Proportionate Interest in any Collateral. The Agent, on behalf of all the Banks, shall hold in accordance with the Loan Documents all items of any collateral or interests therein received or held by the Agent. Subject to the Agent's and the Banks' rights to reimbursement for their costs and expenses hereunder (including attorneys' fees and disbursements and other professional services and the allocated costs of attorneys employed by the Agent or a Bank) and subject to the application of payments in accordance with Section 9.2(d), each Bank shall have an interest in the Banks' interest in any collateral or interests therein in the same proportions that the aggregate Obligations owed such Bank under the Loan Documents bear to the aggregate Obligations owed under the Loan Documents to all the Banks, without priority or preference among the Banks. 10.4 Banks' Credit Decisions. Each Bank agrees that it has, independently and without reliance upon the Agent, any other Bank or the directors, officers, agents, employees or attorneys of the Agent or of any other Bank, and instead in reliance upon information supplied to it by or on behalf of Borrower and upon such other information as it has deemed appropriate, made its own independent credit analysis and decision to enter into this Agreement. Each Bank also agrees that it shall, independently and without reliance upon the Agent, any other Bank or the directors, officers, agents, employees or attorneys of the Agent or of any other Bank, continue to make its own independent credit analyses and decisions in acting or not acting under the Loan Documents. 10.5 Action by Agent. (a) The Agent may assume that no Default has occurred and is continuing, unless the Agent has received notice from Borrower stating the nature of the Default or has received notice from a Bank stating the nature of the Default and that such Bank considers the Default to have occurred and to be continuing. (b) The Agent has only those obligations under the Loan Documents as are expressly set forth therein. (c) Both before and after any Default, the Agent shall be required to act or not act upon the instructions of the Majority Banks (or all of the Banks, to the extent required by Section 11.2) and those instructions shall be binding upon the Agent and all the Banks, provided that the Agent shall not be required to act or not act if to do so would be contrary to any Loan Document or to applicable Law or would result, in the reasonable judgment of the Agent, in a risk of liability to the Agent. The Agent may, without the consent of the Majority Banks, take such actions and exercise such discretion as is specified herein. In addition, should the Agent propose a course of conduct with respect to the administration of the Loan Documents in writing to the Banks and should the Majority Banks (or any of the Banks, if unanimous approval of such action is required under Section 11.2) fail, for five (5) Banking Days after the receipt of notice from the Agent of the proposed course of action, to instruct the Agent to the contrary, then the Agent, in its sole discretion, may act or not act as the Agent deems advisable pursuant to such course of conduct. (d) The Agent shall have no liability to any Bank for acting, or not acting, as instructed by the Majority Banks (or all the Banks, if required under Section 11.2) or as permitted under clause (c), above, notwithstanding any other provision hereof. 10.6 Liability of Agent. Either the Agent nor any of its directors, officers, agents, employees or attorneys shall be liable for any action taken or not taken by them under or in connection with the Loan Documents, except for their own gross negligence or willful misconduct. Without limitation on the foregoing, the Agent and its directors, officers, agents, employees and attorneys: (a) May treat the payee of any Note as the holder thereof until the Agent receives notice of the assignment or transfer thereof, in form satisfactory to the Agent, signed by the payee, and may treat each Bank as the owner of that Bank's interest in the Obligations for all purposes of this Agreement until the Agent receives notice of the assignment or transfer thereof, in form satisfactory to the Agent, signed by that Bank. (b) May consult with legal counsel (including in-house legal counsel), accountants (including in-house accountants) and other professionals or experts selected by it, or with legal counsel, accountants or other professionals or experts for Borrower and/or its Subsidiaries or the Banks, and shall not be liable for any action taken or not taken by it in good faith in accordance with any advice of such legal counsel, accountants or other professionals or experts. (c) Shall not be responsible to any Bank for any statement, warranty or representation made in any of the Loan Documents or in any notice, certificate, report, request or other statement (written or oral) given or made in connection with any of the Loan Documents. (d) Except to the extent expressly set forth in the Loan Documents, shall have no duty to ask or inquire as to the performance or observance by Borrower or its Subsidiaries of any of the terms, conditions or covenants of any of the Loan Documents or to inspect any collateral or the Property, books or records of Borrower or its Subsidiaries. (e) Will not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, effectiveness, sufficiency or value of any Loan Document, any other instrument or writing furnished pursuant thereto or in connection therewith, or any collateral. (f) Will not incur any liability by acting or not acting in reliance upon any Loan Document, notice, consent, certificate, statement, request or other instrument or writing believed by it to be genuine and signed or sent by the proper party or parties. (g) Will not incur any liability for any arithmetical error in computing any amount paid or payable by Borrower or any Subsidiary or Affiliate thereof or paid or payable to or received or receivable from any Bank under any Loan Document, including, without limitation, principal, interest, commitment fees, Advances and other amounts; provided that, promptly upon discovery of such an error in computation, the Agent, the Banks and (to the extent applicable) Borrower and/or its Subsidiaries or Affiliates shall make such adjustments as are necessary to correct such error and to restore the parties to the position that they would have occupied had the error not occurred. 10.7 Indemnification. Each Bank shall, ratably in accordance with its Pro Rata Share of the Commitments, indemnify and hold the Agent and its directors, officers, agents, employees and attorneys harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, attorneys' fees and disbursements and allocated costs of attorneys employed by the Agent) that may be imposed on, incurred by or asserted against it or them in any way relating to or arising out of the Loan Documents (other than losses incurred by reason of the failure of Borrower to pay the indebtedness represented by the Notes) or any action taken or not taken by it as Agent thereunder, except such as result from its own gross negligence or willful misconduct. Without limitation on the foregoing, each Bank shall reimburse the Agent upon demand for that Bank's Pro Rata Share of any out-of-pocket cost or expense incurred by the Agent in connection with the negotiation, preparation, execution, delivery, amendment, waiver, restructuring, reorganization (including a bankruptcy reorganization), enforcement or attempted enforcement of the Loan Documents, to the extent that Borrower or any other Party is required by Section 11.3 to pay that cost or expense but fails to do so upon demand. If payment is made by Borrower or another Party to the Agent for such cost or expense after reimbursement to the Agent by a Bank, the Agent shall reimburse such Bank, as applicable. Nothing in this Section 10.7 shall entitle the Agent to recover any amount from the Banks if and to the extent that such amount has theretofore been recovered from Borrower or any of its Subsidiaries. 10.8 Successor Agent. The Agent may, and at the request of the Majority Banks shall, resign as Agent upon thirty (30) days notice to the Banks and Borrower. If the Agent shall resign as Agent under this Agreement, the Majority Banks shall appoint from among the Banks a successor managing agent for the Banks, which successor managing agent shall be approved by Borrower (and such approval shall not be unreasonably withheld). If no successor managing agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and Borrower, a successor managing agent from among the Banks. Upon the acceptance of its appointment as successor managing agent hereunder, such successor managing agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor managing agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article 10, and Sections 11.3, 11.10 and 11.20, shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 10.9 No Obligations of Borrower. Nothing contained in this Article 10 shall be deemed to impose upon Borrower any obligation in respect of the due and punctual performance by the Agent of its obligations to the Banks under any provision of this Agreement, and Borrower shall have no liability to the Agent or any of the Banks in respect of any failure by the Agent or any Bank to perform any of its obligations to the Agent or the Banks under this Agreement. Without limiting the generality of the foregoing, where any provision of this Agreement relating to the payment of any amounts due and owing under the Loan Documents provides that such payments shall be made by Borrower to the Agent for the account of the Banks, Borrower's obligations to the Banks in respect of such payments shall be deemed to be satisfied upon the making of such payments to the Agent in the manner provided by this Agreement. Article 11 MISCELLANEOUS ------------- 11.1 Cumulative Remedies; No Waiver. The rights, powers, privileges and remedies of the Agent and the Banks provided herein or in any Note or other Loan Document are cumulative and not exclusive of any right, power, privilege or remedy provided by Law or equity. No failure or delay on the part of the Agent or any Bank in exercising any right, power, privilege or remedy may be, or may be deemed to be, a waiver thereof; nor may any single or partial exercise of any right, power, privilege or remedy preclude any other or further exercise of the same or any other right, power, privilege or remedy. The terms and conditions of Article 8 hereof are inserted for the sole benefit of the Agent and the Banks; the same may be waived in whole or in part, with or without terms or conditions, in respect of any Loan without prejudicing the Agent's or the Banks' rights to assert them in whole or in part in respect of any other Loan. 11.2 Amendments; Consents. No amendment, modification, supplement, extension, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder, and no consent to any departure by Borrower or any other Party therefrom, may in any event be effective unless in writing signed by the Majority Banks (and, in the case of any amendment, modification or supplement of or to any Loan Document to which Borrower is a Party, signed by Borrower), and then only in the specific instance and for the specific purpose given; and, without the approval in writing of all the Banks, no amendment, modification, supplement, termination, waiver or consent may be effective: (a) To amend or modify (i) the amount or payment terms of principal or interest payable on the Notes, (ii) the amount of the Commitments, (iii) the amount or payment terms of any commitment or other fee or amount payable to the Banks generally under the Loan Documents; (b) To extend the term of the Commitments or to release a guarantor under the Subsidiary Guaranty (except as provided in Section 5.10); (c) To amend the provisions of the definition of "Majority Banks", Section 9.2(d), 10.3, 11.2, 11.9 or 11.10; or (d) To amend any provision of this Agreement that expressly requires the consent or approval of all the Banks. Any amendment, modification, supplement, termination, waiver or consent pursuant to this Section 11.2 shall apply equally to, and shall be binding upon, all the Banks and the Agent. The provisions of Article 10 and the provisions of the Loan Documents dealing with the rights and responsibilities of the Agent may not be amended without the consent of the Agent. 11.3 Costs, Expenses and Taxes. Borrower shall pay within five (5) Banking Days after demand, accompanied by an invoice therefor, the reasonable costs and expenses of the Agent in connection with the negotiation, preparation, syndication, execution and delivery of the Loan Documents and any amendment thereto or waiver thereof. Borrower shall also pay on demand, accompanied by an invoice therefor, the reasonable costs and expenses of the Agent and the Banks in connection with the refinancing, restructuring, reorganization (including a bankruptcy reorganization) and enforcement or attempted enforcement of the Loan Documents, and any matter related thereto. The foregoing costs and expenses shall include filing fees, recording fees, title insurance fees, appraisal fees, search fees, and other out-of-pocket expenses and the reasonable fees and out-of-pocket expenses of any legal counsel (including allocated costs of in-house legal counsel employed by the Agent or any Bank), independent public accountants and other outside experts retained by the Agent or any Bank, whether or not such costs and expenses are incurred or suffered by the Agent or any Bank in connection with or during the course of any bankruptcy or insolvency proceedings of Borrower or any Subsidiary thereof. Such costs and expenses shall also include, in the case of any amendment or waiver of any Loan Document requested by Borrower, the administrative costs of the Agent reasonably attributable thereto. Borrower shall pay any and all documentary and other taxes, excluding, in the case of each Bank, the Agent, and each Eligible Assignee, and any Affiliate or Eurodollar Lending Office thereof, (i) taxes imposed on or measured in whole or in part by its overall net income, gross income or gross receipts or capital and franchise taxes imposed on its by (A) any jurisdiction (or political subdivision thereof) in which it is organized or maintains its principal office or Eurodollar Lending Office or (B) any jurisdiction (or political subdivision thereof) in which it is "doing business" (unless it would not be doing business in such jurisdiction (or political subdivision thereof) absent the transactions contemplated hereby), (ii) any withholding taxes or other taxes based on gross income imposed by the United States of America (other than withholding taxes and taxes based on gross income resulting from or attributable to any change in any law, rule or regulation or any change in the interpretation or administration of any law, rule or regulation by any governmental authority) or (iii) any withholding taxes or other taxes based on gross income imposed by the United States of America for any period with respect to which it has failed to provide Borrower with the appropriate form or forms required by Section 11.19, to the extent such forms are then required by applicable Laws, and all costs, expenses, fees and charges payable or determined to be payable in connection with the filing or recording of this Agreement, any other Loan Document or any other instrument or writing to be delivered hereunder or thereunder, or in connection with any transaction pursuant hereto or thereto, and shall reimburse, hold harmless and indemnify the Agent and the Banks from and against any and all loss, liability or legal or other expense with respect to or resulting from any delay in paying or failure to pay any such tax, cost, expense, fee or charge or that any of them may suffer or incur by reason of the failure of any Party to perform any of its Obligations. Any amount payable to the Agent or any Bank under this Section 11.3 shall bear interest from the tenth day following the date of demand for payment at the Default Rate. 11.4 Nature of Banks' Obligations. The obligations of the Banks hereunder are several and not joint or joint and several. Nothing contained in this Agreement or any other Loan Document and no action taken by the Agent or the Banks or any of them pursuant hereto or thereto may, or may be deemed to, make the Banks a partnership, an association, a joint venture or other entity, either among themselves or with Borrower or any Affiliate of Borrower. Each Bank's obligation to make any Advance pursuant hereto is several and not joint or joint and several. A default by any Bank will not increase the Pro Rata Share of the Commitments attributable to any other Bank. Any Bank not in default may, if it desires, assume in such proportion as the nondefaulting Banks agree the obligations of any Bank in default, but is not obligated to do so. The Agent agrees that it will use its best efforts either to induce the other Banks to assume the obligations of a Bank in default or to obtain another Bank, reasonably satisfactory to Borrower, to replace such a Bank in default. 11.5 Survival of Representations and Warranties. All representations and warranties contained herein or in any other Loan Document, or in any certificate or other writing delivered by or on behalf of any one or more of the Parties to any Loan Document, will survive the making of the Loans hereunder and the execution and delivery of the Notes, and have been or will be relied upon by the Agent and each Bank, notwithstanding any investigation made by the Agent or any Bank or on their behalf. 11.6 Notices. Except as otherwise expressly provided in the Loan Documents, all notices, requests, demands, directions and other communications provided for hereunder or under any other Loan Document must be in writing and must be mailed, telegraphed, telecopied or delivered to the appropriate party at the address set forth on the signature pages of this Agreement or other applicable Loan Document or, as to any party to any Loan Document, at any other address as may be designated by it in a written notice sent to all other parties to such Loan Document in accordance with this Section 11.6. Except as otherwise expressly provided in any Loan Document, if any notice, request, demand, direction or other communication required or permitted by any Loan Document is given by mail it will be effective on the earlier of receipt or the third calendar day after deposit in the United States mail with first class or airmail postage prepaid; if given by telegraph or cable, when delivered to the telegraph company with charges prepaid; if given by telecopier, when sent; or if given by personal delivery (including delivery by courier), when delivered. If a notice is being given of the occurrence of a Default or Event of Default, the Person giving the notice shall use reasonable efforts to either give or supplement such notice with a notice by telecopy. 11.7 Execution of Loan Documents. Unless the Agent otherwise specifies with respect to any Loan Document, (a) this Agreement and any other Loan Document may be executed in any number of counterparts and any party hereto or thereto may execute any counterpart, each of which when executed and delivered will be deemed to be an original and all of which counterparts of this Agreement or any other Loan Document, as the case may be, when taken together will be deemed to be but one and the same instrument and (b) execution of any such counterpart may be evidenced by a telecopier transmission of the signature of such party. The execution of this Agreement or any other Loan Document by any party hereto or thereto will not become effective until counterparts hereof or thereof, as the case may be, have been executed by all the parties hereto or thereto. 11.8 Binding Effect; Assignment. (a) This Agreement and the other Loan Documents to which Borrower is a Party will be binding upon and inure to the benefit of Borrower, the Agent, the Co-Agent, each of the Banks, and their respective successors and assigns, except that Borrower may not assign its rights or responsibilities hereunder or thereunder or any interest herein or therein without the prior written consent of all the Banks. Each Bank represents that it is not acquiring its Note with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (subject to any requirement that disposition of such Note must be within the control of such Bank). Any Bank may at any time pledge its Note or any other instrument evidencing its rights as a Bank under this Agreement to a Federal Reserve Bank, but no such pledge shall release that Bank from its obligations hereunder or grant to such Federal Reserve Bank the rights of a Bank hereunder absent foreclosure of such pledge. (b) From time to time following the Closing Date, each Bank may assign to one or more Eligible Assignees a portion of its Pro Rata Share of the Commitments; provided that (i) in no event shall an assignment be made that would reduce the remaining Pro Rata Share of the Commitment held by the assigning Bank below $10,000,000 (ii) such Eligible Assignee shall be subject to the prior reasonable approval of the Agent and Borrower, (iii) such assignment shall be evidenced by a Commitment Assignment and Acceptance, a copy of which shall be furnished to the Agent as hereinbelow provided, (iv) the assignment shall not assign a Pro Rata Share of the Commitments equivalent to less than $10,000,000, (v) any such assignment must be made pro-rata with respect to the Line A and Line B Commitments, and (vi) the effective date of any such assignment shall be as specified in the Commitment Assignment and Acceptance, but not earlier than the date which is five (5) Banking Days after the date the Agent has received the Commitment Assignment and Acceptance. Upon the effective date of such Commitment Assignment and Acceptance, the Eligible Assignee named therein shall be a Bank for all purposes of this Agreement, with the Pro Rata Share of the Commitments therein set forth and, to the extent of such Pro Rata Share, the assigning Bank shall be released from its further obligations under this Agreement. Borrower agrees that it shall execute and deliver (against delivery by the assigning Bank to Borrower of its Notes) to such assignee Bank, Notes evidencing that assignee Bank's Pro Rata Share of the Line A and Line B Commitments, and to the assigning Bank, Notes evidencing the remaining balance Pro Rata Share retained by the assigning Bank. Other than as specifically permitted under Sections 11.8(a), 11.8(b), or 11.8(e), or as may be approved by the Majority Banks, no Bank shall be permitted to assign or otherwise transfer (including by participation) its interest in the Commitments, any Loan or any of the Loan Documents. (c) By executing and delivering a Commitment Assignment and Acceptance, the Eligible Assignee thereunder acknowledges and agrees that: (i) other than the representation and warranty that it is the legal and beneficial owner of the Pro Rata Share of the Commitments being assigned thereby free and clear of any adverse claim, the assigning Bank has made no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of this Agreement or any other Loan Document; (ii) the assigning Bank has made no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance by Borrower of the Obligations; (iii) it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.1 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Commitment Assignment and Acceptance; (iv) it will, independently and without reliance upon the Agent, the Co-Agent or any Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) it appoints and authorizes the Agent to take such action and to exercise such powers under this Agreement as are delegated to the Agent by this Agreement; and (vi) it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Bank. (d) The Agent shall maintain at the Agent's Office a copy of each Commitment Assignment and Acceptance delivered to it. After receipt of a completed Commitment Assignment and Acceptance executed by any Bank and an Eligible Assignee, and receipt of an assignment fee of $2,500 from such Eligible Assignee, Agent shall, promptly following the effective date thereof, provide to Borrower and the Banks a revised Schedule 1.2 giving effect thereto. (e) Each Bank may from time to time grant participations to a commercial bank Affiliate of such Bank in a portion of its Pro-Rata Share of the Commitments; provided, however, that (i) such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other financial institutions shall not be a Bank hereunder for any purposes except, if the participation agreement so provides, for the purposes of Sections 3.5, 3.6, 11.10 and 11.21, (iv) Borrower, the Agent and the other Banks shall continue to deal solely and directly with such Bank in connection such Bank's rights and obligations under this Agreement and (v) the holder of such participation shall not be provided under its participation agreement with consent or approval rights with respect to any matters concerning the Loan Documents or the Loans except for those matters designated as requiring the consent or approval of all of the Banks under Section 11.2. 11.9 Sharing of Setoffs. Each Bank severally agrees that if it, through the exercise of any right of setoff, banker's lien or counterclaim against Borrower, or otherwise, receives payment of the Obligations held by it that is ratably more than any other Bank, through any means, receives in payment of the Obligations held by that Bank, then, subject to applicable Laws: (a) The Bank exercising the right of setoff, banker's lien or counterclaim or otherwise receiving such payment shall purchase, and shall be deemed to have simultaneously purchased, from the other Bank a participation in the Obligations held by the other Bank and shall pay to the other Bank a purchase price in an amount so that the share of the Obligations held by each Bank after the exercise of the right of setoff, banker's lien or counterclaim or receipt of payment shall be in the same proportion that existed prior to the exercise of the right of setoff, banker's lien or counterclaim or receipt of payment; and (b) Such other adjustments and purchases of participations shall be made from time to time as shall be equitable to ensure that all of the Banks share any payment obtained in respect of the Obligations ratably in accordance with each Bank's share of the Obligations immediately prior to, and without taking into account, the payment; provided that, if all or any portion of a disproportionate payment obtained as a result of the exercise of the right of setoff, banker's lien, counterclaim or otherwise is thereafter recovered from the purchasing Bank by Borrower or any Person claiming through or succeeding to the rights of Borrower, the purchase of a participation shall be rescinded and the purchase price thereof shall be restored to the extent of the recovery, but without interest. Each Bank that purchases a participation in the Obligations pursuant to this Section 11.9 shall from and after the purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Bank were the original owner of the Obligations purchased. 11.10 Indemnity by Borrower. Borrower agrees to indemnify, save and hold harmless the Agent, the Co-Agent and each Bank and their directors, officers, agents, and employees (collectively the "Indemnitees") from and against: (a) Any and all claims, demands, actions or causes of action (except a claim, demand, action, or cause of action for any amount excluded from the definition of "Taxes" in Section 3.10(c)) if the claim, demand, action or cause of action arises out of or relates to any act or omission (or alleged act or omission) of Borrower, its Affiliates or any of its officers, directors or shareholders relating to the Commitments, the use or contemplated use of proceeds of any Loan, or the relationship of Borrower and the Banks under this Agreement; (b) Any administrative or investigative proceeding by any Governmental Agency arising out of or related to a claim, demand, action or cause of action described in clause (a) above; and (c) Any and all liabilities, losses, costs or expenses (including attorneys' fees and the allocated costs of attorneys employed by any Indemnitee and disbursements of such attorneys and other professional services) that any Indemnitee suffers or incurs as a result of the assertion of any foregoing claim, demand, action or cause of action; provided that no Indemnitee shall be entitled to indemnification for any loss caused by its own gross negligence or willful misconduct or for any loss asserted against it by another Indemnitee. If any claim, demand, action or cause of action is asserted against any Indemnitee, such Indemnitee shall promptly notify Borrower, but the failure to so promptly notify Borrower shall not affect Borrower's obligations under this Section unless such failure materially prejudices Borrower's right to participate in the contest of such claim, demand, action or cause of action, as hereinafter provided. Such Indemnitee may (and shall, if requested by Borrower in writing) contest the validity, applicability and amount of such claim, demand, action or cause of action and shall permit Borrower to participate in such contest. Any Indemnitee that proposes to settle or compromise any claim or proceeding for which Borrower may be liable for payment of indemnity hereunder shall give Borrower written notice of the terms of such proposed settlement or compromise reasonably in advance of settling or compromising such claim or proceeding and shall obtain Borrower's prior consent (which shall not be unreasonably withheld). In connection with any claim, demand, action or cause of action covered by this Section 11.10 against more than one Indemnitee, all such Indemnitees shall be represented by the same legal counsel (which may be a law firm engaged by the Indemnitees or attorneys employed by an Indemnitee or a combination of the foregoing) selected by the Indemnitees and reasonably acceptable to Borrower; provided, that if such legal counsel determines in good faith that representing all such Indemnitees would or could result in a conflict of interest under Laws or ethical principles applicable to such legal counsel or that a defense or counterclaim is available to an Indemnitee that is not available to all such Indemnitees, then to the extent reasonably necessary to avoid such a conflict of interest or to permit unqualified assertion of such a defense or counterclaim, each Indemnitee shall be entitled to separate representation by legal counsel selected by that Indemnitee and reasonably acceptable to Borrower, with all such legal counsel using reasonable efforts to avoid unnecessary duplication of effort by counsel for all Indemnitees; and further provided that the Agent (as an Indemnitee) shall at all times be entitled to representation by separate legal counsel (which may be a law firm or attorneys employed by the Agent or a combination of the foregoing). Any obligation or liability of Borrower to any Indemnitee under this Section 11.10 shall survive the expiration or termination of this Agreement and the repayment of all Loans and the payment and performance of all other Obligations owed to the Banks. 11.11 Nonliability of the Banks. Borrower acknowledges and agrees that: (a) Any inspections of any Property of Borrower made by or through the Agent or the Banks are for purposes of administration of the Loan only and Borrower is not entitled to rely upon the same (whether or not such inspections are at the expense of Borrower); (b) By accepting or approving anything required to be observed, performed, fulfilled or given to the Agent or the Banks pursuant to the Loan Documents, neither the Agent nor the Banks shall be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not constitute a warranty or representation to anyone with respect thereto by the Agent or the Banks; (c) The relationship between Borrower, on the one hand, and the Agent, the Co-Agent and/or any of the Banks, on the other, is, and shall at all times remain, solely that of a borrower and lenders; neither the Agent, the Co-Agent nor the Banks shall under any circumstance be construed to be partners or joint venturers of Borrower or its Affiliates; neither the Agent, the Co-Agent nor the Banks shall under any circumstance be deemed to be in a relationship of confidence (other than as specified in Section 11.22) or trust or a fiduciary relationship with Borrower or its Affiliates, or to owe any fiduciary duty to Borrower or its Affiliates; neither the Agent, the Co-Agent nor the Banks undertake or assume any responsibility or duty to Borrower or its Affiliates to select, review, inspect, supervise, pass judgment upon or inform Borrower or its Affiliates of any matter in connection with their Property or the operations of Borrower or its Affiliates; Borrower and its Affiliates shall rely entirely upon their own judgment with respect to such matters; and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by the Agent, the Co-Agent or the Banks in connection with such matters is solely for the protection of the Agent, the Co-Agent and the Banks and neither Borrower nor any other Person is entitled to rely thereon; and (d) Neither the Agent, the Co-Agent nor the Banks shall be responsible or liable to any Person for any loss, damage, liability or claim of any kind relating to injury or death to Persons or damage to Property caused by the actions, inaction or negligence of Borrower and/or its Affiliates and Borrower hereby indemnifies and holds the Agent, the Co-Agent and the Banks harmless from any such loss, damage, liability or claim. 11.12 No Third Parties Benefited. This Agreement is made for the purpose of defining and setting forth certain obligations, rights and duties of Borrower, the Agent, the Co-Agent and the Banks in connection with the Loans, and is made for the sole benefit of Borrower, the Agent, the Co-Agent and the Banks, and the Agent's, the Co-Agent's and the Banks' successors and assigns. Except as provided in Sections 11.8 and 11.10, no other Person shall have any rights of any nature hereunder or by reason hereof. 11.13 Further Assurances. Borrower and its Subsidiaries shall, at their expense and without expense to the Banks or the Agent, do, execute and deliver such further acts and documents as any Bank or the Agent from time to time reasonably requires for the assuring and confirming unto the Banks or the Agent of the rights hereby created or intended now or hereafter so to be, or for carrying out the intention or facilitating the performance of the terms of any Loan Document. 11.14 Integration. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and supersedes all prior agreements, written or oral, on the subject matter hereof. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control and govern; provided that the inclusion of supplemental rights or remedies in favor of the Agent or the Banks in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 11.15 Governing Law. Except to the extent otherwise provided therein, each Loan Document shall be governed by, and construed and enforced in accordance with, the local Laws of California. 11.16 Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable or invalid as to any party or in any jurisdiction shall, as to that party or jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions or the operation, enforceability or validity of that provision as to any other party or in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 11.17 Headings. Article and Section headings in this Agreement and the other Loan Documents are included for convenience of reference only and are not part of this Agreement or the other Loan Documents for any other purpose. 11.18 Time of the Essence. Time is of the essence of the Loan Documents. 11.19 Foreign Banks. Each Bank that is incorporated under the Laws of a jurisdiction other than the United States of America or any state thereof shall deliver to Borrower (with a copy to the Agent), within twenty days after the Closing Date (or after accepting an assignment interest herein pursuant to Section 11.8, if applicable) two duly completed copies, signed by a Responsible Official, of either Form 1001 (relating to such Person and entitling it to a complete exemption from withholding on all payments to be made to such Person by Borrower pursuant to this Agreement) or Form 4224 (relating to all payments to be made to such Person by Borrower pursuant to this Agreement) of the United States Internal Revenue Service or such other evidence (including, if reasonably necessary, Form W-9) satisfactory to Borrower and the Agent that no withholding under the federal income tax laws is required with respect to such Person. Thereafter and from time to time, each such Person shall (a) promptly submit to Borrower (with a copy to the Agent), such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to Borrower and the Agent of any available exemption from, United States withholding taxes in respect of all payments to be made to such Person by Borrower pursuant to this Agreement and (b) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Bank, and as may be reasonably necessary (including the re-designation of its Eurodollar Lending Office, if any) to avoid any requirement of applicable laws that Borrower make any deduction or withholding for taxes from amounts payable to such Person. 11.20 Hazardous Material Indemnity. Borrower hereby agrees to indemnify, hold harmless and defend (by counsel reasonably satisfactory to the Agent) the Agent, the Co-Agent and each of the Banks and their respective directors, officers, employees, agents, successors and assigns from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial action requirements, enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including but not limited to reasonable attorneys' fees and the allocated costs of attorneys employed by the Agent, the Co-Agent or any Bank, and expenses to the extent that the defense of any such action has not been assumed by Borrower), arising directly or indirectly, in whole or in part, out of (i) the presence on or under any Real Property of any Hazardous Materials, or any releases or discharges of any Hazardous Materials on, under or from any Real Property and (ii) any activity carried on or undertaken on or off any Real Property by Borrower or any of its predecessors in title, whether prior to or during the term of this Agreement, and whether by Borrower or any predecessor in title or any employees, agents, contractors or subcontractors of Borrower or any predecessor in title, or any third persons at any time occupying or present on any Real Property, in connection with the handling, treatment, removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Materials at any time located or present on or under any Real Property. The foregoing indemnity shall further apply to any residual contamination on or under any Real Property, or affecting any natural resources, and to any contamination of any property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such Hazardous Materials, and irrespective of whether any of such activities were or will be undertaken in accordance with applicable Laws, but the foregoing indemnity shall not apply to Hazardous Materials on any Real Property, the presence of which is caused solely by the Agent, the Co-Agent or the Banks. Borrower hereby acknowledges and agrees that, notwithstanding any other provision of this Agreement or any of the other Loan Documents to the contrary, the obligations of Borrower under this Section shall be unlimited personal corporate obligations of Borrower and shall not be secured by any deed of trust on any Real Property. 11.21 Reference to Arbitration. (a) Mandatory Arbitration. Any controversy or claim between any Party or group of Parties, on the one hand, and the Agent, the Co-Agent or any Bank, or any group thereof, on the other hand, including but not limited to those arising out of or relating to this Agreement or any agreements or instruments relating hereto or delivered in connection herewith and any claim based on or arising from an alleged tort, shall at the request of any party be determined by arbitration. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrators shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrators. Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (b) Real Property Collateral. Should real property collateral hereafter be taken by the Banks to secure the Obligations, then, notwithstanding the provisions of Section 11.21(a), no controversy or claim shall be submitted to arbitration without the consent of all parties if, at the time of the proposed submission, such controversy or claim arises from or relates to an obligation to the Bank which is secured by such real property collateral. If all parties do not consent to submission of such a controversy or claim to arbitration, the controversy or claim shall be determined as provided in Section 11.21(c). (c) Judicial Reference. A controversy or claim which is not submitted to arbitration as provided and limited in Sections 11.21(a) and (b) shall, at the request of any party, be determined by a reference in accordance with California Code of Civil Procedure Sections 638 et seq. If such an election is made, the parties shall designate to the court a referee or referees selected under the auspices of the AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings. The presiding referee of the panel, or the referee if there is a single referee, shall be an active attorney or retired judge. Judgment upon the award rendered by such referee or referees shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645. (d) Provisional Remedies, Self-Help and Foreclosure. No provision of this Section 11.21 shall limit the right of any party to this Agreement to exercise self-help remedies such as setoff, to foreclose against collateral or to obtain provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of any party to resort to arbitration or reference. Should real property collateral hereafter be taken by the Banks to secure the Obligations, then, at the Banks' option, foreclosure under any deed of trust or mortgage may be accomplished either by exercise of power or sale under the deed of trust or mortgage or by judicial foreclosure. 11.22 Confidentiality. Each Bank agrees to hold any confidential information that it may receive from Borrower or Agent pursuant to this Agreement in confidence, except for disclosure: (a) To other Banks; (b) To legal counsel and accountants or other professional advisors to Borrower or any Bank, provided that the recipient has accepted such information subject to a confidentiality agreement substantially similar to this Section 11.22; (c) To regulatory officials having jurisdiction over that Bank; (d) As required by Law or legal process or in connection with any legal proceeding to which that Bank is involved and that relates in some manner to the Loan Documents; and (e) To another financial institution in connection with a disposition or proposed disposition to that financial institution of all or part of that Bank's interests hereunder or a participation interest in one of its Notes, provided that the recipient has accepted such information subject to a confidentiality agreement substantially similar to this Section 11.22. For purposes of the foregoing, "confidential information" shall mean the Strategic Plan, the information provided pursuant to Section 7.1(c) and any other written information respecting Borrower or its Subsidiaries provided to the applicable Bank and designated thereon to be confidential, other than (i) information previously filed with any Governmental Agency and available to the public, (ii) information previously published in any public medium from a source other than, directly or indirectly, that Bank, and (iii) information disclosed by Borrower to any Person not associated with Borrower without a confidentiality agreement substantially similar to this Section 11.22. Nothing in this Section shall be construed to create or give rise to any fiduciary duty on the part of the Agent or the Banks to Borrower. 11.23 Co-Agent. Each Bank acknowledges that it has not relied, and will not rely, upon the Co-Agent in deciding to enter into this Agreement or in taking or not taking any action hereunder. The Co-Agent shall have no right, power, obligation, liability, responsibility or duty under this Agreement or the other Loan Documents other than those applicable to all Banks and in its capacity as such. 11.24 Purported Oral Amendments. BORROWER EXPRESSLY ACKNOWLEDGES THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 11.2. BORROWER AGREES THAT IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF THE AGENT OR ANY BANK THAT DOES NOT COMPLY WITH SECTION 11.2 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. DEL WEBB CORPORATION BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ John A. Spencer ----------------------------------- John A. Spencer Senior Vice President By: /s/ Daniel G. Farthing --------------------------------- Daniel G. Farthing Vice President Address: Del Webb Corporation Address: 2231 East Camelback Road, Suite 400 Phoenix, Arizona 85016 Bank of America National Trust and Savings Association Attention: Treasurer Agency Management Services 1455 Market Street, 13th Floor Telephone: (602) 808-8000 San Francisco, California 94103 Telecopier: (602) 808-8097 Attention: Mr. Daniel G. Farthing Vice President With a copy to: Telephone: (415) 622-4931 Del Webb Corporation Telecopier: (415) 622-4894 2231 East Camelback Road, Suite 400 Phoenix, Arizona 85016 Attn: General Counsel Telephone: (602) 808-8000 Telecopier: (602) 808-8097 BANK ONE, ARIZONA, NA, as the Co-Agent BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: /s/ Rhonda R. Williams ----------------------------------- By: /s/ Carol Smith Rhonda R. Williams --------------------------------- Assistant Vice President Carol Smith Vice President Address: Address: Bank One, Arizona, NA Bank One Center Bank of America National Trust and 241 North Central Avenue, 20th Floor Savings Assocation Phoenix, Arizona 85004-2267 CRESG-L.A. - Unit No. 1357 555 S. Flower Street, 6th Floor Attention: Ms. Rhonda R. Williams, Los Angeles, California 90071 Assistant Vice President Attention: Ms. Carol Smith, Telephone: (602) 221-1783 Vice President Telecopier: (602) 221-1372 Telephone: (213) 228-5286 Telecopier: (213) 228-5391 BANK ONE, ARIZONA, NA, as a Bank THE FIRST NATIONAL BANK OF BOSTON, a national banking association By: /s/ Rhonda R. Williams ----------------------------------- Rhonda R. Williams By: /s/ Kevin C. Hake Assistant Vice President --------------------------------- Kevin C. Hake Vice President Address: Bank One, Arizona, NA Bank One Center Address: 241 North Central Avenue, 20th Floor Phoenix, Arizona 85004-2267 The First National Bank of Boston 400 Perimeter Center Terrace Attention: Ms. Rhonda R. Williams, Atlanta, Georgia 30346 Assistant Vice President Attention: Mr. Kevin C. Hake Telephone: (602) 221-1783 Vice President Telecopier: (602) 221-1372 Telephone: (404) 390-6584 Telecopier: (404) 391-9811 GUARANTY FEDERAL BANK, F.S.B. Eurodollar Lending Office ------------------------- Credit Lyonnais Cayman Island Branch By: /s/ Richard V. Thompson c/o Credit Lyonnais ----------------------------------- 515 South Flower Street, Suite 2200 Richard V. Thompson Los Angeles, California 90071 Vice President Attention: Mr. David Miller, Vice President Address: Telephone: (213) 362-5900 Guaranty Federal Bank, F.S.B. Telecopier: (213) 623-3437 8333 Douglas Avenue, 10th Floor Dallas, Texas 75225 Attention: Mr. Richard V. Thompson, NATIONSBANK, N.A. (CAROLINAS), Vice President formerly known as NationsBank of South Carolina, N.A. Telephone: (214) 360-1963 Telecopier: (214) 360-1661 By: /s/ Robert L. Whittemore --------------------------------- Robert L. Whittemore CREDIT LYONNAIS CAYMAN ISLAND BRANCH Vice President Address: By: /s/ Thierry F. Vincent ----------------------------------- NationsBank, N.A. (Carolinas) Thierry F. Vincent 1901 Main Street, 4th Floor Authorized Signatory Columbia, South Carolina 29201 Attention: Mr. Robert L. Whittemore Vice President CREDIT LYONNAIS LOS ANGELES BRANCH Telephone: (803) 733-9650 Telecopier: (803) 733-9660 By: /s/ Thierry F. Vincent -------------------------------------- Thierry F. Vincent Vice President and Manager Domestic Lending Office ----------------------- Credit Lyonnais Los Angeles Branch 515 South Flower Street, Suite 2200 Los Angeles, California 90071 Attention: Mr. David Miller, Vice President BANK OF HAWAII FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: /s/ Joseph T. Donalson ----------------------------------- By: /s/ Carolyn Eskridge Joseph T. Donalson --------------------------------- Vice President Carolyn Eskridge Vice President Address: Address: Bank of Hawaii c/o First National Bank of Arizona First Union National Bank of 1839 South Alma School Road, Suite 150 North Carolina Mesa, Arizona 85210 301 South College Street, TW-8 Charlotte, North Carolina 28288-0600 Attention: Mr. Joseph T. Donalson Vice President Attention: Ms. Carolyn Eskridge Vice President Telephone: (602) 752-8020 Telecopier: (602) 752-8007 Telephone: (704) 383-5374 Telecopier: (704) 374-7102 EX-10.16 4 FIRST AMENDMENT TO RETIREMENT PLAN NO. 2 FIRST AMENDMENT TO THE DEL WEBB CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN NO. 2 The Del Webb Corporation Supplemental Executive Retirement Plan No. 2 (the "Plan"), which was originally effective as of January 1, 1989, and was restated effective as of April 20, 1993, is hereby further amended as follows, effective as of July 1, 1995: 1. Section 2.1(a) of the Plan is amended by the addition of the following sentence to the end thereof: Any Participation Agreement in effect prior to the adoption of this amended and restated Plan shall continue in full force and effect until subsequently modified or replaced. 2. Section 4.2(b) of the Plan is amended in its entirety to read as follows: (b) High Average Compensation. "High Average Compensation" means the sum of the Participant's annual total of salary and incentive compensation, before reduction for deferred compensation and 401(k) contributions, in the five (5) calendar years out of the seven (7) consecutive calendar years of employment with the Employer in which such total is the highest divided by five (5). Where the actual (not annualized) compensation paid to a Participant during a partial calendar year is greater than the compensation paid to the Participant during a completed calendar year, such partial year may be utilized for purposes of this provision. Notwithstanding the above, incentive compensation payments made in July, 1991, for the period January 1, 1991, to June 30, 1991, shall not be included in the computations of High Average Compensation. 3. Section 4.5(d) of the Plan is amended in its entirety to read as follows: (d) Accelerated Distribution. Notwithstanding any other provision of the Plan, at any time after a Change in Control or any time following termination of employment, a Participant shall be entitled to receive, upon written request to the Committee, a lump sum distribution of all or a portion of the Actuarial Equivalent of the Participant's unpaid benefits under this Plan on the date on which the Committee receives the written request. Each accelerated distribution shall be subject to a penalty equal to ten percent (10%) of the amount that would otherwise be distributed and that amount shall be forfeited by the Participant. The amount payable under this section shall be paid in a lump sum within sixty-five (65) days following the receipt of the notice by the Committee from the Participant. In the event a Participant requests and obtains an accelerated distribution under this Section 4.5(d) and remains employed by the Employer, participation will cease and there will be no future benefit accruals under this plan. In the event of a Participant's death and subsequent benefit payments to the designated beneficiary, such beneficiary may request a distribution under this Section 4.5(d). 4. Article VIII is amended by adding the following new Section 8.3 to the end thereof: 8.3 Modifications for Particular Participants. In the exercise of its discretion, the Board may modify or supplement the provisions of this Plan as it applies to a particular Participant. No modification or supplement will be effective, however, unless it is reflected in the Participant's Participation Agreement, or provided for in a resolution duly adopted by the Board, or reflected in any other written document which is executed by an officer of the Company who has been specifically authorized to execute said written document pursuant to a resolution duly adopted by the Board. 5. Except as otherwise provided above, the provisions of the Plan, as amended and restated effective as of April 20, 1993, shall continue in full force and effect. IN WITNESS WHEREOF, Del Webb Corporation has caused this First Amendment to be executed by its duly authorized representative on this 13th day of July, 1995. DEL WEBB CORPORATION By: Robertson C. Jones ---------------------------------- Its: Vice President ---------------------------------- EX-10.22 5 RETIREMENT SAVINGS PLAN DEL WEBB CORPORATION RETIREMENT SAVINGS PLAN Amended and Restated Effective January 1, 1995 TABLE OF CONTENTS Article Section Page ------- ------- ---- Article 1. Restatement of Plan . . . . . . . . . . . . . . . . . . . . . 1 1.1 Restatement of the Plan. . . . . . . . . . . . . . . . . . . . 1 1.2 Purpose of the Plan. . . . . . . . . . . . . . . . . . . . . . 1 1.3 Applicability of the Plan. . . . . . . . . . . . . . . . . . . 1 Article 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.2 Gender and Number . . . . . . . . . . . . . . . . . . . . . . 12 Article 3. Participation. . . . . . . . . . . . . . . . . . . . . . . . . 12 3.1 Participation. . . . . . . . . . . . . . . . . . . . . . . . . 12 3.2 Reemployment . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.3 Transferees. . . . . . . . . . . . . . . . . . . . . . . . . . 13 Article 4. Pretax Savings Contributions . . . . . . . . . . . . . . . . . 13 4.1 Deferral of Basic Pretax Savings Contributions . . . . . . . . 13 4.2 Deferral of Unmatched Pretax Savings Contributions . . . . . . 13 4.3 Deferral Election Procedures . . . . . . . . . . . . . . . . . 14 4.4 Deferral Election Changes. . . . . . . . . . . . . . . . . . . 14 4.5 Discontinuance of Basic and Unmatched Pretax Savings Contributions . . . . . . . . . . . . . . . . . . . . . . . . 14 4.6 Salary Reduction . . . . . . . . . . . . . . . . . . . . . . . 14 4.7 Limitation on Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions . . . . . . . . . . . . . . . . . 14 4.8 Restrictions on Elections . . . . . . . . . . . . . . . . . . 15 4.9 Transfer of Pretax Savings Contributions . . . . . . . . . . . 17 4.10 Crediting of Pretax Savings Contributions. . . . . . . . . . . 17 4.11 Adjustment of Company Contributions Accoun . . . . . . . . . . 17 Article 5. Company Contributions . . . . . . . . . . . . . . . . . . . . 18 5.1 Matching Company Contributions . . . . . . . . . . . . . . . . 18 5.2 Discretionary Company Contributions . . . . . . . . . . . . . 18 5.3 Restrictions on Matching Company Contributions and Discretionary Company Contributions . . . . . . . . . . . . . . . . . . . . 20 5.4 Corrective Contributions . . . . . . . . . . . . . . . . . . . 22 5.5 Transfer of Company Contributions . . . . . . . . . . . . . . 23 5.6 Allocation of Company Contributions to Company Contributions Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 5.7 Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . 24 5.8 Limitation on Annual Additions . . . . . . . . . . . . . . . . 24 5.9 Other Defined Contribution Plans . . . . . . . . . . . . . . . 24 5.10 Defined Benefit Plans . . . . . . . . . . . . . . . . . . . . 24 5.11 Adjusting Annual Additions . . . . . . . . . . . . . . . . . . 24 5.12 Deductibility Limitation . . . . . . . . . . . . . . . . . . . 26 5.13 Rollover Contributions and Prior Account Transfers . . . . . . 26 Article 6. Vesting and Benefits . . . . . . . . . . . . . . . . . . . . . 27 6.1 Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 6.2 Benefits Upon Termination of Employment. . . . . . . . . . . . 28 6.3 Forfeiture of Contingent Interests . . . . . . . . . . . . . . 28 6.4 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . 29 6.5 Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . 29 6.6 Designation of Beneficiary . . . . . . . . . . . . . . . . . . 29 6.7 Latest Time for Payment of Benefits. . . . . . . . . . . . . . 29 6.8 In-Service Distribution of Pretax Savings at Age 59-1/2. . . . 30 6.9 Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . . 30 6.10 Debiting of Investment Funds . . . . . . . . . . . . . . . . . 32 6.11 Loans to Participants . . . . . . . . . . . . . . . . . . . . 32 6.12 Requirement for Consent to Certain Distributions . . . . . . . 35 6.13 Eligible Rollover Distributions. . . . . . . . . . . . . . . . 35 Article 7. Investment Elections . . . . . . . . . . . . . . . . . . . . . 36 7.1 Participant Directed Individual Account Plan . . . . . . . . . 36 7.2 Employee Selected Investment Funds . . . . . . . . . . . . . . 37 7.3 Exercise of Control. . . . . . . . . . . . . . . . . . . . . . 37 7.4 Limitation of Liability and Responsibility . . . . . . . . . . 39 7.5 Former Participants and Beneficiaries. . . . . . . . . . . . . 39 7.6 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . 40 7.7 Voting, Tender Offers, or Similar Rights . . . . . . . . . . . 40 7.8 Investment Restrictions Due to Securities Laws . . . . . . . . 40 7.9 Confidentiality Requirements . . . . . . . . . . . . . . . . . 40 Article 8. Participant Accounts and Records of the Plan . . . . . . . . . 41 8.1 Accounts and Records . . . . . . . . . . . . . . . . . . . . . 41 8.2 Valuation of Investment Funds. . . . . . . . . . . . . . . . . 42 8.3 Valuation Adjustments. . . . . . . . . . . . . . . . . . . . . 42 Article 9. Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 43 9.1 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 43 9.2 Company Contributions. . . . . . . . . . . . . . . . . . . . . 43 9.3 Non-Reversion. . . . . . . . . . . . . . . . . . . . . . . . . 43 Article 10. Administration . . . . . . . . . . . . . . . . . . . . . . . . 44 10.1 The Committee . . . . . . . . . . . . . . . . . . . . . . . . 44 10.2 Compensation and Expenses . . . . . . . . . . . . . . . . . . 44 10.3 Manner of Action . . . . . . . . . . . . . . . . . . . . . . . 44 10.4 Chairman, Secretary and Employment of Specialists. . . . . . . 45 10.5 Subcommittees. . . . . . . . . . . . . . . . . . . . . . . . . 45 10.6 Other Agents . . . . . . . . . . . . . . . . . . . . . . . . . 45 10.7 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 10.8 Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 10.9 Committee's Powers and Duties . . . . . . . . . . . . . . . . 45 10.10 Committee's Decisions Conclusive . . . . . . . . . . . . . . . 46 10.11 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 47 10.12 Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . 47 10.13 Notice of Address . . . . . . . . . . . . . . . . . . . . . . 48 10.14 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 10.15 Appeals from Denial of Claims . . . . . . . . . . . . . . . . 48 Article 11. Amendment And Termination . . . . . . . . . . . . . . . . . . 49 11.1 Amendment and Termination. . . . . . . . . . . . . . . . . . . 49 11.2 Distribution on Termination. . . . . . . . . . . . . . . . . . 49 11.3 Corporate Reorganization . . . . . . . . . . . . . . . . . . . 49 11.4 Plan Merger or Transfer. . . . . . . . . . . . . . . . . . . . 50 Article 12. Adoption by Affiliate . . . . . . . . . . . . . . . . . . . . 50 12.1 Affiliate Participation. . . . . . . . . . . . . . . . . . . . 50 12.2 Company Action Binding on Participating Affiliates . . . . . . 50 12.3 Termination of Participation of Affiliate. . . . . . . . . . . 50 Article 13. Top-Heavy Provisions . . . . . . . . . . . . . . . . . . . . . 51 13.1 Application. . . . . . . . . . . . . . . . . . . . . . . . . . 51 13.2 Key Employees. . . . . . . . . . . . . . . . . . . . . . . . . 51 13.3 Top-Heavy Group. . . . . . . . . . . . . . . . . . . . . . . . 52 13.4 Additional Rules . . . . . . . . . . . . . . . . . . . . . . . 52 13.5 Code Section 415(h) Adjustment . . . . . . . . . . . . . . . . 53 13.6 Minimum Contribution Requirement . . . . . . . . . . . . . . . 53 Article 14. Miscellaneous Provisions. . . . . . . . . . . . . . . . . . . 53 14.1 Employment Rights. . . . . . . . . . . . . . . . . . . . . . . 53 14.2 No Examination or Accounting . . . . . . . . . . . . . . . . . 53 14.3 Investment Risk. . . . . . . . . . . . . . . . . . . . . . . . 53 14.4 Non-Alienation . . . . . . . . . . . . . . . . . . . . . . . . 53 14.5 Incompetency . . . . . . . . . . . . . . . . . . . . . . . . . 54 14.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 55 14.7 Missing Persons and Other Bars to Payment. . . . . . . . . . . 55 14.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 55 14.9 Service of Legal Process . . . . . . . . . . . . . . . . . . . 55 14.10 Headings of Articles and Sections . . . . . . . . . . . . . . 55 14.11 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . 55 DEL WEBB CORPORATION RETIREMENT SAVINGS PLAN (Amended and Restated Effective as of January 1, 1995) Article 1. Restatement of Plan ------------------------------ 1.1 RESTATEMENT OF THE PLAN. Effective January 1, 1976, DEL E. WEBB CORPORATION established the "Retirement Savings Plan for the Employees of Del E. Webb Corporation", now known as the "Retirement Savings Plan for the Employees of Del Webb Corporation" (the "Plan"), covering its Employees and the Employees of participating affiliates. DEL E. WEBB CORPORATION later changed its name to DEL WEBB CORPORATION and it recently reincorporated in Delaware by merging into a Delaware corporation that bears the same name, assumed its role as the sponsor of the Plan, and is referred to in this document as the "Company." The Plan was most recently amended and restated in its entirety, effective January 1, 1987. The Plan was subsequently amended on six separate occasions. By execution of this document, the Company hereby amends and restates the Plan in its entirety, effective January 1, 1995. 1.2 PURPOSE OF THE PLAN. This Plan is intended to encourage and assist Eligible Employees in adopting a regular program of savings to provide additional security for their retirement. For tax purposes, this Plan is intended to qualify as a profit sharing plan with a qualified cash or deferred arrangement and nondiscriminatory matching contributions. In accordance with Code section 401(a)(27), the determination that the Plan is a profit sharing plan shall be made without regard to whether the Company actually has current or accumulated profits. 1.3 APPLICABILITY OF THE PLAN. Except as otherwise stated herein, the provisions of this restatement are applicable only to Eligible Employees in the employ of the Company and Affiliates on or after January 1, 1995. Article 2. Definitions ---------------------- 2.1 DEFINITIONS. Whenever used in the Plan, the following terms shall have the respective meanings set forth below unless otherwise required by the context in which they are used: (a) "Account, Accounts" shall mean the Account or Accounts maintained for each Participant which represent the Participant's total proportionate interest in the Trust Fund as of any date and which consist of the sum of the following: (1) "Basic Pretax Savings Account" shall mean a Participant's Account to which Basic Pretax Savings Contributions have been credited under the Plan, as adjusted from time to time as provided in Article 8. (2) "Company Contributions Account" shall mean a Participant's Account to which Company Contributions made on behalf of the Participant for periods beginning on and after July 1, 1983 have been credited, as adjusted from time to time as provided in Article 8. (3) "Frozen Account" for purposes of this Plan shall mean the Participant's account to which amounts have been transferred directly from the predecessor profit sharing plan known as the "Restated Profit Sharing Plan and Trust Agreement" that Del Webb Corporation originally established in 1949 and later maintained as a "frozen" plan following the discontinuance of all contributions to such plan in 1976, as such Frozen Account may be adjusted from time to time as provided in Article 8. (4) "Loan Account" shall mean the account representing the outstanding balance of any loan to a Participant as provided in section 6.11. (5) "Prior Account" shall mean a Participant's Account to which all Company Contributions made on behalf of the Participant under the prior version of this Plan for periods prior to July 1, 1983, have been credited, and to which any amounts transferred to this Plan on behalf of the Participant pursuant to a rollover described in section 5.13 have also been credited, as such Prior Account may be adjusted from time to time as provided in Article 8. The Committee may require that separate subaccounts be maintained to differentiate amounts attributable to transfers from the Prior Plan and other amounts credited to the Prior Account, or it may instead use the Rollover Account in lieu of the Prior Account to account for amounts attributable to transfers from the Prior Plan and/or rollover contributions made pursuant to section 5.13. (6) "Rollover Account" shall mean a Participant's Account to which rollover contributions made pursuant to section 5.13 have been credited, as adjusted from time to time as provided in Article 8. (7) "Unmatched Pretax Savings Account" shall mean a Participant's Account to which Unmatched Pretax Savings Contributions have been credited under the Plan, as adjusted from time to time as provided in Article 8. (b) "Active Participant" shall mean a Participant who (i) at any time during the Plan Year is eligible to elect to make a Basic Pretax Savings Contribution pursuant to section 4.1, and (ii) either (a) continues to be an Employee (including one who is temporarily absent due to seasonal adjustments or layoff) on the earlier of (1) the date that a discretionary Company Contribution is made for a particular Plan Year or (2) the last working day of the Plan Year, or (b) dies, incurs a disability, or retires at or after age 65 during the applicable period in subparagraph (a) above while still an Employee. (c) "Affiliate" shall mean a corporation or other employer which is controlled by or under common control with the Company, within the meaning of sections 414 and 1563 of the Code. The determination of control shall be made without reference to paragraphs (a)(4) and (e)(3)(c) of section 1563, and solely for the purpose of applying the limitations of sections 5.8 through 5.10 of this Plan, the phrase "more than 50 percent" shall be substituted for the phrase "at least 80 percent" each place it appears in section 1563(a)(1). In addition, "Affiliate" shall also mean, with respect to any Employer which has adopted this Plan, an organization which is treated as a member of an affiliated service group (as defined in Code section 414(m)) to which such Employer belongs. (d) "Alternate Payee" means a spouse, former spouse, child or other dependent of a Participant who is recognized by a Qualified Domestic Relations Order as having a right to receive all, or a portion of, the benefits payable under the Plan with respect to a Participant. (e) "Annual Addition" means with respect to any Participant, the sum of the following amounts allocable for a Plan Year (which is also the limitation year) to a Participant under this Plan or under any defined contribution plan or defined benefit plan maintained by the Employer or an Affiliate: (i) the Employer contributions allocable for a Plan Year to the accounts of the Participant, including any amounts allocable from a suspense account maintained pursuant to such plan on account of a prior Plan Year; amounts deemed to be Employer contributions pursuant to a cash or deferred arrangement qualified under section 401(k) of the Code (including the Basic Pretax Savings Contributions and Unmatched Pretax Savings contributions allocable to a Participant pursuant to this Plan); and amounts allocable to a medical account which must be treated as annual additions pursuant to section 415(l)(1) or section 419A(d)(2) of the Code; (ii) all nondeductible Employee contributions allocable during a Plan Year to the accounts of Participant; and (iii) forfeitures allocable for a Plan Year to the account of the Participant. Any rollover contributions or transfers from other qualified plans, restorations or forfeitures, or other items similarly enumerated in Treasury Regulation section 1.415-6(b)(3) shall not be considered in calculating a Participant's Annual Additions for any Plan Year. For purposes of calculating the "defined contribution plan fraction" for any Plan Year pursuant to section 415 of the Code, nondeductible Employee contributions allocated to a Participant during any Plan Year commencing on or before December 31, 1986, will be considered to be part of the Annual Addition for that Plan Year only to the extent of the lesser of (i) the amount of nondeductible contributions in excess of 6% of the Participant's Compensation for that year or (ii) one-half of the nondeductible contributions allocable during the year to the Participant's accounts. (f) "Basic Pretax Savings Contributions" shall mean the amount, determined as a percentage of Compensation, a Participant requests the Employer to contribute on the Participant's behalf to the Plan on a pretax basis in accordance with section 4.1, which amount is subject to matching by the Employer as provided in Article 5. (g) "Beneficiary" shall mean the person or persons (who may be named contingently or successively) designated by a Participant to receive the Participant's Account in the event of the Participant's death. Each designation shall be in the form prescribed by the Committee, and will be effective only when filed in writing with the Committee and shall revoke all prior designations by the same Participant. The Committee shall require that a married Participant who designates a Beneficiary other than the Participant's spouse obtain the spouse's consent to the designation. In the case of a Participant with at least one Hour of Service on or after August 23, 1984, such spousal consent shall be in writing, acknowledge the effect of the Participant's election, be properly witnessed by a Plan official or a notary public under procedures approved by the Committee and be provided to the Committee. If no Beneficiary is designated at the time of the Participant's death, or if no person so designated shall survive the Participant, the Beneficiary shall be the Participant's surviving spouse, or if the deceased Participant has no surviving spouse, the Participant's estate, provided that this order of preference shall not supersede the former rules of the Plan with respect to any death occurring prior to the adoption of this Plan restatement. (h) "Board of Directors" or "Board" shall mean the Board of Directors of the Company. The Board of Directors of the Company, pursuant to specific resolutions or a general grant of authority, may delegate any duty, power or responsibility assigned to it under the terms of this Plan or the Trust Agreement to the Human Resources Committee or any other committee. (i) "Code" shall mean the Internal Revenue Code of 1986, as from time to time amended. Where reference is made to an incorrect or outdated Code section, the reference shall be reformed to indicate a proper Code section that is consistent with the context and the intended meaning, and any description in the Plan of the rules of such Code section shall also be reformed accordingly. (j) "Committee" shall mean the Benefits Advisory Committee of the Company unless it is apparent that the term is referring to a different body from the context in which it is used. (k) "Company" shall mean Del Webb Corporation, a Delaware corporation. (l) "Company Contributions" shall mean the contributions the Employer makes on behalf of a Participant on a matched basis or on such other basis as is provided in sections 5.1, 5.2, and 5.4. (m) "Company Securities" or "Sponsor Securities" - shall mean "qualifying employer securities", within the meaning of section 407(d)(5) of ERISA, of the Company or an Affiliate. (n) "Compensation" means a Participant's pay determined as follows: (l) For all purposes of the Plan, except as otherwise specified, Compensation means a Participant's total cash compensation, excluding, however, bonuses, overtime, compensation of any type earned or accrued prior to the date he/she becomes a Participant, any "subsistence allowance" payments provided by the Employer, any reimbursements for moving expenses and any other expense reimbursements. Compensation, as so defined, shall be determined prior to any election to defer Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions as described in sections 4.1 and 4.2 of this Plan. (2) For purposes of applying the limits of section 415 of the Code as described in sections 5.8 and 5.11, and application of the top-heavy provisions of Article 13, Compensation means, generally, an Employee's taxable W-2 earnings, and includes such modifications as may be required to conform to the definition of "participant's compensation" in Code section 415(c)(3) and the regulations thereunder. (3) For purposes of satisfying the limits on contributions described in sections 4.7, 4.8 and 5.3 and for purposes of determining whether an individual is a Highly Compensated Employee, Compensation means a "participant's compensation," as defined in section 415(c)(3) of the Code and the applicable Treasury regulations thereunder and as adjusted in the following manner. Except as prohibited by Treasury regulations, the Company may include as Compensation for purposes of this subparagraph all Basic Pretax Savings Contributions, Unmatched Pretax Savings Contributions, and other Code section 401(k) elective deferrals and all Code section 125 salary reduction amounts, if any, under a plan maintained by the Company or an Affiliate provided that such treatment and the determination of Compensation in general shall be applied on a consistent basis in accordance with Code section 414(s) and the regulations thereunder. In lieu of using the foregoing definition of Compensation for purposes of satisfying the limits on contributions described in sections 4.7, 4.8 and 5.3, any definition of Compensation that satisfies section 414(s) of the Code, and the regulations issued thereunder, may be used. The annual Compensation taken into account under the Plan for any Plan Year beginning on or after January 1, 1989, shall not exceed the maximum dollar amount ($200,000 for the year beginning in 1989 and any other amount that applies for a later year, including the limit of $150,000 that applies for the year beginning in 1994) that is permitted as of the beginning of the year under Code section 401(a)(17) (determined after giving effect to any statutory changes affecting Code section 401(a)(17) and any indexing or other adjustments pursuant to Code section 401(a)(17) that are applicable for the year of the determination). In the case of a short Plan Year or other period of less than 12 months requiring a reduction of the Code section 401(a)(17) annual limit, the otherwise applicable limit shall be prorated by multiplying it by a fraction, the numerator of which is the number of months in the short period and the denominator of which is 12. Moreover, in determining an Employee's Compensation for purposes of the Code section 401(a)(17) limit, the rules of Code section 414(q)(6) (requiring the aggregation of Compensation paid to family members of certain five-percent owners and the ten most highly compensated Employees) shall apply, except that in applying such rules, the term "family" shall include only the spouse of the Employee and any lineal descendants of the Employee who have not attained age 19 before the close of the year. If, as a result of the application of such rules, the adjusted annual Code section 401(a)(17) Compensation limit is exceeded, then (except for determining the portion of Compensation up to the integration level if this Plan provides for permitted disparity), such limit shall be prorated among the affected individuals in proportion to each such individual's Compensation as determined prior to the application of the Code section 401(a)(17) limit. (o) "Eligible Employee" means any Employee employed by an Employer, but excluding (i) any Leased Employee, (ii) any Temporary Employee, (iii) effective July 1, 1995, any On Call Employee, and (iv) any Employee covered by a collective bargaining agreement where retirement benefits were the subject of good faith bargaining between representatives of the Employer and the union, unless such agreement expressly provides for participation in the Plan. (p) "Employee" shall mean any employee of the Company or an Affiliate, including any Leased Employee. (q) "Employer" shall mean the Company and any Affiliate which adopts this Plan in accordance with section 12.1. (r) "Entry Date" shall mean the first day of each month. (s) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as from time to time amended. (t) "Highly Compensated Employee" means an Employee described in Code section 414(q) and generally includes any Employee who, during the current Plan Year or immediately preceding Plan Year: (1) was at any time a 5-percent owner (as defined in subsection 13.2 of the Plan); (2) received Compensation in excess of $75,000 (or such other amount as may be prescribed under the Code); (3) received Compensation in excess of $50,000 (or such other amount as may be prescribed under the Code) and was in the group of Employees consisting of the top 20 percent of all active Employees when ranked on the basis of Compensation paid for the Plan Year; or (4) was at any time an officer and received Compensation in excess of $45,000 (or such other amount as may be prescribed under the Code) for the Plan Year; provided that for this purpose no more than 50 Employees or, if lesser, the greater of 3 Employees or 10 percent of all Employees shall be considered officers and, if no officer has Compensation exceeding $45,000, as adjusted, the officer with the highest Compensation shall be treated as a Highly Compensated Employee under this subparagraph. For the Plan Year for which the determination is being made, a person who during the preceding Plan Year was not an Employee described in subparagraphs (2), (3) or (4) shall not be treated as so described during the current Plan Year, unless he/she is among the group of 100 Employees receiving the highest Compensation. In determining the group of Employees consisting of the top 20 percent of all active Employees under subparagraph (3), the following Employees shall be disregarded: Employees who have not attained age 21; Employees who normally work less than 17-1/2 hours per week or 6 months per year; Employees who are nonresident aliens receiving no U.S.-source income from the Company or an Affiliate; and, except as prohibited by Treasury regulations, Employees who are covered by a collective bargaining agreement shall be disregarded. A former Employee shall be treated as a Highly Compensated Employee if he/she was a Highly Compensated Employee when he/she incurred a termination of employment or at any time after attaining age 55. If an Employee is a family member of a 5-percent owner or a Highly Compensated Employee among the group of 10 Employees receiving the highest Compensation for the Plan Year, then such Employee shall not be considered a separate Employee under this subsection and any Compensation paid to him shall be treated as having been paid to the Highly Compensated Employee. For this purpose, "family member" means the Employee's spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. (u) "Hour of Service" shall mean the hours credited to an Employee under the following rules. Each Employee shall receive credit for "Hours of Service" with the Company or an Affiliate as follows: (1) One hour for each hour for which the Employee is directly or indirectly paid, or entitled to payment, by the Company or an Affiliate for the performance of duties during the applicable computation period for which the Employee's Hours of Service are being determined under the Plan. (These hours shall be credited to the Employee for the computation period or periods in which the duties were performed, and shall include hours for which back pay has been either awarded or agreed to by the Company or an Affiliate as provided by regulations under ERISA, with no duplication of credit for hours.) (2) One hour for each hour, in addition to the hours in paragraph (l) above, for which the Employee is directly or indirectly paid, or entitled to payment, by the Company or an Affiliate for reasons other than for the performance of duties during the applicable computation periods, such as paid vacation, holidays, sickness, disability and similar paid periods of non-working time. (These hours shall be counted in the computation period or periods in which the hours occur for which payment is made.) (3) One hour for each hour of the normally scheduled work hours during any period the Employee is on any leave of absence from work with the Company or an Affiliate for military service with the Armed Forces of the United States, but not to exceed the period required under the law pertaining to veterans' reemployment rights; provided, however, if the Employee fails to report for work at the end of such leave during the period in which the Employee has reemployment rights, the Employee shall not receive credit for hours on such leave. (4) One hour for each of the normally scheduled work hours during any period of authorized leave of absence or layoff status granted by the Company or an Affiliate for which the Employee is not compensated, as determined under the Company's policy which is uniformly applicable to all Employees in similar circumstances. When no time records are available, the Employee shall be given credit for ten Hours of Service for each day the Employee is on the Company's or Affiliate's payroll. There shall be no duplication of credit for hours under (1), (2), (3) or (4), above, and all such hours shall be determined in accordance with reasonable standards and policies from time to time adopted by the Committee under Regulation sections 29 C.F.R. 2530.200b-2(b) and (c) which are incorporated into this Plan by this reference. (v) "Investment Fund" or "Fund" shall mean the investment funds, if any, established pursuant to section 7.2(a). (w) "Investment Manager" shall mean an investment manager within the meaning of section 3(38) of ERISA who has been selected by the Committee and has acknowledged a delegation by the Committee of discretionary investment powers with respect to all or a portion of the Trust Fund. (x) "Leased Employee" means a person who is not a common law employee but who performs services for the Company or an Affiliate pursuant to an agreement with a leasing organization (within the meaning of Code section 414(n)(2)) if such person has performed the services on substantially a full-time basis for a period of at least one year, the services are of a type historically performed by Employees, and the person is required to be treated as an Employee pursuant to Code section 414(n), but only for the period and the purposes to which such requirements apply. (y) "Maternity/Paternity Leave" shall mean an absence from work by an Employee for any period by reason of (i) the pregnancy of the Employee, (ii) the birth of a child of the Employee, (iii) the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (iv) the caring for such child by such Employee, beginning immediately following such birth or placement. (z) "On Call Employee" shall mean an Employee who does not have a regular work schedule and who works on an as needed basis. An Employee who is temporarily absent from work due to a seasonal adjustment or layoff is not an On Call Employee. For the purposes of this Plan only, an "ask me employee" shall also be considered to be an "On Call Employee". An "ask me employee" is a resident of a community who is intermittently available to answer questions of prospective residents. (aa) "Participant" shall mean an Employee who has satisfied the eligibility requirements of ----------- Article 3. In addition, the term "Participant" shall refer to an Employee who previously was an Active Participant who has been transferred to an employment classification that is not eligible for participation in the Plan, a former Active Participant whose employment has terminated but who has not yet received a distribution of all of his/her Accounts, and with respect to the Rollover Account of an Employee who would not otherwise be a Participant, an Employee having a Rollover Account. Individuals other than Active Participants may sometimes be referred to as Inactive Participants or former Participants. (bb) "Plan" shall mean the Retirement Savings Plan for the Employees of Del Webb Corporation. (cc) "Plan Administrator" shall mean the Company for purposes of ERISA, but it delegates its duties as such to the Committee appointed in accordance with Article 10. (dd) "Plan Year" shall mean the calendar year. (ee) "Qualified Domestic Relations Order" means a judgment, decree or order (including approval of a property settlement agreement) pursuant to a state domestic relations law (including a community property law) that provides benefits to an Alternate Payee in accordance with Code section 414(p) and subsection 10.9(o) and section 14.4 of this Plan and the procedures established thereunder. (ff) "Qualified Nonelective Contributions" means any nonforfeitable contributions described in Code section 401(m)(4)(C), which contributions are subject to withdrawal restrictions similar to those applicable to Basic Pretax Savings Contributions and other Code section 401(k) elective deferrals, but are not subject to an election by the Participant to receive cash in lieu of a contribution to a qualified plan on his/her behalf. (gg) "Seasonal Employee" shall mean any Employee whose ordinary and customary period of employment, measured in terms of 12 month periods, by the Company or an Affiliate is less than 12 months during any such consecutive 12 month period and who is expected to or has been offered the opportunity to return to active employment with the Company or an Affiliate at the commencement of his/her next succeeding customary period of employment. Any determination as to whether or not an Employee is a Seasonal Employee pursuant to the definition herein shall be made by the Company or an Affiliate in a uniform and nondiscriminatory manner. Any determination so made shall be final and binding on all parties. (hh) "Temporary Employee" shall mean any Employee who is employed in a position that is not expected to be continued for a period of more than 12 months, determined as of the date on which the Employee is initially hired. Any determination as to whether an Employee is a Temporary Employee shall be made in a uniform and nondiscriminatory manner by the Company or the Affiliate that employs the Employee. Any determination so made shall be final and binding on all parties. (ii) "Trust or Trust Agreement" shall mean the Trust or Trust Agreement of the Retirement Savings Plan for the Employees of Del Webb Corporation. (jj) "Trust Fund" shall mean the assets held by the Trustee pursuant to this Plan and the Trust. (kk) "Trustee" shall mean one or more corporations or individuals selected by the Company and acting as trustee under the Trust Agreement governing the Trust Fund at any time of reference. (ll) "Unmatched Pretax Savings Contributions" shall mean the amount, determined as a percentage of Compensation, a Participant requests the Employer to contribute on his/her behalf to the Plan on a pretax basis in accordance with section 4.2, which amount is not matched by Company Contributions. (mm) "Valuation Date" shall mean the date for valuing the assets of the Trust Fund, which shall be the last business day of the Plan Year and any such other dates as the Committee may designate. (nn) "Year of Eligibility Service" shall mean the computation period of 12 consecutive months in which an Employee completes 1,000 Hours of Service. The first such computation period shall commence with the date on which the Employee first receives credit for an Hour of Service. Each subsequent computation period shall be a Plan Year, beginning with the Plan Year that commences within the first computation period. In the case of an Employee who has not yet fulfilled the eligibility requirements set forth in section 3.1 and who incurs a "break in service", and then is reemployed by the Company or an Affiliate, a "Year of Eligibility Service" shall be determined by reference to the date upon which such Employee's reemployment begins. In the case of an Employee who terminates employment and who is then reemployed by the Company or an Affiliate without incurring a "break in service", a "Year of Eligibility Service" shall be determined by reference to the date on which such Employee's original employment began. If an Employee does not complete 1,000 or more Hours of Service during the first 12 month period during which he/she could complete a Year of Eligibility Service, then "Year of Eligibility Service" shall mean a Plan Year during which such Employee completes 1,000 or more Hours of Service. For purposes of this section 2.1(nn), the term "break in service" shall mean a twelve-month computation period as set forth in this section during which an Employee performs 500 or fewer Hours of Service. Solely for purposes of determining whether a break in service has occurred in a computation period, an individual who is absent from work by reason of a Maternity/Paternity Leave shall receive credit for the Hours of Service which would otherwise have been credited to such Employee but for such absence. The Hours of Service credited herein shall be credited to the computation period in which the absence begins if the crediting is necessary to prevent a break in service in that period, or in all other cases, in the following computation period. 2.2 GENDER AND NUMBER. Except when otherwise indicated by the context, any masculine or feminine terminology herein shall also include the other gender, and the definition of any term herein in the singular or plural shall also include the other form. Article 3. Participation ------------------------ 3.1 PARTICIPATION. Every Employee who was a Participant prior to December 31, 1994 shall remain a Participant in accordance with this Article. Every other Employee who is in or is hired into employment as an Eligible Employee on or after December 31, 1994 shall become a Participant in the Plan on the first Entry Date coinciding with or next following the latest to occur of (a), (b), or (c) below: (a) The date the Employee attains age 21; (b) The date the Employee completes One-Half Year of Eligibility Service or, effective September 1, 1995, six months of service; or (c) The date the Employee becomes an Eligible Employee. For purposes of this section, 'One-Half Year of Eligibility Service' means a computation period of six consecutive months, measured from the date an Employee first performs an Hour of Service or from a date that is six months (or an even multiple of six months) thereafter, in which an Employee completes 500 Hours of Service. Notwithstanding the foregoing, a person who became an Employee on or before July 11, 1990 shall become a Participant no later than the Entry Date on which he/she would do so if (b) above were applied by substituting 'one Year of Eligibility Service' in place of 'One-Half Year of Eligibility Service'." As provided above, effective September 1, 1995, an Eligible Employee must complete six months of service rather than One-Half Year of Eligibility Service as a condition of participation in the Plan. In order to complete six months of service, an Eligible Employee must simply remain in the Employer's employ for six months following the day on which he first performs an Hour of Service for the Employer. The Eligible Employee need not complete any specific number of Hours of Service during the six month period. If an Eligible Employee terminates employment before completing six months of service and later returns to employment with the Employer, he will be treated as a new Employee unless he completes or completed 1,000 or more Hours of Service during the 12 month period beginning on the day on which he first performed an Hour of Service, in which case he shall become a Participant as of the later of his date of reemployment or the first day of the month following the expiration of said 12 month period. 3.2 Reemployment. A Participant who has a termination of employment and who is subsequently reemployed as an Employee shall become a Participant as of the date he/she returns to employment as an Eligible Employee. An Employee who has a termination of employment prior to the time he/she becomes eligible to participate in the Plan shall become a Participant in the Plan upon rehire as an Eligible Employee on the Entry Date coinciding with or next following the date he/she fulfills the age and service requirements set forth in section 3.1. Computation of such Employee's service shall be determined in accordance with the provisions of section 2.1(nn). 3.3 Transferees. If an Employee who is not currently an Eligible Employee transfers to a position as an Eligible Employee, he/she shall become a Participant on the later of (i) the Entry Date coinciding with or next following such transfer or (ii) the Entry Date upon which he/she would have satisfied the requirements of section 3.1. Any Participant who transfers to a status as an Employee who is not an Eligible Employee shall no longer be an Active Participant as of the effective date of the change in his employment classification. The Participant's Accounts will continue to be held pursuant to the terms of this Plan and will be distributed upon his/her subsequent termination of employment or the occurrence of some other event permitting a distribution pursuant to the provisions of this Plan. Article 4. Pretax Savings Contributions --------------------------------------- 4.1 DEFERRAL OF BASIC PRETAX SAVINGS CONTRIBUTIONS. Each Participant may elect on a prospective basis to have the Employer contribute a portion of his/her Compensation to the Plan on his/her behalf each Plan Year, measured in whole percentage points of from two percent up to the applicable maximum percentage described below, as a Basic Pretax Savings Contribution, in accordance with the rules set forth in section 4.3 and such other rules as the Committee may prescribe. The applicable maximum percentage shall be six percent or such other percent as may be established by the Board of Directors for the particular Plan Year, which percentages may vary for different groups of Participants. 4.2 DEFERRAL OF UNMATCHED PRETAX SAVINGS CONTRIBUTIONS. In addition to a Participant's Basic Pretax Savings Contributions as provided under section 4.1, in any Plan Year, a Participant who has elected the maximum percentage available to him under section 4.1 may also elect on a prospective basis to have the Employer contribute a portion of his/her Compensation to the Plan on his/her behalf, measured in whole percentage points of from one percent up to the applicable maximum percentage described below, as an Unmatched Pretax Savings Contribution, in accordance with the rules set forth in section 4.3 and such other rules as the Committee may prescribe. The applicable maximum percentage for any given Participant shall be the difference between 15 percent and the maximum percentage that the Participant is allowed to elect as a Basic Pretax Savings Contribution under section 4.1. Thus, for example, the applicable maximum percentage is nine percent if the Participant is allowed to elect a maximum Basic Pretax Savings Contribution of six percent, and it is ten percent if the Participant is allowed to elect a maximum Basic Pretax Savings Contribution of five percent. 4.3 DEFERRAL ELECTION PROCEDURES. Each Participant (or Employee expected to become a Participant within the next 90 days) shall make the election or elections described in sections 4.1 and 4.2 by completing an election form obtained from the Committee. The Employee shall return the election form to the Committee at least 30 days (or such shorter period as may be specified by the Committee) preceding the Entry Date on which he/she expects to become a Participant. 4.4 DEFERRAL ELECTION CHANGES. Elections made in accordance with section 4.3 shall remain in effect until a new election to increase or decrease the deferral percentage becomes effective. Such new election must be filed at least 30 days (or such shorter period as may be specified by the Committee) prior to the beginning of any payroll period in which the Participant desires the change to become effective. Any new election so filed shall become effective on the first day of such payroll period and shall remain in effect until changed under the rules of this section 4.4. 4.5 DISCONTINUANCE OF BASIC AND UNMATCHED PRETAX SAVINGS CONTRIBUTIONS. A Participant may discontinue his/her Basic and Unmatched Pretax Savings Contributions to the Plan at any time by filing a written notice with the Committee at least 15 days (or such other period as may be specified by the Committee) prior to the beginning of the payroll period in which he/she desires the discontinuance to become effective. Such Participant shall thereafter be eligible to resume Pretax Savings Contributions to the Plan, provided that at least six months have elapsed since the effective date of his/her prior election to discontinue Pretax Savings Contributions, upon filing a new election form with the Committee at least 30 days (or such shorter period as may be specified by the Committee) prior to the beginning of the payroll period in which he/she desires his/her election to become effective. 4.6 SALARY REDUCTION. Each Participant who makes an election described in section 4.3 to have the Employer contribute a percentage of his/her Compensation to this Plan shall, by the act of making such election, agree to have his/her pay reduced by an equivalent percentage for so long as the election remains in effect. 4.7 LIMITATION ON BASIC PRETAX SAVINGS CONTRIBUTIONS AND UNMATCHED PRETAX SAVINGS CONTRIBUTIONS. This Plan is not intended to permit Basic Pretax Savings Contributions plus Unmatched Pretax Savings Contributions for any calendar year, with respect to any Participant, in excess of $7,000 (or such other amount as may at the time be prescribed under Code section 402(g)(5)). The Committee shall prescribe procedures designed to prevent this limit from being exceeded and to cause such contributions that have been elected by a Participant to be stopped at any time during the year when this limit has been reached under the Plan. The Committee shall also adopt reasonable procedures to assist a Participant in fulfilling his/her responsibility of ensuring that the Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions made on his/her behalf for the Participant's taxable year do not exceed $7,000 (or such other amount as may at the time be prescribed under Code section 402(g)(5)), less any other elective deferrals (within the meaning of Code section 402(g)(3)) made on behalf of the Participant. The Participant will be treated as having a calendar taxable year and as having no elective deferrals other than Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions unless the Participant notifies the Committee differently, in writing, before the beginning of his/her taxable year. If the Participant notifies the Committee in writing no later than March l following his/her taxable year of the amount of any excess Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions under this section for such taxable year, the Plan may, but need not, distribute such excess (and any income and investment gain or loss allocable to such excess) to him no later than April 15 following such taxable year and, if so distributed, such excess shall not be included as an Annual Addition for the Participant for the immediately preceding Plan Year. The Participant's income for the year of the excess Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions (or, the year of distribution or other year or years that may be specified pursuant to Treasury rules and regulations) shall be increased by the amount distributed under this section. The distribution described in this section may be made notwithstanding any other Plan provision. The Committee shall adopt reasonable procedures for coordinating distributions of excess Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions under this section and section 4.8, in accordance with any applicable Treasury rules and regulations. 4.8 RESTRICTIONS ON ELECTIONS. In conjunction with Participant elections of Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions or at such other or additional times throughout the Plan Year as the Committee may determine, the Committee shall require testing of the elections of Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions by Participants (and any other Employer contributions that the Company elects to include in the testing under the conditions specified below) to assure that the average deferral percentage for the Plan Year of Participants who are Highly Compensated Employees will not exceed the greater of: (a) 1.25 times the average deferral percentage for the Plan Year of all other Participants who are non-Highly Compensated Employees, or (b) the lesser of (i) 2 percentage points more than, or (ii) 2 times the average deferral percentage for the Plan Year of all other Participants who are non-Highly Compensated Employees. For purposes of this section, the term "average deferral percentage" for each group of Participants for any period shall be the average of the percentages, calculated separately for each Participant in such group, of the aggregate amount of Compensation that each Participant elects to have contributed to the Plan for the period as Basic Pretax Savings Contributions or Unmatched Pretax Savings Contributions. As provided in Section 5.4, if the Company so elects, Qualified Nonelective Contributions shall be added to Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions in computing each Participant's deferral percentage. In addition, the Company may elect, in accordance with such regulations as may be prescribed by the Secretary of the Treasury, to aggregate Code section 401(m) matching contributions (including matching and discretionary Company Contributions under this Plan) that meet the withdrawal and vesting requirements of Code sections 401(k)(2)(B) and (C) with the Basic Pretax Savings Contributions, Unmatched Pretax Savings Contributions and Qualified Nonelective Contributions for purposes of computing each Participant's deferral percentage. Except as provided in Treasury Regulations, excess Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions under section 4.7 shall be treated as an amount elected under section 4.3 and contributed to the Plan, whether or not such excess contribution is distributed. Advance testing done under this section may be based on a Participant's annual rate of Compensation in effect at the time of the test, and corrections to be made to reduce the amount in excess of the maximum permissible deferral percentage may be made from Compensation to be earned for the remainder of the Plan Year. Final Plan Year compliance with the restrictions of this section shall be based on the Participant's actual Compensation and Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions for the Plan Year. If, at the end of the Plan Year, the percentage of Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions elected by Highly Compensated Employees (and any other Company Contributions that are included in the testing at the Company's election) would (if not distributed) cause the average deferral percentage of such Participants to exceed the maximum deferral percentage permitted for the Plan Year under this section, then, before the end of the following Plan Year, the excess amount of such contributions (and income and investment gain or loss attributable thereto) for the Highly Compensated Employees shall be distributed to such Participants in the order of their average deferral percentages, beginning with the Highly Compensated Employees with the highest average deferral percentage until the limitations of this section are met. The income and investment gain or loss attributable to excess contributions is that portion of the income and investment gain or loss on the Participant's Account for the Plan Year that bears the same ratio as the excess Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions bear to the total Account balance, determined as of the last day of the Plan Year. To the extent required by Code section 401(k) and related regulations, any amount distributed under this paragraph to a Highly Compensated Employee shall be included in that Employee's taxable wages for the Plan Year for which the contribution was made. The distribution described in this section may be made notwithstanding any other Plan provision. The Committee shall adopt reasonable procedures for coordinating distributions of excess contributions under this section and section 4.7. Moreover, notwithstanding the foregoing rules, the Committee shall take steps to ensure that this section 4.8 is interpreted and administered so as to comply with applicable legal requirements for the determination of what amounts constitute excess Code section 401(k) elective deferrals and for the return of such excess amounts and any income and investment gain or loss attributable thereto. If two or more plans which include Code section 401(k) cash or deferred arrangements are considered as one plan for purposes of Code section 401(a)(4) or 410(b), the cash or deferred arrangements included in such plans shall be treated as one arrangement for purposes of this section 4.8. If any Highly Compensated Employee is a participant under two or more cash or deferred arrangements of an Employer or Affiliate, all such cash or deferred arrangements shall be treated as one such arrangement for purposes of determining the actual deferral percentage with respect to such Employee. No benefits other than Code section 401(m) matching contributions shall be conditioned on a Participant's election of Basic Pretax Savings Contributions or Unmatched Pretax Savings Contributions under this Plan. 4.9 TRANSFER OF PRETAX SAVINGS CONTRIBUTIONS. Any amount to be contributed to the Plan because of a Participant's election and resulting salary reduction under sections 4.3 or 4.6, respectively, shall be transferred to the Trust Fund at such times as the Company may determine; provided, however, that the amounts so contributed for any payroll period shall be transferred to the Trust Fund not later than 30 days after the end of the month in which occurs the last day of such payroll period. 4.10 CREDITING OF PRETAX SAVINGS CONTRIBUTIONS. Any amount contributed to the Trust under section 4.1 or 4.2 on behalf of a Participant shall be credited, as of the appropriate Valuation Date, to the Basic Pretax Savings Account or the Unmatched Pretax Savings Account, as applicable, of each Participant on whose behalf the contribution was made. 4.11 ADJUSTMENT OF COMPANY CONTRIBUTIONS ACCOUNT. In the event that a distribution of excess Basic Pretax Savings Contributions is made pursuant to section 4.7 or section 4.8 of the Plan, the Company Contributions Account will be adjusted by the amount of any matching Company Contributions previously made and allocated to the Company Contributions Account that are attributable to such excess Basic Pretax Savings Contributions (the "excess matching contributions") plus the income allocable to any such excess matching contributions. The income allocable to the excess matching contributions shall be determined by the Committee in accordance with any method permitted under Treasury Regulation sections 1.401(m)-1(e)(3) or 1.401(k)-1(f)(4) as applicable. Any such excess matching contributions (and earnings allocable thereto) will be forfeited and reallocated among the unaffected Participant's Accounts, pursuant to such rules as shall be adopted by the Committee, provided that such treatment is applied uniformly to all Participants under the Plan for the Plan Year involved. Alternatively if the Company chooses, the adjustment of the Company Contributions Account will be made by an additional matching Company Contribution, allocated to the Company Contributions Accounts of Participants who are not Highly Compensated Employees. Article 5. Company Contributions -------------------------------- 5.1 MATCHING COMPANY CONTRIBUTIONS. For each Plan Year, so long as this Plan is in existence, and subject to the limitations set forth in section 5.8 below, the Employer shall make a matching Company Contribution on behalf of every Participant for whom a Basic Pretax Savings Contribution was made to the Plan under section 4.1. Any contribution made in accordance with this section 5.1 may be made in the form of cash or Company Securities in the discretion of the Board of Directors. The matching amount to be contributed on behalf of each Participant hereunder shall be equal to a specified percentage of the Basic Pretax Savings Contributions made on behalf of a Participant under section 4.1, as determined by the Company's Board of Directors with respect to particular groups of Participants, and subject to compliance with any regulations under Code section 401(a)(26) that prohibit separate benefit schedules covering less than 50 Participants under certain circumstances. The matching percentage shall be specified in advance and shall remain in effect until changed by the Board or its delegate on a prospective basis. The amount of matching Company Contribution allocable to the Company Contributions Account of any Participant in any Plan Year shall not exceed the limitations of section 5.3 or the limitations of sections 5.8 through 5.10, as determined after taking into account the amount of Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions deferred by such Participant for the Plan Year. 5.2 DISCRETIONARY COMPANY CONTRIBUTIONS. The Board of Directors in its discretion may authorize and require the Employer to make a Company Contribution to the Trust Fund for a Plan Year in addition to the matching Company Contribution made under section 5.1. Any discretionary Company Contribution made in accordance with this section 5.2 may be made in the form of cash or Company Securities in the discretion of the Board of Directors. The contribution made under this section shall be allocated in one or a combination of the following methods, as the Board of Directors in its discretion may determine: (a) discretionary Company Contributions may be allocated to the Company Contributions Accounts of only those Active Participants for whom a Basic Pretax Savings Contribution was made for the Plan Year in the proportion that the Basic Pretax Savings Contribution of each such Active Participant for the Plan Year up to the effective date of the discretionary Company Contribution bears to the total of such contributions for all such Active Participants for the Plan Year up to the effective date of the discretionary Company Contribution, and/or (b) discretionary Company Contributions may be allocated to the Company Contribution Accounts of all Active Participants (regardless of whether or not they have deferred an amount under section 4.1) in the proportion that the Compensation of each Active Participant for the Plan Year up to the effective date of the discretionary Company Contribution bears to the total Compensation of all Active Participants for the Plan Year up to the effective date of the discretionary Company Contribution, and/or (c) discretionary Company Contributions may be allocated to the Company Contributions Accounts of only those Active Participants who are not covered by any other Company incentive compensation plan ("qualified participants"), regardless of whether or not such qualified participants have deferred an amount under Section 4.1, in the proportion that the Compensation of each qualified participant for the Plan Year up to the effective date of the discretionary Company Contribution bears to the total covered Compensation of all qualified participants up to the effective date of the discretionary Company Contribution for the Plan Year, and/or (d) discretionary Company contributions may be allocated to the Company Contributions Accounts of only those Active Participants who do not meet the eligibility requirements for participation in the Del Webb Corporation Deferred Compensation Plan ("qualified participants"), regardless of whether or not such qualified participants have deferred an amount under Section 4.1, in the proportion that the Compensation of each qualified participant for the Plan Year up to the effective date of the discretionary Company Contribution bears to the total covered Compensation of all qualified participants for the Plan Year up to the effective date of the Company Contribution. The amount of discretionary Company Contribution allocable to the Company Contributions Account of any Active Participant in any Plan Year shall not exceed the limitations of section 5.8 through 5.10, as determined after taking into account the amount of Basic Pretax Savings Contributions, Unmatched Pretax Savings Contributions, and matching Company Contributions allocable to such Active Participant's Company Contributions Account for the Plan Year. 5.3 RESTRICTIONS ON MATCHING COMPANY CONTRIBUTIONS AND DISCRETIONARY COMPANY CONTRIBUTIONS. At such times throughout the Plan Year as the Committee may determine, the Committee shall require testing to assure that the contribution percentage for the Plan Year of Participants who are Highly Compensated Employees will not exceed the greater of: (a) 1.25 times the contribution percentage for the Plan Year of all other Participants who are non-Highly Compensated Employees, or (b) the lesser of (i) 2 percentage points more than, or (ii) 2 times the contribution percentage for the Plan Year of all other Participants who are non-Highly Compensated Employees. For purposes of this section, the term "contribution percentage" for each group of Participants shall be the average of the ratios, calculated separately for each Participant in such group, of the aggregate amount of matching and discretionary Company Contributions that are allocated pursuant to section 5.2(a), made by or on behalf of the Participant for the Plan Year to that Participant's Compensation for the Plan Year. As provided in section 5.4, if the Company so elects, Qualified Nonelective Contributions shall be added to the matching Company Contributions and the discretionary Company Contributions allocated pursuant to section 5.2(a) for the Plan Year for purposes of calculating the contribution percentages. In addition, the Company may elect, in accordance with such regulations as may be prescribed by the Secretary of Treasury, to consider Code section 401(k) elective deferrals (including Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions to this Plan) for purposes of calculating contribution percentages. Advance testing under this section may be based on a Participant's level of Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions and his/her annual rate of Compensation in effect at the time of the test, and corrections to be made to reduce the amount in excess of the maximum permissible contribution percentage may be from Company Contributions to be made for the remainder of the Plan Year. Final Plan Year compliance with the restrictions of this section shall be based on the Participant's actual contributions and Compensation for the Plan Year. If, at the end of the Plan Year, the contribution percentage of Highly Compensated Employees exceeds the maximum contribution percentage permitted for the Plan Year under this section, then simultaneously, before the end of the following Plan Year: (1) the excess nonforfeitable Company Contributions (and the income and investment gain or loss attributable thereto) for Highly Compensated Employees shall be distributed to such Participants, and (2) the excess Company Contributions that are forfeitable pursuant to section 4.11 (and income and investment gain or loss attributable thereto) for Highly Compensated Employees shall be forfeited, in the order of the contribution percentages of such Participants beginning with the Highly Compensated Employee with the highest contribution percentage until the limitations of this section are met. The income and investment gain or loss attributable to excess contributions is that portion of income and investment gain or loss on the Participant's Company Contributions Account for the Plan Year that bears the same ratio as the excess contributions bears to the total Company Contributions Account balance, determined as of the last day of the Plan Year. To the extent required by Code section 401(m) and related regulations, any amount distributed under this paragraph to a Highly Compensated Employee shall be included in that Employee's taxable wages for the Plan Year for which the contribution was made. The distribution described in this section may be made notwithstanding any other Plan provision. In the event that this Plan satisfies the requirements of section 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of section 410(b) of the Code only if aggregated with this Plan, then this section 5.3 shall be applied by determining the contribution percentages of eligible Participants as if all such plans were a single plan. If a Highly Compensated Employee participates in two or more plans of an Employer or Affiliate to which such contributions are made, all such contributions shall be aggregated for purposes of this section. Any Employee required to be taken into consideration under Code section 401(m)(5) shall be treated as an eligible Employee in accordance with such Code section for purposes of the application of this section 5.3. Moreover, the determination of excess contributions under this section 5.3 shall be made after first determining the excess deferrals (within the meaning of Code section 402(g)) pursuant to section 4.7 of this Plan and then determining the excess Code section 401(k) deferrals pursuant to section 4.8 of this Plan. All determinations under this section 5.3 shall comply with Code section 401(m) and the regulations thereunder, including any such regulations as may be necessary to prevent the multiple use of the alternative percentage limitations in Code sections 401(k)(3)(A)(ii)(II) and 401(m)(2)(A)(ii) with respect to any Highly Compensated Employee and also including regulations permitting appropriate aggregation of plans and contributions. The foregoing requirement to correct multiple use of the alternative percentage limitations (by first reducing excess Code section 401(k) deferrals pursuant to Plan section 4.8) applies to all Highly Compensated Employees who are eligible for both Code section 401(k) deferrals under Article 4 and matching Company Contributions under Article 5. This requirement accordingly extends to all such Employees who are active Participants in the Plan at any time during the Plan Year. In addition, if a matching Company Contribution for a Participant who is a Highly Compensated Employee is made on account of a Basic Pretax Savings Contribution that must be returned to such Participant as an amount in excess of a limit specified in Article 4 (whether or not multiple use has occurred), such matching Company Contribution shall be forfeited pursuant to Code section 411(a)(3)(G) and the forfeiture shall be used to reduce concurrent or subsequent matching Company Contributions. If such matching Company Contribution is also in excess of the amount permitted by the contribution percentage test in this section 5.3, the first corrective step shall be the correction of the excess Basic Pretax Savings Contribution pursuant to Article 4 and the forfeiture of any related matching Company Contribution. The second corrective step shall then be the distribution of any remaining excess matching Contribution that exceeds the contribution percentage limit of this section 5.3 and has not been forfeited in the first step. 5.4 CORRECTIVE CONTRIBUTIONS. In accordance with such regulations as may be prescribed by the Secretary of the Treasury, the Company may elect to treat any or all of the discretionary Company Contributions made pursuant to section 5.2 as Qualified Nonelective Contributions for purposes of complying with the average deferral percentage requirements of section 4.8, the contribution percentage requirements of section 5.3, or both. In accordance with such regulations as may be prescribed by the Secretary of the Treasury, the Company also may elect to make additional Qualified Nonelective Contributions on behalf of Active Participants who are not Highly Compensated Employees in an amount sufficient to satisfy either the average deferral percentage requirements of section 4.8, the contribution percentage requirements of section 5.3, or both. Such additional Qualified Nonelective Contributions shall be allocated to the Company Contribution Accounts of those Active Participants who are not Highly Compensated Employees in the proportion that the Compensation of each such Active Participant bears to the total Compensation of all such Active Participants for the relevant Plan Year. If an Eligible Employee is inadvertently excluded from participation in the Plan, the Company shall make special Qualified Nonelective Contributions and special discretionary Company Contributions to the Plan on behalf of the Eligible Employee. The special Qualified Nonelective Contributions shall be in an amount equal to the sum of (i) the average deferral percentage for the group of non-Highly Compensated Employee Participants or the group of Highly Compensated Employee Participants (depending on whether the Eligible Employee was a Highly Compensate Employee) for the Plan Year or Plan Years that includes the period or periods during which the Eligible Employee was inadvertently excluded from participation multiplied by the Eligible Employee's Compensation for the same period or periods; and (ii) the matching Company Contributions that would have been made pursuant to section 5.1 if the Eligible Employee contributed the amount referred to in clause (i) on a pretax basis during the relevant period or periods. The special discretionary Company Contribution called for by this paragraph shall be in an amount equal to the discretionary Company Contribution or Contributions that would have been allocated to the Eligible Employee had he not been excluded. The Company also shall make a special discretionary Company Contribution on behalf of the Eligible Employee in an amount equal to the annual rate of return on Plan investments for the relevant Plan Year or Plan Years multiplied by the amounts of Qualified Nonelective Contributions or discretionary Company Contributions made pursuant to this paragraph, adjusted to reflect partial years. The Qualified Nonelective Contributions made pursuant to the preceding paragraph shall be allocated to the Account or Accounts to which the contributions they are replacing would have been allocated. For example, the portion of such Qualified Nonelective Contribution that would have been characterized as a Basic Pretax Savings Contribution if it had been made by the Eligible Employee during the relevant Plan Year will be allocated to the Basic Pretax Savings Account. The special discretionary Company Contribution shall be allocated to the Company Contribution Account to the extent that the special discretionary Company Contribution is replacing a discretionary Company Contribution that should have previously been made. The special discretionary Company Contribution that is replacing Plan investment earnings shall be allocated to the Accounts to which the contributions to which the Plan investment earnings relate would be allocated. All contributions made pursuant to this section are subject to the limitations of section 5.12. To the extent that the limitations of said section preclude the making of the full special Qualified Nonelective Contributions or the full special discretionary Company Contributions called for by the third paragraph of this section, the balance of the special contributions will be made in later years subject to the limitations of section 5.12. The special discretionary Company Contribution that is intended to replace Plan investment earnings shall be adjusted to reflect Plan investment earnings on the balance of said contribution for the period of time during which contributions are limited. In accordance with Treasury Regulations section 1.415-6(b)(2), for purposes of applying the limitations of sections 5.8 through 5.11 of the Plan and section 415 of the Code, Qualified Nonelective Contributions and discretionary Company Contributions made in accordance with this section 5.4 will not be considered Annual Additions with respect to the Participant for the limitation year in which said contributions are made, but, rather, will be considered Annual Additions in the limitation year to which such contributions relate. Furthermore, to the extent a discretionary Company Contribution made pursuant to this section is intended to replace investment earnings, it will not be treated as an Annual Addition for any limitation year. 5.5 TRANSFER OF COMPANY CONTRIBUTIONS. Matching Company Contributions described in section 5.1 shall normally be transferred to the Trust Fund at the same time Participant Basic Pretax Savings Contributions are transferred to the Trust Fund and in any event shall be transferred to the Trust Fund prior to the due date of the Company's federal income tax return (including extensions thereof) for the taxable year coinciding with such Plan Year. Discretionary Company Contributions described in section 5.2 shall be transferred to the Trust Fund at such time as the Committee may determine but in no event shall they be transferred to the Trust Fund later than the due date of the Company's federal income tax return (including extensions thereof) for the taxable year coinciding with such Plan Year. 5.6 ALLOCATION OF COMPANY CONTRIBUTIONS TO COMPANY CONTRIBUTIONS ACCOUNTS. Matching Company Contributions and discretionary Company Contributions described in sections 5.1 and 5.2 shall be allocated to the Company Contributions Accounts of Participants, as of the appropriate Valuation Date to which it relates, provided that in no event shall such contributions be treated as having been made or allocated as of a date later than the last day of the Plan Year to which they relate. 5.7 FORFEITURES. The nonvested portion of a Participant's Company Contributions Account shall be forfeited in accordance with section 6.3. The Committee shall use forfeitures occurring in any Plan Year to reduce subsequent Company Contributions for such Plan Year and future Plan Years. If the amount of forfeitures occurring in a Plan Year exceeds the amount of Company Contributions for such year, then the excess shall be held in a separate account and allocated to the extent that it reduces Company Contributions in succeeding Plan Years. No Company Contributions shall be made while such a separate account exists, and if the Plan terminates while such account is in existence, the balance shall be allocated under section 5.2(b) not to exceed the limitations of sections 5.8 through 5.10. 5.8 LIMITATION ON ANNUAL ADDITIONS. Notwithstanding anything to the contrary contained in this Plan, the total Annual Additions to be allocated to the Accounts of a Participant for any Plan Year shall not exceed an amount equal to the lesser of: (a) $30,000 (or such greater amount as may be permitted under Code section 415(c)(1)(A)) or (b) 25 percent of the Participant's Compensation for the limitation year. 5.9 OTHER DEFINED CONTRIBUTION PLANS. If the Company is contributing to any other defined contribution plan, as defined in section 414(i) of the Code, for its Employees, some or all of whom are Participants of this Plan, then any such Participant's Annual Addition shall be aggregated with amounts credited to the Participant under the other plan for purposes of applying the limitations and reducing allocations under such other plan. 5.10 DEFINED BENEFIT PLANS. If a Participant in this Plan is also a Participant in a defined benefit plan, as defined in section 414(j) of the Code, to which contributions are made by the Employer, then in addition to the limitations contained in section 5.8 of this Plan, the projected benefit of the Participant under the defined benefit plan shall be limited to the extent necessary to comply with the limitation set forth in section 415(e) of the Code. 5.11 ADJUSTING ANNUAL ADDITIONS. If at any time during the Plan Year the Plan Administrator anticipates that the contributions to a Participant's Account will exceed the limitations of section 5.8, the Plan Administrator may limit the Participant's ability to make Unmatched Pretax Savings Contributions for the remainder of the Plan Year. If after application of the preceding sentence the Plan Administrator anticipates that the limitations of section 5.8 will still be exceeded, the Plan Administrator may limit the Participant's ability to make Basic Pretax Savings Contributions for the remainder of the Plan Year. If the limitation of section 5.8 cannot be met by limiting future Unmatched or Basic Pretax Savings Contributions in this manner, or, if the limitations of section 5.8 have been exceeded by contributions already made, the Plan Administrator also shall take the following steps to limit Annual Additions: (a) First, the Plan Administrator shall distribute to the Participant all or a portion of the Unmatched Pretax Savings Contributions made by the Participant to the extent necessary to reduce the Participant's Annual Additions to the maximum amount permitted by section 5.8. Earnings attributable to any such "excess Unmatched Pretax Savings Contributions" also shall be distributed to the Participant. The earnings allocable to any excess Unmatched Pretax Savings Contributions shall be determined by the Plan Administrator in accordance with any method permitted under Treasury Regulation section 1.401(k)-1(f)(4). (b) Second, if after the application of paragraph (a) the Annual Additions continue to exceed the limitations of section 5.8, the Plan Administrator shall distribute to the Participant all or a portion of the Basic Pretax Savings Contributions made by the Participant to the extent necessary to reduce the Participant's Annual Additions to the maximum amount permitted by section 5.8. Earnings attributable to such "excess Basic Pretax Savings Contributions" also shall be distributed to the Participant. The earnings attributable to any excess Basic Pretax Savings Contributions shall be determined by the Plan Administrator in accordance with any method permitted under Treasury Regulation section 1.401(k)-1(f)(4). No matching Company Contribution will be made with respect to Basic Pretax Savings Contributions distributed to a Participant pursuant to this paragraph. If matching Company Contributions have been made and allocated to the Participant's Account before the excess Basic Pretax Savings Contributions have been identified, the Plan Administrator shall reallocate the matching Company Contributions attributable to such excess Basic Pretax Savings Contributions to a suspense account. The amounts allocated to the suspense account shall be held to be allocated on a first-in-first-out basis in reduction of matching Company Contributions due in future Plan Years prior to the allocation of additional matching Company Contributions. In deciding the amount of Basic Pretax Savings Contributions that must be distributed in accordance with this paragraph, the Plan Administrator shall take into consideration that no matching Company Contributions will be made (or if previously made, will be reallocated), with respect to excess Basic Pretax Savings Contributions that will be distributed. (c) Third, if further limitation is required after the application of paragraphs (a) and (b), the Plan Administrator shall allocate to a suspense account all or a portion of the discretionary Company Contributions made on behalf of the Participant to the extent necessary to reduce the Participant's Annual Additions to the maximum amount permitted by section 5.8. Discretionary Company Contributions allocated to the suspense account shall be held to be allocated on a first-in-first-out basis in reduction of discretionary Company Contributions prior to the allocation of additional discretionary Company Contributions in future Plan Years. (d) Further reductions or adjustments to the methods described above for adjusting the Accounts of Participants may be made pursuant to the directions of the Plan Administrator and may be made pursuant to priorities established under related defined contribution plans. 5.12 DEDUCTIBILITY LIMITATION. The dollar amount of Company Contributions, as provided under sections 5.1, 5.2 and 5.4, shall be limited to the amount deductible under section 404 of the Code for the taxable year for which such contributions are paid. 5.13 ROLLOVER CONTRIBUTIONS AND PRIOR ACCOUNT TRANSFERS. As provided in section 2.1(a)(5), this Plan may include amounts transferred directly to the Prior Account of a Participant. In addition, subject to the Committee's approval, amounts which an Eligible Employee has received from any other employee benefit plan may, in accordance with uniform and nondiscriminatory procedures adopted by the Committee, be transferred by such Employee to this Plan, and if transferred, shall constitute such Employee's "Rollover Account" hereunder: provided the following conditions are satisfied: (a) The amounts tendered must have been received by the Employee from: (l) A plan qualified under section 401(a) of the Code; or (2) An individual retirement account or annuity ("IRA"), containing amounts described in section 408(d)(3)(A)(ii) of the Code, to which no deductible IRA contributions were made, or rolled over from a qualified plan. (b) The amounts tendered must not include amounts attributable to: (1) After-tax contributions to a qualified plan by the Employee; (2) Deductible IRA contributions; or (3) A partial distribution from a qualified plan which is eligible for rollover to an IRA but not to another qualified plan. (c) In no event will a transfer to an Employee's Rollover Account be permissible if it would cause this Plan to become a transferee plan that is subject to the qualified plan survivor annuity requirements of the Code with respect to the Employee. (d) The transfer to this Plan of amounts described in paragraph (a) will only be accepted if the Employee presents to the Committee such information as the Committee may require to administer the rules of this section 5.13 and to maintain the qualified status of the Plan. Such information may include the Federal Form 1099, or equivalent, and the original distribution check, or a copy thereof. (e) Amounts must be received by the Committee not later than 60 days after the distribution was received by the Employee. The Committee shall establish such procedures, and may require such additional information from the Employee, as it deems necessary or appropriate to determine that a proposed transfer hereunder will satisfy the above requirements. Upon approval by the Committee, rollover amounts shall be transmitted to the Trustee, to be invested in such Investment Funds as the Employee may select in accordance with such rules as are provided in Article 7. No matching or discretionary Company Contributions shall be made with respect to rollovers or amounts transferred to a Participant's Prior Account hereunder. The Committee shall not be required to permit any rollover amount to be transferred to or held under this Plan if the Committee determines, in its sole discretion, that acceptance of any such rollover amount may adversely affect the continued qualification of this Plan or may subject the Plan to burdensome additional requirements for continued qualification, including without limitation any requirement to provide a spousal survivor annuity or other forms of distribution that are not otherwise available under the Plan. An Employee who transfers a rollover amount into this Plan shall be eligible to commence Pretax Savings to this Plan only when he/she satisfies the applicable eligibility requirements in section 3.1. Notwithstanding the foregoing, on and after January 1, 1993, a rollover contribution under this section shall, to the extent required by Code section 402 (c), include and be limited to a contribution relating to an eligible rollover distribution described in Code section 402 (c) (4), including a direct rollover or a sixty-day rollover of such eligible rollover distribution. The Committee may establish other uniform rules and procedures, consistent with the requirements of the Code and this section 5.13, concerning the acceptance of rollover contributions, including rules that limit or prohibit wire transfers and other payments that are made directly to this Plan from another plan in lieu of having the Participant receive a check payable to this Plan's Trustee for delivery to a Plan representative who is authorized to receive rollover contributions. Article 6. Vesting and Benefits ------------------------------- 6.1 VESTING. The interest of a Participant in his/her Basic Pretax Savings Account, Unmatched Pretax Savings Account, Prior Account, and Rollover Account (if any) shall be fully vested at all times, and his/her rights and interests therein shall not be forfeitable for any reason. The interest of a Participant in his/her Company Contributions Account shall be fully vested in him/her at all times if the Participant has ever received credit for an Hour of Service on or after April 1, 1988. If a Participant terminated employment before April 1, 1988, his/her vested interest in his/her Company Contributions Account shall be determined in accordance with the Plan provisions in effect when his/her employment terminated. 6.2 BENEFITS UPON TERMINATION OF EMPLOYMENT. Every Participant who has a termination of employment for any reason other than death or disability shall have the value of his/her Basic Pretax Savings Account, Unmatched Pretax Savings Account, Prior Account, Frozen Account, and Rollover Account, and the vested portion of his/her Company Contributions Account, distributed pursuant to section 8.1, in either: (a) one lump sum within the time set forth in section 6.7; or (b) substantially equal monthly, quarterly, or annual installments (as selected by the Participant). The first such installment shall be payable within 60 days after the end of the month in which occurs the last day such Participant is paid by the Company, unless such Participant elects to defer receipt of his/her benefits as provided in section 6.7. Such Participant, may specify the number of installments to be paid each year and the number of years, not to exceed 10, over which the installments will be paid; provided, however, that the balance remaining in a Participant's Accounts at the end of the designated installment payout period shall be distributed on the last payment; and provided, further, that the Account balance of such Participant shall be fully distributed within the lifetime of such Participant or the lifetimes of the Participant or his/her Beneficiary, or within a period not extending beyond the life expectancy of the Participant or the life expectancy of the Participant and his/her Beneficiary. The Account balance of a Participant who has elected to receive an installment distribution shall be invested per the Participant's instructions. Should such a Participant die before all of his/her installment payments have been distributed, his/her Beneficiary shall receive the remainder of such unpaid installments in one lump sum as soon as practicable and in no event later than one year. 6.3 FORFEITURE OF CONTINGENT INTERESTS. The provisions of the Plan as in effect on December 31, 1986, shall govern forfeitures occurring on or before that date. The following provisions shall govern forfeitures that occur thereafter as well as any reinstatements that may be required for such forfeitures. Any portion of a Participant's Company Contributions Account that is not vested under the provisions of section 6.1 upon his/her termination of employment shall be held in a separate Company Contributions Account and shall be forfeited as of the earlier of (i) a distribution of the Participant's vested Account balance, or (ii) the Valuation Date next following the passage of five consecutive years during which the Participant has not received credit for at least one Hour of Service. If the Participant is rehired as an Employee and receives credit for an Hour of Service before the passage of the number of years specified in clause (ii) of the foregoing sentence, then the following rules shall apply. Any unforfeited amount held in his/her Company Contributions Account shall remain to his/her credit and/or any previously forfeited amount shall be restored to his/her Company Contributions Account by means of a special Employer contribution or a special allocation out of forfeitures available for reallocation, as determined by the Committee. Prior to the Participant's full vesting thereafter, the amount of any subsequent distribution from his/her Company Contributions Account on any later termination of employment shall be determined by adding to his/her Company Contributions Account the amount of the previous distribution, multiplying this total by his/her vested percentage, and then subtracting from the resulting product the amount of the previous distribution. 6.4 DISABILITY. A Participant who becomes disabled while still in the service of the Company or an Affiliate and who is entitled to disability payments under the Del Webb Corporation Long Term Disability Plan (LTD Plan) shall have his/her Account balance, valued as provided in section 8.1, distributed to him in the form of a single lump sum as soon as practicable and in no event later than three months after the end of the calendar quarter in which the Participant is last paid by the Company, unless such Participant elects to defer receipt of his/her Account balance as provided in section 6.7. A Participant who becomes disabled but who is not entitled to disability payments from the LTD Plan, however, shall have the option of receiving his/her Account balance in the form of a single lump sum or in installments as provided in section 6.2. For purposes of this Article, "disability" shall mean (l) a physical or mental condition which, in the judgment of the Committee, based on such competent medical evidence as the Committee may require, renders an individual unable to engage in any substantial gainful activity for the Company for which he/she is reasonably fitted by education, training or experience and which impairment is likely to result in death or to be of long continued duration for a period of at least 12 months, or (2) a judicial declaration of incompetence. 6.5 DEATH BENEFITS. Should a Participant die while still in the service of the Company or an Affiliate, said deceased Participant's Account balance shall be distributed pursuant to section 8.1 to the Participant's Beneficiary in the form of a single lump sum as soon as practicable and in no event later than the latest date specified in section 6.7 for the distribution of benefits whose payments have not commenced as of the Participant's date of death. 6.6 DESIGNATION OF BENEFICIARY. Subject to the requirements of section 2.1(g), a Participant may designate, in writing, the Beneficiary whom he/she desires to receive the benefits provided by the Plan in the event of his/her death. Such designation shall be filed on a form provided by the Committee for that purpose. A Participant may change his/her designated Beneficiary from time to time without the consent of anyone other than his/her spouse by filing a new designation in writing with the Committee. 6.7 LATEST TIME FOR PAYMENT OF BENEFITS. To comply with legal restrictions on the deferral of benefit commencement, all benefit payments must comply with the following limits, notwithstanding any other provisions of the Plan. If the Participant dies before the distribution of benefits, distribution of benefits to the deceased Participant's spouse must be made by April 1 of the Plan Year following the Plan Year in which the Participant would have reached age 70-1/2, and distribution of benefits to any other Beneficiary must be made within one year after the Participant's death (or such later date as may be prescribed by regulations). If a Participant is still living, then unless he/she elects otherwise in accordance with an option permitted under the Plan, the distribution of benefits to him shall occur not later than the 60th day after the close of the Plan Year in which occurs the latest of (i) the Participant's termination of employment, (ii) the tenth anniversary of the year in which the Participant commenced participation in the Plan, or (iii) the Participant's 65th birthday. Moreover, (a) if the Participant is a 5-percent owner, as defined in section 13.2, in any calendar year during which or after he/she attains age 66-1/2, or (b) if the Participant attains age 70-1/2 after December 31, 1987, then distribution of the Participant's vested Account must occur not later than the April l following the calendar year in which the Participant attains age 70-1/2 even if the Participant has not incurred a termination of employment by such date. For this purpose, the distribution of the Participant's vested account means the payment of the entire vested balance in a lump sum in accordance with subsection 6.7(a), except that an installment distribution under subsection 6.7(b) shall continue in the form in which it was elected if it started before the Code section 401(a)(9) required beginning date and its continuation in this manner will comply with the minimum distribution requirements of Code section 401(a)(9). Except for such continuing installments, recent additions to the Participant's Account that have not been included in a prior distribution shall be distributed in a lump sum on or before each December 31 due date following the April 1 on which distributions are required to begin pursuant to this paragraph and Code section 401(a)(9). All distributions under this paragraph shall comply with the requirements of Code section 401(a)(9) and the regulations thereunder. If for any reason the amount which is required to be paid cannot be ascertained on the date payment would be due hereunder, payment shall be made not later than 90 days after the earliest date on which the amount of such payment can be ascertained. 6.8 IN-SERVICE DISTRIBUTION OF PRETAX SAVINGS AT AGE 59-1/2. Notwithstanding any other provisions in the Plan to the contrary, an Active Participant who has attained age 59-1/2 may elect, in accordance with such rules as the Committee may prescribe, to have the vested value of his/her Basic Pretax Savings Account, Unmatched Pretax Savings Account, Company Contributions Account, Prior Account, Frozen Account, and Rollover Account distributed to him pursuant to section 8.1 as of the end of any month on or after the date he/she attains age 59-1/2 in the form of a single lump sum. 6.9 HARDSHIP WITHDRAWALS. (a) Any Participant shall be permitted to make a cash withdrawal, in any whole percentage increment or dollar amount, up to 100 percent of the amount in the Participant's Unmatched Pretax Savings Account, Basic Pretax Savings Account (exclusive of earnings on such amounts for withdrawals after December 31, 1988), and the vested portion of his/her Company Contributions Account (except that for withdrawals after December 31, 1983, Company Contributions, which have been used to satisfy the testing requirements of sections 4.8 or 5.3, and earnings thereon shall not be eligible for withdrawal), provided that the minimum amount of a withdrawal under this section 6.9 shall be $1,000. No Participant shall be permitted to withdraw any amount from his/her Prior Account, Frozen Account, or Rollover Account. A Participant wishing to withdraw any amount hereunder shall do so by making application therefor which demonstrates to the satisfaction of the Committee that the Participant is confronted by a financial hardship. (b) Subject to subparagraph (a) of this section 6.9, withdrawals must be made of all amounts in each available category below (listed in descending order) before amounts in a lower category may be withdrawn: (1) Unmatched Pretax Savings Account (2) Basic Pretax Savings Account (3) Company Contributions Account (c) Application for withdrawals shall be made on such forms as the Committee prescribes and may be made at any time. Distribution of withdrawals shall be made in accordance with section 8.1 and shall be paid in a lump sum as soon as is administratively possible following such application. (d) For purposes of this section 6.9, "financial hardship", means a hardship occurring in the personal affairs of a Participant because of: (1) Illness of the Participant or any of his/her dependents resulting in significant expenses not covered by the Participant's medical benefit plan; (2) Need for the purchase of/or substantial renovation of a Participant's primary residence; (3) The education of the Participant, the Participant's spouse or children; or (4) Family emergencies. The amount of any distribution under this section shall be limited to the amount necessary to defray the hardship expense which is not reasonably available from other sources and not covered by any other employee benefit plan maintained by the Company or an Affiliate. For this purpose, the Committee may accept the written statement of the Participant as to his/her financial resources unless it has reason to believe the statement is in error. In addition, effective January l, 1989, hardship withdrawals shall be further limited to prevent the distribution of earnings on Basic Pretax Savings Contributions and Unmatched Pretax Savings Contributions to Participants who have not attained age 59-1/2, and also to prevent the distribution of earnings on Company Contributions to the extent necessary to satisfy the withdrawal restrictions of Code section 401(k)(2)(B) in the event that such Company Contributions have been used to satisfy the average deferral percentage test of section 4.8 or the contribution percentage test of section 5.3. The foregoing notwithstanding, the Committee shall not approve a hardship withdrawal for any of the reasons listed under this paragraph (d) unless such hardship withdrawal complies with the applicable regulations promulgated by the Department of Treasury. The amount of any distribution under this section shall be limited to the amount necessary to defray the hardship expense which is not reasonably available from other reasonably liquid assets from other sources outside the Plan. For this purpose, the Committee may accept the written statement of the Participant stating the nature of his/her immediate and heavy financial need, his/her financial resources, and the fact that the amount of withdrawal requested is not reasonably available from other resources. 6.10 DEBITING OF INVESTMENT FUNDS. If a Participant making less than a total withdrawal of his/her Accounts under section 6.8 and/or 6.9 has his/her Accounts invested in more than one Investment Fund, the amount withdrawn from such Accounts shall be debited against each of the Investment Funds in which such Accounts are invested pro rata. 6.11 LOANS TO PARTICIPANTS. The Committee has instituted a loan program whereby, upon written application of a Participant, the Committee may permit the Plan to make a loan to such Participant, provided that all loans shall comply with such rules and regulations as the Committee may establish for making Plan loans and with the following terms and conditions: (a) Loans shall be made available, on a nondiscriminatory and reasonably equivalent basis, to all Participants, who are actively employed by the Company or are otherwise required to be eligible for loans under the Code or ERISA because of their status as disqualified persons or parties in interest. No loan shall be granted to a Participant who has a currently outstanding loan or a prior loan that has not been repaid in full for a period of at least three full months prior to the month of the loan. (b) A Participant, who receives a loan from the Plan, must sign a note payable to the Trust in the proper amount on a form prescribed by the Committee and authorize payroll deductions for payment of interest and principal during any period of his/her employment as an Employee in accordance with procedures adopted by the Committee. The loan shall be evidenced by the Participant's promissory note and shall be secured by an assignment of the Participant's vested interest in his/her Accounts and such additional collateral as the Committee may deem necessary, provided that in no event shall the loan be secured by an assignment of more than 50% of the Participant's vested (non- forfeitable) interest in his/her Accounts. In determining whether a pledge of additional collateral is necessary, the Committee shall consider the Participant's credit worthiness and the impact on the Plan in the event of default under the loan prior to the Participant's benefit commencement date. To secure repayment of the loan, the Participant shall, within the 90-day period before the loan is made, consent to any distribution resulting from the setoff of the loan against the Participant's Accounts under subsection (g). Any loan processing fee (charged by a person other than the Company) shall be deducted from the principal amount available to the Participant. (c) The amount of the loan shall not be less than $1,000 nor more than the least of: (1) $50,000, reduced by the highest outstanding balance of loans to the Participant from the Plan during the 1-year period ending on the day the loan is made; (2) 50 percent of the vested balance in all of such Participant's Accounts at the time of the loan; or (3) 100 percent of the Participant's vested balance in all of such Participant's Accounts (excluding any balances in his/her Prior Account, Frozen Account, or Rollover Account) at the time of the loan. If such Participant is also covered under another qualified plan maintained by the Company or an Affiliate, the limitations of clauses (1) and (2) above shall be applied as though all such qualified plans are one plan. (d) The repayment period for any loan shall be determined by the Committee and shall not extend beyond five years; provided, however, that if the Participant can show, by proof satisfactory to the Committee, that the loan will be used to acquire any dwelling unit which, within a reasonable time, is to be used as the principal residence of the Participant (a "Home Loan"), then the repayment period may extend to 15 years. Moreover, the Committee may, under uniform rules, limit the duration of loans to a shorter period than the maximum periods specified above so that, for example, the Plan does not grant any Home Loans and grants regular loans for a maximum duration of 54 months to part-time Employees or 30 months to Seasonal Employees so as to comply with the foregoing maximum limits while allowing for the possible effect of repayment suspensions during unpaid leaves of absence. (e) Each loan shall bear a reasonable interest rate as determined by the Committee in accordance with the Code, ERISA, and applicable rulings and regulations. Unless otherwise specified by the Committee, the rate shall be equal to the average of the rates of Phoenix banks for certificates of deposit with maturities equivalent to the terms of the loan, as determined at the beginning of the month in which the loan is granted. The interest rate so determined shall be fixed for the term of the loan. (f) The Committee shall establish a Loan Account for the Participant, and shall credit the Loan Account with an amount equal to the principal amount of the loan granted. Loans shall be processed on a monthly basis. When a loan is made, the principal amount shall be withdrawn pro rata from each Investment Fund in which the Participant's Accounts (other than the Prior Account, the Frozen Account or the Rollover Account) are invested as of the most recent Valuation Date. Each repayment of principal on the loan received by the Trustee from the Participant shall reduce the balance credited to the Participant's Loan Account and each payment of principal and interest shall increase pro rata the amount invested in each Investment Fund in accordance with the Participant's investment elections at the time of such repayment. (g) Except in the case of lump sum prepayments described below, repayment in substantially equal installments occurring not less frequently than quarterly of interest and principal shall be accomplished through regular payroll deductions (or by check or other means of payment satisfactory to the Committee in the case of a former Employee who continues his/her outstanding loan). The Committee may restrict loan amounts if payroll withholdings for repayment would exceed 20 percent of Compensation. The obligation to make repayments of principal and interest shall be suspended during the period a Participant is on seasonal leave of absence (of less than 12 months) without pay. Repayment of the substantially equal installments occurring not less frequently than quarterly shall resume as of the date the Participant returns to pay status, and any remaining unpaid balance at the end of the maximum five-year term of the loan (or 15-year term in the case of a Home Loan) shall be paid in a final lump sum installment at such time. Except as may be prohibited by the rules of particular Investment Funds from which loan amounts are taken or to which loan repayments are directed, a Participant shall be entitled at any time to prepay, without penalty, the total accrued interest and outstanding principal amount of the loan by direct payment, but shall not be allowed to make partial prepayments of amounts that are not currently due under the regular repayment schedule for the loan. If a Participant is in default by more than 90 days on any loan payment that is due and payable, the note in the Participant's Loan Account shall be canceled and the principal deemed distributed to him by the Trust Fund as soon as practicable thereafter, provided that the Participant has had a hardship or a termination of employment or is otherwise eligible for such deemed distribution and loan cancellation under the Code and ERISA. (h) The Plan's security interest in a Participant's Account shall be superior to an Alternate Payee's right to receive a distribution pursuant to a Qualified Domestic Relations Order. In the event the Plan Administrator is presented with a Qualified Domestic Relations Order with respect to a Participant having an outstanding Participant loan, the Plan Administrator shall not be required to make any distribution to the Alternate Payee if immediately following said distribution the sum of the Participant's share of Plan benefits awarded under the Qualified Domestic Relations Order and the Alternate Payee's share of Plan benefits awarded under the Qualified Domestic Relations Order is less than two times the then outstanding balance of said loan(s). All outstanding Participant loans shall be allocated to the Participant's Account and treated as a separate investment of the Participant's Account, and Participant shall be responsible for the repayment of all loans from the Plan, except that Alternate Payee's share of Plan benefits shall continue to serve as security for outstanding loans. (i) The foregoing provisions of this section 6.11 notwithstanding, the Committee reserves the right to stop granting loans to Participants at any time. 6.12 REQUIREMENT FOR CONSENT TO CERTAIN DISTRIBUTIONS. Notwithstanding any other provision regarding the Plan distributions, the Plan may not immediately distribute the balance of a Participant's Account that exceeds $3,500 without the written consent of the Participant. Where the Participant does not consent to a distribution that is subject to the foregoing requirement, this section shall be interpreted and administered so as to comply with Code section 411(a)(11) by delaying any distribution that might otherwise be required under the Plan to the extent necessary to comply with said Code section. 6.13 ELIGIBLE ROLLOVER DISTRIBUTIONS. Eligible rollover distributions from the Plan shall comply with the requirements of Code section 401(a)(31) as follows. This section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this section, a distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. For purposes of this section, the following definitions shall apply. An "eligible rollover distribution" is any distribution of all or any portion of the balance to the credit of the distributes, except that an "eligible rollover distribution" does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributes and the distributee's designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401 (a) (9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and provided further that the determination of what constitutes an "eligible rollover distribution" shall at all times be made in accordance with the current rules of Code section 402 (c), which shall be controlling for this purpose. An "eligible retirement plan" is an individual retirement account (described in section 408(a) of the Code, an individual retirement annuity described in section 408 (b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an "eligible retirement plan" is an individual retirement account or individual retirement annuity. A "distributee" includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. A "direct rollover" is a payment by the Plan to the eligible retirement plan specified by the distributee. In prescribing the manner of making elections with respect to eligible rollover distributions, as described above, the Committee may provide for the uniform, nondiscriminatory application of any restrictions permitted under applicable sections of the Code and related rules and regulations, including a requirement that a distributee may not elect a partial direct rollover in an amount less than $500 and a requirement that a distributee may not elect to make a direct rollover from a single eligible rollover distribution to more than one eligible retirement plan. Moreover, if a distribution is one to which sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the notice required under section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (1) The Plan administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (2) The Participant, after receiving the notice, affirmatively elects a distribution. Article 7. Investment Elections ------------------------------- 7.1 PARTICIPANT DIRECTED INDIVIDUAL ACCOUNT PLAN. This Plan is intended to constitute a participant directed individual account plan under section 404(c) of ERISA. As such, Participants shall be provided the opportunity to exercise control over the investment of their Accounts and to choose from a broad range of investment alternatives. 7.2 EMPLOYEE SELECTED INVESTMENT FUNDS. (a) The Committee, pursuant to uniform and non-discriminatory rules, shall establish three or more Investment Funds in accordance with the terms and provisions of this Article 7. In establishing the Investment Funds, the Committee shall select investment alternatives which provide each Participant with a broad range of investment alternatives in accordance with Department of Labor Regulation section 2550.404c-1(b)(3). The available Investment Funds may be changed or supplemented from time to time by action of the Committee. One of the investment alternatives will be a fund invested in Company Securities, which shall be referred to as the "Company Stock Fund". (b) Each Participant shall designate, on a form supplied by the Committee, signed by the Participant and delivered to the Committee, the Investment Funds established pursuant to paragraph (a), above, in which amounts held in his/her Accounts are to be invested. The Committee, in its discretion, will invest the portion of the Participant's Accounts for which the Participant has not issued any investment directions in accordance with this Plan and the Trust Agreement. The written investment directive of a Participant shall be effective until another directive is received by the Committee. 7.3 EXERCISE OF CONTROL. (a) Each Participant may direct that all of the amounts attributable to his/her Accounts be invested in a single Investment Fund or may direct 5% increments (falling within the range from 10% to 100%) of his/her Accounts to be invested in such Investment Fund(s) as he/she shall desire in accordance with uniform procedures promulgated by the Committee. Each Participant, in accordance with such rules, may change investment directions to provide for the investment of existing Account balances or future contributions among the various Investment Funds in such increments, or all to any one of them, as the Participant shall elect on a form provided by the Committee, signed by the Participant and delivered to the Committee. The Committee shall provide Participants the opportunity to receive written confirmation of any such investment direction. The Trustee and Committee shall be obligated to comply with such instruction except as provided in paragraph (d) below. The Committee shall promulgate uniform and nondiscriminatory rules constituting the investment direction policy under the Plan which shall be communicated to Participants regarding: (1) The frequency of change of investment direction of current account balances among Investment Funds; (2) The frequency of change of investment direction of future contributions among Investment Funds; (3) The effective dates of instructions regarding investment directions and changes in investment directions; (4) The fractional (percentage) limitations, if any, in which current Account balances may be invested and/or transferred between Investment Funds; (5) The fractional (percentage) limitations, if any, in which future contributions are to be invested between Investment Funds; and (6) The periods within which direction must be given if it is to be effective for a particular period. Procedures with regard to any one or more Investment Funds may vary to reflect the variable or contrasting characteristics of a particular investment alternative, provided that Participants are given the opportunity to give investment instructions with respect to each investment alternative available under the Plan with a frequency which is appropriate in light of the market volatility to which the investment alternative may reasonably be expected to be subject and that any restrictions on the frequency of investment instructions are in accordance with Department of Labor Regulation section 2550.404c-1(b)(2)(ii)(C). Notwithstanding the foregoing or anything in the Plan or Trust Agreement to the contrary, any discretionary Company Contributions made in the form of Company Securities in accordance with section 5.2 shall be initially invested in the Company Stock Fund. Any Participant whose share of discretionary Company Contributions is invested in the Company Stock Fund in accordance with the preceding sentence may elect to transfer such amounts among the other available Investment Funds, in accordance with such uniform and nondiscriminatory procedures as may be established by the Committee concerning matters such as the timing and amount of transfers. (b) The Committee shall provide each Participant with the opportunity to obtain sufficient information to make informed decisions with regard to investment alternatives available under the Plan, and incidents of ownership related to such investment. The Committee shall promulgate and distribute to Participants an explanation that the Plan is intended to comply with section 404(c) of ERISA and any relief from fiduciary liability resulting therefrom, a description of investment alternatives available under the Plan, an explanation of the circumstances under which Participants may give investment instructions and any limitations thereon, along with all other information and explanations required under Department of Labor Regulation section 2550.404c-1(b)(2)(B)(1). In addition, the Committee shall provide information to Participants upon request as required by Department of Labor Regulation section 2550.404c-1(b)(2)(B)(2). Neither the Employer, Committee, Trustee, nor any other individual associated with the Plan or the Employer shall give investment advice to Participants with respect to Plan investments. The providing of information pursuant to this Article 7 shall not in any way be deemed to be the providing of investment advice, and shall in no way obligate the Company, any other Employer, the Committee, the Trustee or any other individual associated with the Plan to provide any investment advice. (c) The Committee, pursuant to uniform and nondiscriminatory rules, may charge each Participant's Accounts for the reasonable expenses of carrying out investment instructions directly related to such Account, provided that each Participant is periodically (not less than quarterly) informed of such actual expenses incurred with respect to his or her respective accounts. (d) The Committee shall decline to implement any Participant instructions if: (i) the instruction is inconsistent with any provisions of the Plan or Trust Agreement; (ii) the instruction is inconsistent with any investment direction policies adopted by the Committee from time to time; (iii) implementing the instruction would not afford a Plan fiduciary protection under section 404(c) of ERISA; (iv) implementing the instruction would result in a prohibited transaction under section 406 of ERISA or section 4975 of the Code; (v) implementing the instruction would result in taxable income to the Plan; (vi) implementing the instruction would jeopardize the Plan's tax qualified status; or (vii) implementing the instruction could result in a loss in excess of a Participant's Account balance. The Committee, pursuant to uniform and nondiscriminatory rules, may promulgate additional limitations on investment instruction consistent with section 404(c) of ERISA from time to time. (e) A Participant shall be given the opportunity to make independent investment directions. No Plan fiduciary shall subject any Participant to improper influence with respect to any investment decisions, and nor shall any Plan fiduciary conceal any non-public facts regarding a Participant's Plan investment unless disclosure is prohibited by law. Plan fiduciaries shall remain completely neutral in all regards with respect to Participant investment direction. A Plan fiduciary may not accept investment instructions from a Participant known to be legally incompetent, and any transactions with a fiduciary, otherwise permitted under this Article 7 and the uniform and nondiscriminatory rules regarding investment direction promulgated by the Committee, shall be fair and reasonable to the Participant in accordance with Department of Labor Regulation section 404c- 1(c)(3). 7.4 LIMITATION OF LIABILITY AND RESPONSIBILITY. The Trustee, the Committee and the Employer shall not be liable for acting in accordance with the directions of a Participant pursuant to this Article 7 or for failing to act in the absence of any such direction. The Trustee, the Committee and the Employer shall not be responsible for any loss resulting from any direction made by a Participant and shall have no duty to review any direction made by a Participant. The Trustee shall have no obligation to consult with any Participant regarding the propriety or advisability of any selection made by the Participant. 7.5 FORMER PARTICIPANTS AND BENEFICIARIES. For purposes of this Article 7, the term "Participant" shall be deemed to include former Participants and the Beneficiaries of any deceased Participants. 7.6 TRANSFER OF ASSETS. If the Company is serving as an intermediary in conveying the investment elections of Participants, the Committee shall direct the Trustee to transfer moneys or other property to or from the various Investment Funds as may be necessary to carry out the aggregate transfer transactions after the Committee has caused the necessary entries to be made in the Participants' Accounts in the Investment Funds and has reconciled offsetting transfer elections, in accordance with uniform rules therefore established by the Committee. The foregoing sentence shall be inapplicable if Participants are, in accordance with current procedures for investment elections, communicating their elections directly to the appropriate Investment Fund agent. 7.7 VOTING, TENDER OFFERS, OR SIMILAR RIGHTS. Unless passed through to the Participants, the Trustee, in its discretion, shall vote all proxies relating to the exercise of voting, tender or similar rights which are incidental to the ownership of any asset which is held in any Investment Fund, other than the Company Stock Fund. Subsequent to a Participant's investment in the Company Stock Fund, the Participant shall be entitled to vote such shares in accordance with section 4(e) of the Trust Agreement, and approve or reject any tender offers in accordance with section 4(e) of the Trust Agreement. Except as otherwise specified by the Board, the Committee shall have the duties and responsibilities assigned to the Named Fiduciary in section 4(e) of the Trust Agreement, and the Company shall have the duties and responsibilities assigned to the Sponsor in that section 4(e). 7.8 INVESTMENT RESTRICTIONS DUE TO SECURITIES LAWS. No Participant or Beneficiary who is a Company officer, director, or ten percent beneficial owner subject to reporting and potential liability for short-swing profits under section 16 of the Securities Exchange Act of 1934 (hereinafter, a "Section 16 Insider") shall be permitted to acquire or retain an Account balance that is invested the Company Stock Fund. This investment restriction takes precedence over other, more general investment rules stated elsewhere in the Plan. The Committee shall provide for adequate coordination with the Plan's recordkeeper and take other appropriate steps to ensure that this investment restriction will be administered, consistent with applicable qualification and fiduciary requirements under the Code and ERISA, in a manner that furthers the purpose of eliminating the need for Section 16 Insiders to report Plan transactions pursuant section 16 of the Securities Exchange Act of 1934. In addition to prohibiting new Company Stock Fund investments by Participants and Beneficiaries who are Section 16 Insiders, the Committee shall establish appropriate rules under which a Participant or Beneficiary who has an existing balance in the Company Stock Fund and is, or at some future time becomes, a Section 16 Insider will be required to dispose of such balance as soon as practicable. This section 7.8 does not limit the Company Stock Fund investments of Participants and Beneficiaries who are not now, and are not expected to become, Section 16 Insiders. Thus, it does not prevent the Trust from acquiring a level of ownership in the Company's common stock that could cause the Trust to become a Section 16 Insider. 7.9 CONFIDENTIALITY REQUIREMENTS. Because Participants are permitted to invest in Company Securities, the Company must establish written procedures in order to safeguard the confidentiality of information relating to the purchase, holding and sale of Company Securities and the exercise of voting, tender and similar rights. While the Committee may adopt expanded confidentiality procedures, this section 7.9 shall constitute the confidentiality procedures for the Plan until such time as expanded procedures, if any, are adopted. Information relating to the purchase, holding and sale of Company Securities and the exercise of voting, tender and similar rights shall be held in confidence and not divulged to the Company, or any other officer or Employee thereof, or any other person except to the extent necessary to ensure that a Participant's directions to purchase, hold or sell Company Securities or the Participant's exercise of voting, tender or similar rights are given effect. Any person who willfully or negligently violates the confidentiality rules espoused in the preceding sentence will be subject to disciplinary action, and, to the extent the Committee deems it necessary, will be relieved of any duties which allow the person to gain access to such confidential information. The Committee shall appoint a person (the "confidentiality fiduciary") to monitor compliance with the foregoing procedures, and/or any expanded procedures adopted by the Committee. The confidentiality fiduciary shall appoint an independent fiduciary to carry out activities relating to any situations that the confidentiality fiduciary determines involve a potential for undue influence upon Participants and Beneficiaries with regard to the direct or indirect exercise of shareholder rights. For purposes of this section, a fiduciary is not independent if the fiduciary is affiliated with the Company or its Affiliates. Article 8. Participant Accounts and Records of the Plan ------------------------------------------------------- 8.1 ACCOUNTS AND RECORDS. The Committee shall maintain or cause to be maintained, accounts and records which shall accurately disclose the status of the Accounts of each Participant or his/her Beneficiary in the Plan. Each Participant's Basic Pretax Savings Account, Unmatched Pretax Savings Account, Prior Account, Frozen Account, Company Contributions Account, and Rollover Account shall be assigned an appropriate share of each Investment Fund in which the Participant's Accounts are invested, based on the times and the amounts of the Participant's investments in, and withdrawals from, each such Investment Fund with respect to each such Account. The records relative to a Participant's Accounts shall permit a determination as of any Valuation Date of the current value of his/her Accounts in the Trust Fund. Each Participant shall be advised from time to time, at least once each Plan Year, as to the status of his/her Accounts and the portions thereof attributable to his/her Basic Pretax Savings Account, Unmatched Pretax Savings Account, Prior Account, Frozen Account, Company Contributions Account, and Rollover Account. Nothing in this Plan shall prevent the aggregation of the separate Accounts of any group of Participants for recordkeeping purposes, provided that it is possible as of any Valuation Date to determine the separate interest of each Participant in such aggregated Account, as well as the vested and nonvested portions thereof, and the portion that is attributable to each separate Investment Fund. In general, disbursements on account of loans, withdrawals, or distributions following a termination of employment shall be made monthly and shall be accounted for as occurring as of the most current Valuation Date coinciding with or immediately preceding the disbursement. Consequently, no adjustment shall be made for earnings or investment gains or losses occurring since such Valuation Date. However, at any time that Valuation Dates are occurring no more frequently than monthly, the Committee may suspend the practice of making and accounting for disbursements as of a prior Valuation Date whenever special circumstances indicate that this step is necessary in order to protect the assets of the Plan and the share of all Participants and Beneficiaries in such assets. An indication of the existence of such special circumstances will occur if the disbursements to be processed indicate that a reduction of more than 10 percent will occur in the number of Participant Accounts invested in a particular Investment Fund or if the market value of the principal investment assets of a particular Investment Fund has declined by more than 20 percent since the last Valuation Date. Moreover, at any such time, the Participant or Beneficiary receiving the disbursement may, at his/her election, avoid the use of a prior Valuation Date by delaying his/her disbursement until the next monthly (or other, less frequent) Valuation Date. If a disbursement is delayed until the next monthly (or other, less frequent) Valuation Date, the recipient shall receive an adjustment to his/her Account for earnings and investment gains or losses up to such next Valuation Date. 8.2 VALUATION OF INVESTMENT FUNDS. As of each Valuation Date, the Trustee shall determine the fair market value of the assets of each Investment Fund, including uninvested cash (if any), accrued interest and dividends, and shall notify the Company of the value so determined. Assets for which there is a readily ascertainable market shall be valued by the Trustee at their fair market value, determined by the last known sale on the Valuation Date as of which the market value is determined, provided that the use of average daily book value or other similar method may be used to value any guaranteed investment contract fund in accordance with established procedures that are generally followed for purposes of arm's length transactions involving such a Fund. In the absence of a sale on the Valuation Date, the fair market value of such assets, as well as other assets for which there is no readily ascertainable fair market value, shall be determined by the Trustee in such manner as the Trustee shall consider appropriate. 8.3 VALUATION ADJUSTMENTS. As of each Valuation Date, the prior balances in the Accounts of a Participant or Beneficiary shall be updated as follows if transactions are not being processed on a daily basis. First, such prior balances shall be reduced by the amount of any payouts due to loans, withdrawals, or distributions occurring during the valuation period and shall be increased by the amount of any contributions or loan repayments during such period to the extent that such contributions or repayments are considered to be available as of the first day of the valuation period under rules approved by the Committee. The adjusted prior Account balances, as described above, shall then be further adjusted, upward or downward, in proportion to the adjusted Account balance of each Participant or Beneficiary in each Investment Fund so as to reflect the results of earnings and investment gains or losses during the valuation period. Finally, the Account balances so obtained shall be increased by any contributions or loan repayments during the valuation period (other than those previously added as an Account adjustment) which are considered available as of the new Valuation Date. The resulting net credit balances in the Accounts shall reflect their current status as of the new Valuation Date and shall also become the starting point for the adjustment of prior Account balances as adjusted for transfers for purposes of the next following Valuation Date. The sum of the net credit balances attributable to an Investment Fund shall equal the net value of such Fund as of the current Valuation Date. The Committee shall determine the net value of an Investment Fund by subtracting from the fair market value of assets (as reported by the Trustee) held in such Investment Fund any expenses, withdrawals, distributions and transfers chargeable to that investment Fund which have been incurred but not yet paid. All determinations made by the Trustee with respect to fair market values and determinations of the Committee concerning net value shall be made in accordance with generally accepted principles of trust accounting, and such determinations when so made by the Trustee and the Committee shall be conclusive and binding upon all persons having an interest under the Plan. Article 9. Financing -------------------- 9.1 FINANCING. The Company shall maintain a Trust Fund to finance the benefits under the Plan, by entering into one or more Trust Agreements or insurance contracts approved by the Company, or by causing insurance contracts to be held under a Trust Agreement. Any Trust Agreement or any insurance contract that is not held in trust is designated as and shall constitute a part of this Plan, and all rights which may accrue to any person under this Plan shall be subject to all the terms and provisions of such Trust Agreement or insurance contract. A Trustee shall be appointed by the Board of Directors and shall have such powers as provided in the Trust Agreement. The Committee shall have responsibility for selecting the Investment Managers, if any, who shall direct the Trustee in the investment of the assets of any or all of the available Investment Funds, and for selecting the insurance contracts or securities issued by regulated investment companies or trusts that shall be used by the Trustee in making investments under each Fund to the extent that the Fund's assets are not to be invested by the Trustee acting in its own discretion or pursuant to the direction of an Investment Manager. The Committee shall instruct the Trustee as to the specific Investment Managers and/or regulated investment company or trust securities or insurance contracts that it has selected for each Fund. In the event that the Committee has not given the Trustee or an Investment Manager responsibility for managing the assets of a particular Fund and has not directed the Trustee to invest the assets of such Fund in a particular insurance contract or in particular securities issued by a regulated investment company or trust, the Trustee shall invest the assets of such Fund according to its best judgment. 9.2 Company Contributions. The Company shall make such contributions to the Trust Fund as are required by this Plan, subject to the right of the Company to discontinue the Plan. 9.3 Non-Reversion. Anything in this Plan to the contrary notwithstanding, it shall be impossible at any time for the contributions of the Company or any part of the Trust Fund to revert to the Company or an Affiliate or to be used for or diverted to any purpose other than the exclusive benefit of Participants or their Beneficiaries, except that: (a) If a contribution or portion thereof is made by the Company by a mistake of fact, upon written request to the Committee, such contribution or such portion and any increment thereon shall be returned to the Company within one year after the date of payment; and (b) In the event that a deduction for any contributions made by the Company is disallowed by the Internal Revenue Service in any Plan Year, then that portion of the Company Contribution that is not deductible shall be returned to the Company within one year from the date of receipt of notice by the Internal Revenue Service of the disallowance of the deduction. Article 10. Administration -------------------------- 10.1 THE COMMITTEE. The Plan Administrator shall be the Company, but the Company delegates its duties as such to the Benefits Advisory Committee (the "Committee") appointed by the Board of Directors. The Committee shall be composed of as many members as the Board of Directors may appoint from time to time, but not fewer than 3 members, and shall hold office at the pleasure of the Board of Directors. Such members may, but need not, be Employees of the Company. Any member of the Committee may resign by delivering his/her written resignation to the Board of Directors with 30 days' advance notice. Vacancies in the Committee arising by resignation, death, removal or otherwise, shall be filled by the Board of Directors. The Company shall be the Named Fiduciary under the Plan and under the Trust Agreement, in accordance with ERISA. 10.2 COMPENSATION AND EXPENSES. The members of the Committee shall serve without compensation for services as such a member. Any member of the Committee may receive reimbursement by the Company of expenses properly and actually incurred. All expenses of the Committee shall be paid out of the Plan assets unless paid directly by the Company. Such expenses shall include any expenses incident to the functioning of the Committee, including, but not limited to, fees of the Plan's accountants, outside counsel and other specialists and other costs of administering the Plan. 10.3 MANNER OF ACTION. A majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business. All resolutions adopted, and other actions taken by the Committee at any meeting shall be by the vote of a majority of those present at any such meeting. Upon concurrence in writing of a majority of the members at the time in office, action of the Committee may be taken otherwise than at a meeting. A member of the Committee shall not vote or act upon any matter which relates solely to such person as a Participant. If a matter arises affecting one of the members of the Committee as a Participant and the other members of the Committee are unable to agree as to the disposition of such matter, the Board of Directors shall appoint a substitute member in the place and stead of the affected member, for the sole and only purpose of passing upon and deciding the particular matter. 10.4 CHAIRMAN, SECRETARY AND EMPLOYMENT OF SPECIALISTS. The members of the Committee shall elect one of their number as Chairman and shall elect a Secretary who may, but need not, be a member of the Committee. They may authorize one or more of their number or any agent to execute or deliver any instrument or instruments on their behalf, and may employ such counsel, which may be in-house counsel of the Company, auditors, and other specialists and such clerical, medical, actuarial and other services as they may require in carrying out the provisions of the Plan. 10.5 SUBCOMMITTEES. The Committee may appoint one or more subcommittees and delegate such of its power and duties as it deems desirable to any such subcommittee, in which case every reference herein made to the Committee shall be deemed to mean or include the subcommittees as to matters within their jurisdiction. The members of any such subcommittee shall consist of such officers or other employees of the Company and such other persons as the Committee may appoint. 10.6 OTHER AGENTS. The Committee may also appoint one or more persons or agents to aid it in carrying out its duties in administration of the Plan, and delegate such of its powers and duties as it deems desirable to such persons or agents. 10.7 RECORDS. All resolutions, proceedings, acts and determinations of the Committee shall be recorded by the Secretary thereof or under his/her supervision, and all such records, together with such documents and instruments as may be necessary for the administration of the Plan, shall be preserved in the custody of the Secretary. 10.8 RULES. Subject to the limitations contained in the Plan, the Committee shall be empowered from time to time in its discretion to adopt by-laws and establish rules for the conduct of its affairs and the exercise of the duties imposed upon it under the Plan. 10.9 COMMITTEE'S POWERS AND DUTIES. The Committee shall have responsibility for the general administration of the Plan and for carrying out its provisions. The Committee shall have the power and discretion as may be necessary to discharge its functions hereunder. Without limiting the generality of the foregoing, the Committee shall have the discretionary authority: (a) To construe and interpret the Plan, to decide all questions of eligibility and determine the amount, manner and time of payment of any benefits hereunder; (b) To make a determination as to the right of any person to a benefit; (c) To obtain from the participating Affiliates and from Employees such information as shall be necessary for the proper administration of the Plan and, when appropriate, to furnish such information promptly to the Trustees or other persons entitled thereto; (d) To prepare and distribute, in such manner as the Company determines to be appropriate, information explaining the Plan; (e) To furnish the participating Affiliates, upon request, such reports with respect to the administration of the Plan as are reasonable and appropriate; (f) To establish and maintain such accounts in the name of the participating Affiliates and of each Participant as are necessary; (g) To instruct the Trustee with respect to the payment of benefits hereunder; (h) To provide for any required bonding of fiduciaries and other persons who may from time to time handle Plan assets; (i) To prepare and file any reports required by the ERISA; (j) To engage an independent public accountant to conduct such examinations and to render such opinions as may be required by the ERISA; (k) To allocate contributions and Trust Fund gains or losses to the Accounts of Participants; (l) To establish a funding policy and method consistent with the objectives of the Plan and the requirements of ERISA; (m) To correct any errors and remedy any defects in the administration of this Plan, including, if necessary, by requiring any Employer to make a Qualified Nonelective Contribution that prevents discrimination under Code section 401(k) or 401(m) without materially increasing the cost of the Plan; (n) To establish reasonable claims procedures in accordance with the terms of this Plan and ERISA; and (o) To establish procedures for identifying and complying with Qualified Domestic Relations Orders. 10.10 COMMITTEE'S DECISIONS CONCLUSIVE. The Committee shall exercise its powers hereunder in a uniform and nondiscriminatory manner. Any and all disputes with respect to the Plan which may arise involving Participants, or their Beneficiaries shall be referred to the Committee and its decision shall be final, conclusive and binding. Furthermore, if any question arises as to the meaning, interpretation or application of any provision hereof, the decision of the Committee with respect thereto shall be final. 10.11 INDEMNITY. To the extent permitted by law, Del Webb Corporation shall and does hereby jointly and severally indemnify and agree to hold harmless its employees, officers and directors who serve in fiduciary capacities with respect to the Plan and Trust Agreement and each member of the Committee (which, for purposes of this section, includes any Employee to whom the Committee has delegated fiduciary or other duties) from all loss, damage, or liability, joint or several, including payment of expenses in connection with defense against any such claim, for their acts, omissions and conduct, and for the acts, omissions and conduct of their duly appointed agents, which acts, omission or conduct constitute or are alleged to constitute a breach of such individual's fiduciary or other responsibilities under ERISA or any other law, except for those acts, omissions or conduct resulting from his own willful misconduct, willful failure to act, or gross negligence. The right of indemnity described in the preceding sentence shall be conditioned upon (i) the timely receipt of notice by Del Webb Corporation of any claim asserted against the member, which notice, in the event of a lawsuit shall be given within 10 days after receipt by the member of the complaint, and (ii) the receipt by Del Webb Corporation of an offer from the Employee of an opportunity to participate in the settlement or defense of such claim. 10.12 FIDUCIARIES. The fiduciaries named in this Article shall have only those powers, duties, responsibilities and obligations as are specifically given them under this Plan or the Trust. The Company and participating Affiliates shall have the sole responsibility for making the contributions specified in Article 5. The Board of Directors or the Company, acting through a duly authorized representative (including the chairman of the Committee to the extent provided in section 11.1 with respect to amendments) shall have the sole authority to appoint and remove the Trustee and to amend or terminate, in whole or in part, this Plan or the Trust. The Committee shall be the Named Fiduciary under the Plan and shall have the sole responsibility for the administration of this Plan, which responsibility is specifically described in this Plan and the Trust Agreement. The officers and Employees of the Company shall have the responsibility of implementing the Plan and carrying out its provisions as the Committee shall direct. The Trustee, and any Investment Manager shall have the sole responsibility for the administration of the Trust and the management of the assets held under the Trust, to the extent provided in the Trust Agreement. A fiduciary may rely upon any direction, information or action of another fiduciary as being proper under this Plan or the Trust, and is not required under this Plan or the Trust to inquire into the propriety of any such direction, information or action. It is intended under this Plan and the Trust that each fiduciary shall be responsible for the proper exercise of his/her or its own powers, duties, responsibilities and obligations under this Plan and the Trust and shall not be responsible for any act or failure to act of another fiduciary. No fiduciary guarantees the Trust Fund in any manner against investment loss or depreciation in asset value. Any party may serve in more than one fiduciary capacity with respect to the Plan or Trust. 10.13 NOTICE OF ADDRESS. Each person entitled to benefits from the Plan must file with the Committee or its agent, in writing, his/her post office address and each change of post office address. Any communication, statement or notice addressed to such a person at his/her latest reported post office address will be binding upon him for all purposes of the Plan, and neither the Committee nor the Company or any Trustee shall be obliged to search for or ascertain his/her whereabouts. 10.14 DATA. All persons entitled to benefits from the Plan must furnish to the Company such documents, evidence or information as the Company considers necessary or desirable for the purpose of administering the Plan; and it shall be a condition of the Plan that each such person must furnish such information and sign such documents as the Company may require before any benefits become payable from the Plan. 10.15 APPEALS FROM DENIAL OF CLAIMS. Benefits shall be provided from this Plan through procedures initiated by the Committee, and the Participant need not file a claim. However, if a Participant or Beneficiary believes he/she is entitled to a benefit, or a benefit different from the one he/she receives, then the Participant or Beneficiary may file a claim for the benefit by writing a letter to the Committee. If any claim for benefits under the Plan is wholly or partially denied, the claimant shall be given notice in writing of such denial within 90 days after receipt of the claim or within an additional 90 days if special circumstances require an extension of time, and written notice of the extension shall be furnished to the claimant. Notice of the denial shall set forth the following information: (a) The specific reason or reasons for the denial; (b) Specific reference to pertinent Plan provisions on which denial is based; (c) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; (d) An explanation that a full and fair review by the Committee of the decision denying the claim may be requested by the claimant or his/her authorized representative by filing with the Company, within 60 days after such notice has been received, a written request for such review; and (e) If such request is so filed, the claimant or his/her authorized representative may review pertinent documents and submit issues and comments in writing within the same 60-day period specified in paragraph (d) above. The decision of the Committee upon review shall be made by the Committee's delegate, and shall be made promptly, and not later than 60 days after the Committee's receipt of the request for review, unless special circumstances require an extension of time for processing, in which case the claimant shall be so notified and a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. if the claim is denied, wholly or in part, the claimant shall be given a copy of the decision promptly. The decision shall be in writing and shall include specific reasons for the denial, specific references to the pertinent Plan provisions on which the denial is based and shall be written in a manner calculated to be understood by the claimant. Article 11. Amendment And Termination ------------------------------------- 11.1 AMENDMENT AND TERMINATION. The Company expects the Plan to be permanent and continue indefinitely, but since future conditions affecting the Company cannot be anticipated or foreseen, the Company must necessarily and does hereby reserve the right to amend, modify or terminate the Plan at any time by action of the Board of Directors or its Human Resources Committee. In addition, the chair of the Benefits Advisory Committee may make any modifications or amendments to the Plan that are necessary or appropriate to meet the requirements of the Code or any other applicable law, as now in effect or hereafter amended, or any amendment which does not significantly increase benefit levels or costs. No amendment of the Plan shall cause any part of the Trust Fund to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants or their Beneficiaries covered by the Plan. Retroactive Plan amendments may not decrease the accrued benefits of any Participant determined as of the beginning of the first Plan Year to which the amendment applies, or, if later, as of the time the amendment was adopted. 11.2 DISTRIBUTION ON TERMINATION. Upon termination of the Plan in whole or in part (after an initial determination has been obtained from the Internal Revenue Service that the Plan constitutes a qualified defined contribution plan with respect to the Employer), or upon complete discontinuance of Employer contributions to the Plan (after such initial determination has been obtained), the value of the proportionate interest in the Trust Fund of each Participant affected by such termination having an interest in the Trust Fund shall be determined by the Committee as of the date of such termination or discontinuance. The Accounts of such Participants shall be fully vested and nonforfeitable, and thereafter distribution shall be made to such Participants as soon as is practicable consistent with the requirement of section 6.7 to obtain the Participant's consent to certain distributions and the restrictions of sections 6.8 and 6.9 limiting the ability of Participants who remain in service as Employees to make withdrawals from the Plan. 11.3 CORPORATE REORGANIZATION. In the event the Company is dissolved or liquidated or shall by appropriate legal proceedings be adjudged a bankrupt, or in the event judicial proceedings of any kind result in the involuntary dissolution of the Company, the Plan shall be terminated. The merger, consolidation or reorganization of the Company, or the sale of the Company or of all or substantially all of its assets or stock, shall not terminate the Plan if there is delivery to the Company, by its successor or by the purchaser of all or substantially all of its stock or assets, a written instrument requesting that it be substituted for the Company and agreeing to perform all the provisions hereof which the Company is required to perform. Upon the receipt of said instrument, with the approval of the Company, the successor or the purchaser shall be substituted for the Company herein, and each participating Affiliate and the Company shall be relieved and released from all obligations of any kind, character or description herein or in any trust agreement. 11.4 PLAN MERGER OR TRANSFER. This Plan shall not merge or consolidate with, or transfer assets and liabilities to, or accept a transfer from, any other employee benefit plan unless each Participant in this Plan will (if the plan had then terminated) receive a benefit immediately after the merger, consolidation or transfer which is not less than the benefit the Participant would have been entitled to receive immediately before the merger, consolidation or transfer of assets (if this Plan had then terminated). Article 12. Adoption by Affiliate --------------------------------- 12.1 AFFILIATE PARTICIPATION. An Affiliate may become a party to the Plan and Trust Agreement by adopting the Plan for the benefit of any specified group of its Employees, with such modifications of the basic Plan provisions as may be approved by the Company, effective as of the date specified in such adoption. Such adoption shall be accomplished by the Affiliate: (a) By filing with the Company a certified copy of a resolution of its Board of Directors to that effect, and such other instruments as the Company may require; and (b) By the Company's filing with the then Trustee a copy of such resolution, and other instruments, together with a certified copy of resolutions of the Company's Board of Directors approving such adoption. 12.2 Company Action Binding on Participating Affiliates. As long as the Company is a party to the Plan and the Trust Agreement it shall be empowered to act thereunder for any participating Affiliate in all matters respecting the Committee and the Trustee and the designation of Affiliates and any action taken by the Company with respect thereto shall automatically include and be binding upon any Affiliate which is a party to the Plan. 12.3 TERMINATION OF PARTICIPATION OF AFFILIATE. The Company reserves the right, in its sole discretion and at any time, to terminate the participation in this Plan of any or all Affiliates. Such termination shall be effective immediately upon notice of such termination from the Company to the Trustee and the Affiliate being terminated. In event of such termination, this Plan shall not terminate, but the portion of the Plan attributable to the Affiliate shall become a separate Plan, and the Company shall inform the Trustee of the portion of the Trust Fund that is then attributable to the participation of such terminated Affiliate. Such portion shall as soon thereafter as is administratively feasible be set apart by the Trustee as a separate Trust which shall be part of the separate Plan of such terminated Affiliate. Thereafter the administration, control, and operation of the Plan with respect to such terminated Affiliate shall be on a separate basis in accordance with the terms hereof, or as such terms may be amended by appropriate action of such terminated Affiliate in accordance with the provisions of Article 12. Article 13. Top-Heavy Provisions -------------------------------- 13.1 APPLICATION. If in any Plan Year after 1983 (a) the sum of the Account balances of Participants who are "Key Employees" for such Plan Year exceeds 60 percent of the sum of the Account balances of all Participants (excluding, however, balances that are disregarded under the rules of this Article), or (b) the Plan is part of a top-heavy group, then the following provisions under this Article 13 shall apply for such Plan Year. The date for determining the applicability of this Article 13 ("determination date") is: (a) For the first Plan Year, the last day of the Plan Year, and (b) For any other Plan Year, the last day of the preceding Plan Year. 13.2 KEY EMPLOYEES. For purposes of this Article 13, the terms "Key Employee" and an Employee who is not a Key Employee ("non-Key Employee") have the meaning specified in Code section 416(i), where the term "Key Employee" generally means any Employee (and the Beneficiary of such an Employee) who at any time during a Plan Year or any of the four preceding Plan Years is: (a) An officer of the Company or an Affiliate whose Compensation during the relevant Plan Year exceeded 150 percent of the dollar limitation under Code section 415(c)(1)(A); provided, however, no more than the lesser of 50 Employees, or the greater of three Employees or 10 percent of all Employees are to be treated as officers, (b) One of the 10 Employees having Compensation for the relevant Plan Year in excess of the dollar limitation in effect under Code section 415(c)(1)(A) and owning (or considered as owning within the meaning of Code section 318) the largest interests in the Company or an Affiliate, then the Employee with the greater Compensation shall be treated as having the larger interest, (c) A 5 percent owner of the Company or an Affiliate, or (d) A 1 percent owner of the Company or an Affiliate having annual Compensation of more than $150,000. An Employee is considered to be a "5 percent owner" if the Employee owns more than 5 percent of the outstanding stock of the Company or an Affiliate or stock possessing more than 5 percent of the total combined voting power of all of the Company or Affiliates' stock. An Employee is also treated as owning stock owned by certain members of the Employee's family as provided in Code section 318. The same rules apply to determine whether an Employee is a 1 percent owner. If a current Employee ceases to be a Key Employee, such Employee's Account balance shall be disregarded under the top-heavy plan computation for any Plan Year following the last Plan Year for which he/she was treated as a Key Employee. For Plan Years beginning after 1984, the account balances and accrued benefits of a Participant who has not performed any services for the Company or any Affiliate at any time during the 5-year period ending on the determination date will be disregarded. In addition, a Participant's Rollover Account balance shall be disregarded to the extent that it consists of amounts attributable to a rollover initiated by the Participant from a plan that is not maintained by the Company or an Affiliate. 13.3 TOP-HEAVY GROUP. For purposes of determining whether the Plan is part of a top-heavy group as described in section 13.1, the following rules shall apply: (a) Aggregation Group. All plans maintained by the Company or an Affiliate are aggregated to determine whether the plans, as a group, are top-heavy. The aggregation group shall include any plan which covers a Key Employee and any other plan which enables a plan covering a Key Employee to meet the requirements of section 401(a)(4) or 410 of the Code. (b) An aggregation group is a top-heavy group if, as of the determination date, (1) the sum of the account balances of Key Employees under all defined contribution plans included in the group exceeds 60 percent of the account balances of all participants under all such plans in the group, or (2) the present value of the accumulated accrued benefits for Key Employees under all defined benefit plans in the group exceeds 60 percent of the present value of the accumulated accrued benefits for all participants under all such plans in the group. In any Plan Year, in testing for top-heaviness under section 13.3(a) or (b), the Company may in its discretion take into account accumulated accrued benefits and account balances in any other plan maintained by it or an Affiliate, so long as such expanded aggregation group continues to meet the requirements of sections 401(a)(4) and 410 of the Code. 13.4 ADDITIONAL RULES. In determining the present value of the accumulated accrued benefits under a defined benefit plan and the sum of the account balances under a defined contribution plan, Company contributions and voluntary employee contributions shall be taken into account. The present value of the accrued benefit in a defined benefit plan or the account balance in a defined contribution plan will include any amount distributed to a Participant within the five year period ending on the determination date. 13.5 CODE SECTION 415(H) ADJUSTMENT. If the Plan is determined to be top-heavy in any Plan Year, then the combined limits of Code section 415(e) and section 5.11 of the Plan shall be applied in accordance with Code section 416(h)(1) by substituting "1.0" for "1.25" in computing the defined benefit fraction and the defined contribution fraction under Plan section 5.10 and paragraphs 2(B) and 3(B) of Code section 415(e). 13.6 MINIMUM CONTRIBUTION REQUIREMENT. If this Plan is determined to be top-heavy in any Plan Year under the provisions of this Article, then the Employer shall contribute and allocate the amount described below to the Account of any person who was an Employee and a Participant at any time during the Plan Year and is not treated as a Key Employee (such person or, if he/she is deceased, his/her Beneficiary, being referred to as a "non-Key Employee") for such Plan Year such amount shall be equal to the difference, if any, between (i) 3 percent of the Participant's Compensation for that Plan Year and (ii) the amount of Employer contributions, expressed as a percentage of Compensation allocated to the account of each non-Key Employee who was a participant under this Plan or any other plan in the same aggregation group. For this purpose, salary reduction contributions made at the election of the Participant to this Plan or any other similar plan in the aggregation group for Plan Years beginning before January 1, 1985, shall be disregarded, but such contributions for all subsequent Plan Years shall be taken into account. The contributions under this section 13.6 shall be accounted for and vested as Company Contributions. Article 14. Miscellaneous Provisions ------------------------------------ 14.1 EMPLOYMENT RIGHTS. Nothing contained in this Plan or any modification of the same or act done in pursuance hereof shall be construed as giving any person any legal or equitable right against the Company, the Trustee or the Trust Fund, unless specifically provided herein, or as giving any person a right to be retained in the employ of the Company. All Participants shall remain subject to assignment, reassignment, promotion, transfer, layoff, reduction, suspension and discharge to the same extent as if this Plan had never been established. 14.2 NO EXAMINATION OR ACCOUNTING. Neither this Plan nor any action taken thereunder shall be construed as giving any person the right to an accounting or to examine the books or affairs of the Company. 14.3 INVESTMENT RISK. The Participants and their Beneficiaries shall assume all risks in connection with any decrease in the value of any assets or funds which may be invested or reinvested in the Trust Fund which supports this Plan. 14.4 NON-ALIENATION. Except as permitted under the Plan in accordance with Code section 401(a)(13) and ERISA section 206(d) with respect to matters such as loans to Participants and assignments to Alternate Payees under Qualified Domestic Relations Orders, no benefit payable at any time under the Plan shall be subject to the debts or liabilities of a Participant or his/her spouse or Beneficiary, and any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such benefit, whether presently or thereafter payable, shall be void. Subject to the foregoing exception, no benefit under the Plan shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, garnishment or encumbrance of any kind. In accordance with procedures consistent with Code section 414(p) that are established by the Committee (including procedures requiring prompt notification of the affected Participant and each Alternate Payee of the Plan's receipt of a domestic relations order and its procedures for determining the qualified status of such order), judicial orders for purposes of enforcing family support obligations or pertaining to domestic relations (which orders do not alter the amount, timing or form of benefit other than to have it commence at the earliest legally permissible date) shall be honored by the Plan if the Committee determines that they constitute Qualified Domestic Relations Orders. Except as may otherwise be required by regulations of the Secretary of Labor, such orders may not require a retroactive transfer of all or part of a Participant's Account to or for the benefit of an Alternate Payee without permitting an appropriate adjustment for earnings and investment gains or losses that have occurred in the interim, nor shall such orders require the Plan to provide loans, self-directed investment elections, or other rights to Alternate Payees that are not available to Beneficiaries generally. To the full extent permitted by Code section 414(p)(10) and by the terms of a Qualified Domestic Relations Order, amounts assigned to an Alternate Payee may be paid as soon as possible in a lump sum, notwithstanding the age, financial hardship, employment status, or other factors affecting the ability of the Participant to make a withdrawal or otherwise receive a distribution of balances to his/her credit under the Plan. In cases where such full and prompt payment of amounts assigned to an Alternate Payee will not be made, the assigned amounts will be transferred within a reasonable time to the Income Fund and, pending payment, shall be maintained in a separate Account, for the benefit of the Alternate Payee. 14.5 INCOMPETENCY. Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally competent and of age until the date on which the Committee receives a written notice, in a form and manner acceptable to the Committee, that such person is incompetent or a minor, for whom a guardian or other person legally vested with the care of his/her person or estate has been appointed; provided, however, that if the Committee shall find that any person to whom a benefit is payable under the Plan is unable to care for his/her affairs because of incompetency, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed legal representative) may be paid to the spouse, a child, a parent or a brother or sister, or to any person or institution deemed by the Committee to have incurred expense for such person otherwise entitled to payment. To the extent permitted by law, any such payment so made shall be a complete discharge of liability therefor under the Plan. In the event a guardian of the estate of any person receiving or claiming benefits under the Plan shall be appointed by a court of competent jurisdiction, benefit payments may be made to such guardian provided that proper proof of appointment and continuing qualification is furnished in a form and manner acceptable to the Committee. To the extent permitted by law, any such payment so made shall be a complete discharge of any liability therefor under the Plan. 14.6 SEVERABILITY. In the event any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Plan, and it shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 14.7 MISSING PERSONS AND OTHER BARS TO PAYMENT. If the Committee shall be unable to make payment to any Participant or Beneficiary because the whereabouts of such person cannot be ascertained or because there is an unresolved question about who is entitled to the payment or how the payment is to be made, the Committee shall delay the payment until it can properly be made and, in the case of a missing person or another situation where the Committee is unable to provide an investment election to a person who is clearly entitled to direct the investment of the Account balance, shall direct that the balance in the Account from which the payment is due shall be invested in the Money Market Fund. After an amount has been due and payable to a missing person for five years without his/her coming forth or providing a current address to the Committee, the Committee may mail a notice by registered mail to the last known address of such person stating that unless such person makes written reply to the Committee within 60 days from the mailing of such notice, the Committee will direct that such amount and all further benefits with respect to such person shall be discontinued and all liability for the payment thereof shall terminate; provided, however, that in the event of the subsequent reappearance of the Participant or Beneficiary prior to termination of the Plan, the benefits which were due and payable and which such person missed shall be paid in a single sum, and any future benefits due such person shall be reinstated in full. The amount of any discontinued interest shall be used to reduce Company Contributions at the end of the two-year period. The reinstatement of a benefit shall be accomplished by the making of a special Company Contribution in an amount sufficient to provide the Participant's benefit. 14.8 COUNTERPARTS. This Plan may be executed in any number of counterparts, each of which shall be deemed to be an original. All the counterparts shall constitute but one and the same instrument and may be sufficiently evidenced by any one counterpart. 14.9 SERVICE OF LEGAL PROCESS. The members of the Committee and the Secretary of the Company are hereby designated agent of the Plan for the purpose of receiving service of summons, subpoena or other legal process. 14.10 HEADINGS OF ARTICLES AND SECTIONS. The headings of Articles and Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of the Plan, the text shall control. 14.11 APPLICABLE LAW. The Plan and all rights hereunder shall be governed, construed and administered in accordance with the laws of the State of Arizona with the exception that any Trust Agreement which may constitute a part of the Plan shall be construed and enforced in all respects under and by the laws of the State in which the Trustee thereunder is located. * * * * * * * * * * IN WITNESS WHEREOF, Del Webb Corporation has caused this instrument to be executed by its duly authorized representative in a number of counterparts, each of which shall be deemed an original even though the others are not produced and all of which collectively shall be deemed to constitute one instrument. DEL WEBB CORPORATION By Lynn Schuttenberg, Vice President ------------------------------------------ Title Chairman, Benefits Advisory Committee ------------------------------------------ Date 6/29/95 ------------------------------------------ ATTEST By Robertson C. Jones --------------------- Vice President --------------------- EX-10.25 6 1995 EXECUTIVE LONG-TERM INCENTIVE PLAN EXHIBIT 10.25 DEL WEBB CORPORATION 1995 EXECUTIVE LONG-TERM INCENTIVE PLAN ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION 1.1 Establishment of the Plan. Del Webb Corporation, a Delaware corporation (hereinafter referred to as the "Company"), hereby establishes an incentive compensation plan to be known as the "Del Webb Corporation 1995 Executive Long-Term Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Performance Units, and Performance-Based Awards. Upon approval by the Board of Directors of the Company and subject to shareholder ratification, the Plan shall become effective as of November 8, 1995 (the "Effective Date"), and shall remain in effect as provided in Section 1.3 herein. 1.2 Purpose of the Plan. The purpose of the Plan is to promote the success, and enhance the value, of the Company by linking the personal interests of participants to those of Company shareholders, and by providing Participants with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants upon whose judgment, interest, and special effort the successful conduct of its operation largely is dependent. 1.3 Duration of the Plan. Subject to approval by the Board of Directors of the Company and ratification by the shareholders of the Company, the Plan shall commence on the Effective Date, as described in Section 1.1 herein, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 14 herein, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan on or after November 7, 2005. ARTICLE 2. DEFINITIONS AND CONSTRUCTION 2.1 Definitions. Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: (a) "Award" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Performance Units, or Performance-Based Awards. (b) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (c) "Board" or "Board of Directors" means the Board of Directors of Del Webb Corporation. (d) "Cause" means: (i) willful and gross misconduct on the part of a Participant that is materially and demonstrably detrimental to the Company; or (ii) the commission by a Participant of one or more acts which constitute an indictable crime under United States Federal, state, or local law. "Cause" under either (i) or (ii) shall be determined in good faith by the Committee in the exercise of its discretion. (e) "Change in Control" of the Company shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company's then outstanding Voting Securities (defined as any securities of the Company which vote generally in the election of directors), or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all the Company's assets. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (g) "Committee" means the committee, as specified in Article 3, appointed by the Board to administer the Plan with respect to grants of Awards. (h) "Company" means Del Webb Corporation, a Delaware corporation (including any and all Subsidiaries), or any successor thereto as provided in Article 16 herein. (i) "Covered Employee" means an Employee who is a "covered employee" within the meaning of Section 162(m) of the Code. (j) "Director" means any individual who is a member of the Board of Directors of the Company. (k) "Disability" means a permanent and total disability, within the meaning of Code Section 22(e)(3), as determined by the Committee in good faith, upon receipt of sufficient competent medical advice from one or more individuals, selected by the Committee, who are qualified to give professional medical advice. (l) "Employee" means any full-time, nonunion employee of the Company. Directors who are not otherwise employed by the Company shall not be considered Employees under this Plan. (m) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor Act thereto. (n) "Fair Market Value" means the average of the highest and lowest quoted selling prices for Shares on the relevant date, or (if there were no sales on such date) the weighted average of the means between the highest and lowest quoted selling prices on the nearest day before and the nearest day after the relevant date, as prescribed by Treasury Regulation Section 20.2031-2(b)(2), as reported in the Wall Street Journal or a similar publication selected by the Committee. (o) "Incentive Stock Option" or "ISO" means an option to purchase Shares, granted under Article 6 herein, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code. (p) "Insider" shall mean an Employee who is, at the time an Award is made under this Plan, an insider pursuant to Section 16 of the Exchange Act. (q) "Nonqualified Stock Option" or "NQSO" means an option to purchase Shares, granted under Article 6 herein, which is not intended to be an Incentive Stock Option. (r) "Option" means an Incentive Stock Option or a Nonqualified Stock Option. (s) "Option Price" means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee. (t) "Parent" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (u) "Participant" means an Employee of the Company who has outstanding an Award granted under the Plan. (v) "Performance-Based Awards" means the Restricted Stock Awards and Performance Unit Awards granted to selected Covered Employees pursuant to Articles 7 and 8, but which are subject to the terms and conditions set forth in Article 9. All Performance-Based Awards are intended to qualify as "performance-based compensation" under Section 162(m) of the Code. (w) "Performance Criteria" means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria that will be used to establish Performance Goals are limited to the following: pre- or after-tax net earnings, revenue growth, operating income, operating cash flow, return on net assets, return on shareholders' equity, return on assets, return on capital, Share price growth, shareholder returns, gross or net profit margin, earnings per share, price per Share, and market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Committee shall, within the time prescribed by Section 162(m) of the Code, define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant. (x) "Performance Goals" means, for a Performance Period, the goals established in writing by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Goal, the Goal may be expressed in terms of overall Company performance or the performance of an operating unit or community. The Committee, in its discretion, may, within the time prescribed by Section 162(m) of the Code, adjust or modify the calculation of Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants, (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development; and (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions. (y) "Performance Period" means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant's right to, and the payment of, a Performance-Based Award. (z) "Performance Unit" means an Award granted to an Employee pursuant to Article 8 herein. (aa) "Period of Restriction" means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 7 herein. (bb) "Restricted Stock" means an Award granted to a Participant pursuant to Article 7 herein. (cc) "Retirement" means a voluntary termination of employment by a Participant who has less than ten (10) years of service with the Company at or after age sixty-five (65), or voluntary termination at or after age fifty-five (55) for Participants who have at least ten (10) years of service with the Company as of the date of employment termination. (dd) "Shares" means the shares of common stock of Del Webb Corporation. (ee) "Subsidiary" means any corporation in which the Company owns directly, or indirectly through subsidiaries, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns at least fifty percent (50%) of the combined equity thereof. 2.2 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 2.3 Severability. In the event that a court of competent jurisdiction determines that any portion of this Plan is in violation of any statute, common law, or public policy, then only the portions of this Plan that violate such statute, common law, or public policy shall be stricken. All portions of this Plan that do not violate any statute or public policy shall continue in full force and effect. Further, any court order striking any portion of this Plan shall modify the stricken terms as narrowly as possible to give as much effect as possible to the intentions of the parties under this Plan. ARTICLE 3. ADMINISTRATION 3.1 The Committee. The Plan shall be administered by the Human Resources Committee of the Board, or by any other Committee appointed by the Board consisting of not less than two (2) Directors who are not Employees. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors. Except as permitted under Section 16b-3(c)(2)(i)(A), (B), (C), and (D) of the Exchange Act, no member of the Committee shall have received a grant of an Award under the Plan or any similar Plan of the Company or any of its Subsidiaries while serving on the Committee, or shall have so received such a grant at any time within one (l) year prior to his or her service on the Committee, or, if different, for the time period just necessary to fulfill the then current Rule 16b-3 requirements under the Exchange Act. However, if for any reason the Committee does not qualify to administer the Plan, as contemplated by Rule 16b-3 of the Exchange Act, the Board of Directors may appoint a new Committee so as to comply with Rule 16b-3. 3.2 Authority of the Committee. The Committee shall have full power except as limited by law or by the Articles of Incorporation or Bylaws of the Company, and subject to the provisions herein, to determine the size and types of Awards; to determine the terms and conditions of such Awards in a manner consistent with the Plan; to cancel and reissue any Awards granted hereunder in the event the Award lapses for any reason (provided that the Committee shall not have the authority to reprice previously issued and currently outstanding Awards without shareholder approval); to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 14 herein) to amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authorities as identified hereunder. 3.3 Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders or resolutions of the Board of Directors shall be final, conclusive, and binding on all persons, including the Company, its stockholders, Employees, Participants, and their estates and beneficiaries. ARTICLE 4. SHARES SUBJECT TO THE PLAN 4.1 Number of Shares. Subject to adjustment as provided in Section 4.3 herein, the total number of Shares available for grant under the Plan may not exceed One Million Two Hundred Thousand (1,200,000). These One Million Two Hundred Thousand (1,200,000) Shares may be either authorized but unissued or reacquired Shares. 4.2 Lapsed Awards. If any Award granted under this Plan is canceled, terminates, expires, or lapses for any reason, any Shares subject to such Award again shall be available for the grant of an Award under the Plan. 4.3 Adjustments in Authorized Shares. In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, Share combination, or other change in the corporate structure of the Company affecting the Shares, such adjustment shall be made in the number and class of Shares which may be delivered under the Plan, and in the number and class of and/or price of Shares subject to outstanding Options and Restricted Stock granted under the Plan, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; and provided that the number of Shares subject to any Award shall always be a whole number. 4.4 Limitation on Number of Shares Subject to Award. Notwithstanding any provision in the Plan to the contrary, the maximum number of shares of Stock that may be subject to one or more Awards granted to any one Participant over the term of the Plan shall be 400,000. ARTICLE 5. ELIGIBILITY AND PARTICIPATION 5.1 Eligibility. Persons eligible to participate in this Plan include all officers and key Employees of the Company, as determined by the Committee, including Employees who are members of the Board, but excluding Directors who are not Employees 5.2 Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No Employee shall have any right to be granted an Award under this Plan. In addition, nothing in this Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. ARTICLE 6. STOCK OPTIONS 6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Employees at any time and from time to time as shall be determined by the Committee. The Committee shall have discretion in determining the number of Shares subject to Options granted to each Participant. The Committee may grant ISOs, NQSOs, or a combination thereof. Nothing in this Article 6 shall be deemed to prevent the grant of NQSOs in excess of the maximum established by Section 422(d) of the Code. 6.2 Option Agreement. Each Option grant shall be evidenced by an Option Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Option Agreement also shall specify whether the Option is intended to be an ISO within the meaning of Section 422 of the Code, or a NQSO whose grant is intended not to fall under the provisions of Section 422 of the Code. 6.3 Option Price. The Option Price for each grant of an Option shall not be less than one hundred percent (100%) of the Fair Market Value of such Share on the date the Option is granted. 6.4 Duration of Options. Each Option shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. 6.5 Exercise of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant. However, in no event may any Option granted under this Plan become exercisable prior to six (6) months following the date of its grant. 6.6 Payment. Options shall be exercised by the delivery of a written notice of exercise to the Secretary of the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having a Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares which are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price), or (c) by a combination of (a) and (b). The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. The proceeds from such a payment shall be added to the general funds of the Company and shall be used for general corporate purposes. As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s). 6.7 Restrictions on Share Transferability. The Committee shall impose such restrictions on any Shares acquired pursuant to the exercise of an Option under the Plan, as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. 6.8 Termination of Employment Due to Death, Disability, or Retirement. (a) Termination by Death. In the event the employment of a Participant is terminated by reason of death, any outstanding Options granted to that Participant which are vested as of the date of death shall remain exercisable at any time prior to their expiration date, or for one (1) year after the date that employment was terminated, whichever period is shorter, by such person or persons as shall have been named as the Participant's beneficiary, or by such persons that have acquired the Participant's rights under the Option by will or by the laws of descent and distribution. The portion of any outstanding Option which is deemed vested under this Plan as of the date of employment termination shall be determined according to the following guidelines: (i) The portion of the Option which is exercisable as of the date of employment termination shall remain exercisable; (ii) The percentage vesting of the portion of the Option which otherwise would have vested at the end of the calendar year in which employment termination occurs, will equal a fraction, the numerator of which is the number of full weeks of employment during the calendar year in which employment termination occurs, and the denominator of which is fifty-two (52); and (iii) The portion of the Option which is scheduled to vest in a year which begins after the end of the calendar year in which employment termination occurs, and the portion of the Option that does not vest in the year in which employment termination occurs, shall be forfeited by the Participant and returned to the Company (and shall once again be available for grant under the Plan). Any Options which are not vested as of the date of employment termination shall expire immediately, and may not be exercised following such time. (b) Termination by Disability. In the event the employment of a Participant is terminated by reason of Disability, any outstanding Options granted to that Participant which are vested as of the date the Committee determines the definition of Disability to have been satisfied, shall remain exercisable at any time prior to their expiration date, or for one (l) year after the date that the Committee determines the definition of Disability to have been satisfied, whichever period is shorter. The portion of any outstanding Option which is deemed vested as of the date the definition of Disability is determined to have been satisfied by the Committee shall be determined pursuant to the guidelines set forth in Subparagraphs (a)(i) through (a)(iii) of this Section 6.8. Any Options that are not vested as of the date that the Committee determines the definition of Disability to have been satisfied, shall expire immediately, and may not be exercised following such date. (c) Termination by Retirement. In the event the employment of a Participant is terminated by reason of Retirement, any outstanding Options granted to that Participant which are vested as of the effective date of Retirement, shall remain exercisable at any time prior to their expiration date, or for three (3) years after the effective date of Retirement, whichever period is shorter. The portion of any outstanding Option which is deemed vested as of the effective date of Retirement shall be determined pursuant to the guidelines set forth in Subparagraphs a(i) through a(iii) of this Section 6.8. Any Options which are not vested as of the effective date of Retirement shall expire immediately, and may not be exercised following such date. (d) Exercise Limitations on ISOs. In the case of ISOs, the tax treatment prescribed under Section 422 of the Code may not be available if the Options are not exercised within the Section 422 prescribed time periods after each of the various types of employment termination. Notwithstanding the exercise periods described in Subparagraphs (a), (b), and (c) above, the Committee shall have the authority, in its sole discretion, to accelerate the vesting of Options which are outstanding as of the date of employment termination for one of the reasons described in this Section 6.8. 6.9 Termination of Employment for Other Reasons. If the employment of a Participant shall terminate for any reason (other than the reasons set forth in Section 6.8 or for Cause), all Options held by the Participant which are not vested as of the effective date of employment termination immediately shall be forfeited to the Company (and shall once again become available for grant under the Plan). However, the Committee, in its sole discretion, shall have the right to immediately vest all or any portion of such Options, subject to such terms as the Committee, in its sole discretion, deems appropriate. Options which are vested as of the effective date of employment termination may be exercised by the Participant within the period beginning on the effective date of employment termination, and ending three (3) months after such date. If the employment of a Participant shall terminate for Cause, all outstanding Options held by the Participant immediately shall be forfeited to the Company and no additional exercise period shall be allowed, regardless of the vested status of the Options. 6.10 Nontransferability of Options. Each Incentive Stock Option granted under the Plan may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution; each other Option granted under the Plan may be transferable subject to the terms and conditions as may be established by the Committee in accordance with the regulations promulgated under the Exchange Act, or any other applicable law or regulation. Further, all Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. ARTICLE 7. RESTRICTED STOCK 7.1 Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to eligible Employees in such amounts as the Committee shall determine; provided that the total number of Shares of Restricted Stock granted under this Plan shall not exceed One Hundred Thousand (100,000) Shares of Restricted Stock. 7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be evidenced by a Restricted Stock Agreement that shall specify the Period of Restriction, or Periods, the number of Restricted Stock Shares granted, and such other provisions as the Committee shall determine. 7.3 Transferability. Except as provided in this Article 7, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Agreement. However, in no event may any Restricted Stock granted under the Plan become vested in a Participant prior to six (6) months following the date of its grant. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant. 7.4 Other Restrictions. The Committee shall impose such other restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, restrictions based upon the achievement of specific performance goals (Company-wide, divisional, and/or individual), and/or restrictions under applicable Federal or state securities laws; and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions. 7.5 Certificate Legend. In addition to any legends placed on certificates pursuant to Section 7.4 herein, each certificate representing Shares of Restricted Stock granted pursuant to the Plan may bear the following legend: "The sale or other transfer of the Shares of Stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Del Webb Corporation 1995 Executive Long-Term Incentive Plan, and in a Restricted Stock Agreement. A copy of the Plan and such Restricted Stock Agreement may be obtained from the Secretary of Del Webb Corporation." 7.6 Removal of Restrictions. Except as otherwise provided in this Article 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the Period of Restriction. Once the Shares are released from the restrictions, the Participant shall be entitled to have the legend required by Section 7.5 removed from his or her Share certificate. 7.7 Voting Rights. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares. 7.8 Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those Shares while they are so held. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. 7.9 Termination of Employment. If the employment of a Participant shall terminate for any reason, except as determined by the Committee at the time of such termination for any reason other than for Cause, all nonvested Shares of Restricted Stock held by the Participant upon the effective date of employment termination immediately shall be forfeited and returned to the Company (and shall once again become available for grant under the Plan). The number of Shares of Restricted Stock which are deemed vested as of the effective date of employment termination shall be determined pursuant to the guidelines set forth with respect to the vesting of Options, as specified in Sections 6.8 and 6.9 herein. ARTICLE 8. PERFORMANCE UNITS 8.1 Grant of Performance Units. Subject to the terms of the Plan, Performance Units may be granted to eligible Employees at any time and from time to time, as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Performance Units granted to each Participant. 8.2 Value of Performance Units. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units that will be paid out to the Participants. The time period during which the performance goals must be met shall, in all cases, exceed six (6) months in length. 8.3 Earning of Performance Units. After the applicable time period during which the goals must be met, the holder of Performance Units shall be entitled to receive payout on the number of Performance Units earned by the Participant over such period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. 8.4 Form and Timing of Payment of Performance Units. Payment of earned Performance Units shall be made in a single lump sum, within forty-five (45) calendar days following the close of the applicable time period during which the goals must be met. The Committee, in its sole discretion, may pay earned Performance Units in the form of cash or in Shares (or in a combination thereof) which have an aggregate Fair Market Value equal to the value of the earned Performance Units at the close of such period. Prior to the beginning of each time period during which the goals must be met, Participants may elect to defer the receipt of Performance Unit payout upon such terms as the Committee deems appropriate. 8.5 Termination of Employment Due to Death, Disability, Retirement, or Involuntary Termination (without Cause). In the event the employment of a Participant is terminated by reason of death, Disability, Retirement, or involuntary termination without Cause during a Performance Period, the Participant shall receive a prorated payout of the Performance Units. The prorated payout shall be determined by the Committee, in its sole discretion, based upon the guidelines set forth with respect to the vesting of Options, as specified in Sections 6.8 and 6.9 herein, and further adjusted based on the achievement of the preestablished performance goals. Payment of earned Performance Units shall be made at the same time payments are made to Participants who did not terminate employment during the applicable time period during which the goals must be met. 8.6 Termination of Employment for Other Reasons. In the event that a Participant terminates employment with the Company for any reason other than those reasons set forth in Section 8.5, all Performance Units shall be forfeited by the Participant to the Company, and shall once again be available for grant under the Plan. 8.7 Nontransferability. Performance Units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative. ARTICLE 9. PERFORMANCE-BASED AWARDS 9.1 Purpose. The purpose of this Article 9 is to provide the Committee the ability to qualify the Restricted Stock Awards under Article 7 and the Performance Unit Awards under Article 8 as "performance-based compensation" under Section 162(m) of the Code. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall control over any contrary provision contained in Articles 7 or 8. 9.2 Applicability. This Article 9 shall apply only to those Covered Employees selected by the Committee to receive Performance-Based Awards. The Committee may, in its discretion, grant Restricted Stock Awards or Performance Unit Awards to Covered Employees that do not satisfy the requirements of this Article 9. The designation of a Covered Employee as a Participant for a Performance Period shall not in any manner entitle the Participant to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant for a particular Performance Period shall not require designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of one Covered Employee as a Participant shall not require designation of any other Covered Employees as a Participant in such period or in any other period. 9.3 Discretion of Committee with Respect to Performance Awards. With regard to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period, the type of Performance-Based Awards to be issued, the kind and/or level of the Performance Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary or any division or business unit thereof. 9.4 Payment of Performance Awards. Unless otherwise provided in the relevant Award Agreement, a Participant must be employed by the Company or a Subsidiary on the last day of the Performance Period to be eligible for a Performance Award for such Performance Period. Furthermore, a Participant shall be eligible to receive payment under a Performance- Based Award for a Performance Period only if the Performance Goals for such period are achieved. In determining the actual size of an individual Performance-Based Award, the Committee may reduce or eliminate the amount of the Performance-Based Award earned for the Performance Period, if in its sole and absolute discretion, such reduction or elimination is appropriate. 9.5 Maximum Award Payable. Notwithstanding any provision contained in the Plan to the contrary, the maximum Performance-Based Award payable to any one Participant under the Plan for a Performance Period is Seventy-five Thousand (75,000) Shares, or in the event the Performance-Based Award is paid in cash, such maximum Performance-Based Award shall be determined by multiplying Seventy-five Thousand (75,000) by the Fair Market Value of one Share as of the date of grant of the Performance-Based Award. ARTICLE 10. BENEFICIARY DESIGNATION Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Human Resource Department of the Company during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. ARTICLE 11. DEFERRALS The Committee may permit a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option, the lapse or waiver of restrictions with respect to Restricted Stock, or the satisfaction of any requirements or goals with respect to Performance Units. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals. ARTICLE 12. RIGHTS OF EMPLOYEES 12.1 Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. For purposes of the Plan, transfer of employment of a Participant between the Company and any one of its Subsidiaries (or between Subsidiaries) shall not be deemed a termination of employment. 12.2 Participation. No Employee shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. ARTICLE 13. CHANGE IN CONTROL Upon the occurrence of a Change in Control, unless otherwise specifically prohibited by the terms of Article 17 herein: (a) Any and all Options granted hereunder shall become immediately exercisable; (b) Any restriction periods and restrictions imposed on Restricted Shares shall lapse, and within ten (10) business days after the occurrence of a Change in Control, the stock certificates representing Shares of Restricted Stock, without any restrictions or legend thereon, shall be delivered to the applicable Participants; (c) The target value attainable under all Performance Units shall be deemed to have been fully earned for the entire Performance Period as of the effective date of the Change in Control, except that all Performance Units which shall have been outstanding less than six (6) months on the effective date of the Change in Control shall not be deemed to have earned the target value; and (d) Subject to Article 14 herein, the Committee shall have the authority to make any modifications to the Awards as determined by the Committee to be appropriate before the effective date of the Change in Control. ARTICLE 14. AMENDMENT, MODIFICATION, AND TERMINATION 14.1 Amendment, Modification, and Termination. With the approval of the Board, at any time and from time to time, the Committee may terminate, amend, or modify the Plan. However, without the approval of the stockholders of the Company (as may be required by the Code, by the insider trading rules of Section 16 of the Exchange Act, by any national securities exchange or system on which the Shares are then listed or reported, or by a regulatory body having jurisdiction with respect hereto) no such termination, amendment, or modification may: (a) Increase the total amount of Shares which may be issued under this Plan, except as provided in Section 4.3 herein; or (b) Change the class of Employees eligible to participate in the Plan; or (c) Materially increase the cost of the Plan or materially increase the benefits to Participants; or (d) Extend the maximum period after the date of grant during which Options may be exercised. 14.2 Awards Previously Granted. No termination, amendment, or modification of the Plan shall in any manner adversely affect any Award previously granted under the Plan, without the written consent of the Participant holding such Award. ARTICLE 15. WITHHOLDING 15.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any grant, exercise, or payment made under or as a result of this Plan. 15.2 Share Withholding. With respect to withholding required upon the exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event, Participants shall satisfy all federal, state and local tax withholding requirements by having the Company withhold Shares (to the extent that Shares are issued pursuant to the Award) having a Fair Market Value on the date the tax is to be determined equal to the maximum marginal total tax which would be imposed on the transaction. ARTICLE 16. SUCCESSORS All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. ARTICLE 17. REQUIREMENTS OF LAW 17.1 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision set forth in the Plan, if required by the then current Rule 16b-3 of the Exchange Act, any "derivative security or equity security" offered pursuant to the Plan to any Insider may not be sold or transferred for at least six (6) months after the date of grant of such Award, except in the case of the death, disability, or termination of employment of the Participant. The terms "equity security" and "derivative security" shall have the meanings ascribed to them in the then current Rule 16b-3 of the Exchange Act. 17.2 Governing Law. The Plan, and all agreements hereunder, shall be governed by the laws of the State of Delaware. EX-10.26 7 1995 DIRECTOR STOCK PLAN EXHIBIT 10.26 DEL WEBB CORPORATION 1995 DIRECTOR STOCK PLAN ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION 1.1 Establishment of the Plan. Del Webb Corporation, a Delaware corporation (the "Company"), hereby establishes a stock plan for Nonemployee Directors, to be known as the "Del Webb Corporation 1995 Director Stock Plan" (the "Plan"), as set forth in this document. The Plan permits the deferral of Directors' Annual Retainers into grants of Nonqualified Stock Options and Restricted Stock, and sets forth the terms of annual grants of Stock Options to Nonemployee Directors, subject to the terms and provisions set forth herein. Upon approval by the Board of Directors of the Company, and conditioned upon subsequent approval of the Plan by the shareholders of the Company, the Plan shall become effective as of November 8, 1995 (the "Effective Date"), and shall remain in effect as provided in Section 1.3 herein. Without limiting the immediately preceding sentence, the Plan and the grant of Awards thereunder will be void ab initio, and of no force and effect, if the Plan is not approved by the Company's shareholders on or before November 8, 1995. 1.2 Purpose of the Plan. The purpose of the Plan is to promote the achievement of long-term objectives of the Company by linking the personal interests of Nonemployee Directors to those of Company shareholders, and to attract and retain Nonemployee Directors of outstanding competence. 1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as described in Section 1.1 herein, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 9 or Section 10.3 herein, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan on or after November 7, 2005. ARTICLE 2. DEFINITIONS AND CONSTRUCTION 2.1 Definitions. Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: (a) "Annual Retainer" means the annual fee payable by the Company to a Director, including amounts payable for service as a chairperson of a committee of the Board, but excluding meeting fees. (b) "Award" means, individually or collectively, a grant of Nonqualified Stock Options or Restricted Stock under this Plan. (c) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (d) "Board" or "Board of Directors" means the Board of Directors of Del Webb Corporation, and includes any committee of the Board of Directors designated by the Board to administer part or all of this Plan. (e) "Change in Control" of the Company shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company's then outstanding Voting Securities (defined as any securities of the Company which vote generally in the election of directors), or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all the Company's assets. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (g) "Committee" means the Human Resources Committee of the Board of Directors, or any other committee appointed by the Board to administer this Plan. (h) "Company" means Del Webb Corporation, a Delaware corporation, or any successor thereto as provided in Section 10.2 herein. (i) "Director" means any individual who is a member of the Board of Directors of the Company. (j) "Disability" means a permanent and total disability, within the meaning of Code Section 22(e)(3). To the extent permitted pursuant to Section 16 of the Exchange Act, Disability shall be determined by the Board in good faith, upon receipt of sufficient competent medical advice from one or more individuals, selected by the Board, who are qualified to give professional medical advice. (k) "Employee" means any full-time, nonunion, salaried employee of the Company. For purposes of this Plan, an individual whose only employment relationship with the Company is as a Director, shall not be deemed to be an Employee. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor Act thereto. (m) "Fair Market Value" means the average of the highest and lowest quoted selling prices for Shares on the relevant date, or (if there were no sales on such date) the weighted average of the means between the highest and lowest quoted selling prices on the nearest day before and the nearest day after the relevant date, as prescribed by Treasury Regulation Section 20.2031-2(b)(2), as reported in the Wall Street Journal or a similar publication selected by the Committee. (n) "Grant Date" means the tenth (10th) day following the public release of the Company's fiscal year-end earnings information. (o) "Nonemployee Director" means any individual who is a member of the Board of Directors of the Company, but who is not otherwise an Employee of the Company. (p) "Nonqualified Stock Option" or "NQSO" means an option to purchase Shares, granted under Articles 6 or 7 herein, which is not intended to be an incentive stock option qualifying under Code Section 422. (q) "Option" means a Nonqualified Stock Option under this Plan. (r) "Participant" means a Nonemployee Director of the Company who has outstanding an Award granted under the Plan. (s) "Period of Restriction" means the period during which the transfer of Shares of Restricted Stock is limited in some way, and the Shares are subject to a substantial risk of forfeiture, as provided in Article 6 herein. (t) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d). (u) "Restricted Stock" means an Award granted to a Nonemployee Director pursuant to Article 6 herein. (v) "Shares" means the shares of common stock of Del Webb Corporation. 2.2 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 2.3 Severability. In the event that a court of competent jurisdiction determines that any portion of this Plan is in violation of any statute, common law, or public policy, then only the portions of this Plan that violate such statute, common law, or public policy shall be stricken. All portions of this Plan that do not violate any statute or public policy shall continue in full force and effect. Further, any court order striking any portion of this Plan shall modify the stricken terms as narrowly as possible to give as much effect as possible to the intentions of the parties under this Plan. ARTICLE 3. ADMINISTRATION 3.1 The Committee. The Plan shall be administered by the Committee, subject to the restrictions set forth in this Plan. 3.2 Administration by the Committee. The Committee shall have full power, discretion, and authority to interpret and administer this Plan in a manner which is consistent with the Plan's provisions. However, in no event shall the Committee have the power to (i) determine Plan eligibility, or to determine the number, the price, the vesting period, or the timing of Awards to be made under the Plan to any Participant, or (ii) take an action that would result in the Awards not being treated as "formula awards" within the meaning of Rule 16b- 3(c)(ii) or any successor provision promulgated pursuant to the Exchange Act. 3.3 Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of the Plan, and all related orders or resolutions of the Board, shall be final, conclusive, and binding on all persons, including the Company, its stockholders, employees, Participants, and their estates and beneficiaries. ARTICLE 4. SHARES SUBJECT TO THE PLAN 4.1 Number of Shares. Subject to adjustment as provided in Section 4.3 herein, the total number of Shares available for grant under the Plan may not exceed Seventy-Five Thousand (75,000). The Shares issued as Restricted Stock and the Shares issued pursuant to the Options exercised under this Plan may be authorized and unissued Shares or Shares reacquired by the Company, as determined by the Committee. 4.2 Lapsed Awards. If any Option or Share of Restricted Stock granted under this Plan terminates, expires, or lapses for any reason, any Shares subject to purchase pursuant to such Option and any such Shares of Restricted Stock again shall be available for the grant under the Plan. 4.3 Adjustments in Authorized Shares. In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, Share combination, or other change in the corporate structure of the Company affecting the Shares, the number and/or type of Shares subject to any outstanding Award, the Option exercise price per Share under any outstanding Option, will be automatically adjusted so that the proportionate interests of the Participants will be maintained as before the occurrence of such event. Any adjustment pursuant to this Section 4.3 will be conclusive and binding for all purposes of this Plan. ARTICLE 5. ELIGIBILITY AND PARTICIPATION 5.1 Eligibility. Persons eligible to participate in this Plan are limited to Nonemployee Directors. 5.2 Actual Participation. All eligible Nonemployee Directors shall receive grants of Options pursuant to Article 7 herein, and shall be given the opportunity to defer all or a portion of their Annual Retainers into Options and/or Restricted Stock, pursuant to the terms and provisions set forth in Article 6 herein. ARTICLE 6. DEFERRAL OF ANNUAL RETAINERS 6.1 Deferral Election. On or before December 31 of each year during the term of this Plan, each Nonemployee Director shall have the ability to elect to defer any portion or all of his or her Annual Retainer, pursuant to the terms of this Article 6. Deferrals may, at the discretion of the Director, be made in the form of discounted Options or Restricted Stock, or combination thereof. The deferral election shall be irrevocable, and shall be made by means of a written notice delivered to the Secretary of the Company on or before December 31 of the calendar year which ends prior to the beginning of the applicable fiscal year. The deferral election shall state the percentage and/or dollar amount of the Director's Annual Retainer, which is to be deferred, and shall specify whether the deferral is to be in the form of discounted Stock Options or Restricted Stock, or combination thereof. Each deferral election by a Director shall correspond to the Annual Retainer which is to be earned by the Director for the Company's fiscal year which begins in the first calendar year following the calendar year in which the deferral election is made. For example, a deferral election made by a Director on December 31, 1995 will correspond to a deferral of an Annual Retainer which is to be earned by the Director during the fiscal year beginning July 1, 1996, and ending June 30, 1997. The effective date of the Award grant relating to Annual Retainer deferrals shall be the Grant Date which falls in the first calendar year following the calendar year in which the applicable deferral election is made. Accordingly, the Option price of Stock Options granted pursuant to Article 6 of this Plan shall equal seventy-five percent (75%) of the Fair Market Value of Shares on the Grant Date. Awards of Restricted Stock pursuant to Annual Retainer deferrals under this Plan also shall be made on the Grant Date. 6.2 Terms of Stock Option Deferrals. (a) Number of Shares under Option. The number of shares which may be purchased under Options pursuant to Annual Retainer deferrals shall be derived according to the following formula: Number of Shares = Amount of Deferral ------------------------------------------------------- 0.25 x Fair Market Value of Shares at Grant Date The Option price for each Share granted pursuant to an Annual Retainer deferral shall equal seventy-five percent (75%) of the Fair Market Value of a Share on the Grant Date. Options are issued using this formula to give the Director who is deferring his or her Annual Retainer an equivalent economic value. (b) Vesting of Options. Options granted under this Article 6 shall vest one hundred percent (100%) at the end of the sixth month following the date of grant of the Options. (c) Individual Award Agreement. Each Option grant shall be evidenced by an Individual Award Agreement that will not include any terms or conditions that are inconsistent with the terms and conditions of this Plan. (d) Duration of Options. Unless earlier terminated, forfeited, or surrendered pursuant to a provision of this Plan, each Option shall expire on the tenth (10th) anniversary date of its grant. (e) Payment. Options shall be exercised by the delivery of a written notice of exercise to the Secretary of the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. The Option price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having a Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares tendered upon Option exercise have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price), or (c) by a combination of (a) and (b). The proceeds from such a payment shall be added to the general funds of the Company and shall be used for general corporate purposes. (f) Restrictions on Share Transferability. To the extent necessary to ensure that Awards granted hereunder comply with applicable law, the Committee shall impose restrictions on any Shares acquired pursuant to the exercise of an Option under this Plan, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. (g) Termination of Service on Board of Directors Due to Death, Disability, or Retirement. In the event the service of a Participant on the Board is terminated by reason of death, Disability, or retirement from the Board after attaining age 72, and if a portion of the Participant's Award is not fully vested as of the date of termination of service on the Board, then the portion of the Participant's Award which is exercisable as of the date of termination of service on the Board shall be determined by prorating the Award according to the following guidelines: (i) The portion of the Award which is exercisable as of the date of termination of service on the Board shall remain exercisable; (ii) The percentage vesting of the portion of the Award which otherwise would have vested at the end of the Company's fiscal year in which termination of service on the Board occurs, will equal a fraction, the numerator of which is the number of full weeks of service on the Board during the Company's fiscal year in which termination occurs, and the denominator of which is fifty-two (52); and (iii) The portion of the Award which is scheduled to vest in a year which begins after the end of the Company's fiscal year in which termination of service on the Board occurs, and the portion of the Award that does not vest in the Company's fiscal year in which termination of service on the Board occurs, shall be forfeited by the Participant, and returned to the Company (and shall once again be available for grant under the Plan). To the extent an Option is exercisable as of the date of death (or as of the date of termination by reason of Disability or retirement from the Board after attaining age 72, as applicable), it shall remain exercisable at any time prior to its expiration date, or for one (1) year after the date of death (or the date of termination by reason of Disability or retirement from the Board after attaining age 72, as applicable), whichever period is shorter, by the Participant or such person or persons as shall have been named as the Participant's legal representative or beneficiary, or by such persons that have acquired the Participant's rights under the Option by will or by the laws of descent and distribution. (h) Termination of Service on Board of Directors for Other Reasons. If the service of the Participant on the Board shall terminate for any reason other than death, Disability, or retirement from the Board after attaining age 72, any outstanding Options held by the Participant that are not exercisable as of the date of termination immediately shall be forfeited to the Company (and shall once again become available for grant under the Plan). To the extent an Option is exercisable as of the date of termination of the Participant's service on the Board under this Section 6.2(h), it shall remain exercisable at any time prior to its expiration date, or for one (1) year after the date the Participant's service on the Board terminates, whichever period is shorter. (i) Nontransferability of Options. No Option granted under this Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the laws of descent and distribution, or pursuant to Section 10.1 herein. Further, all Options granted to a Participant under this Plan shall be exercisable during his or her lifetime only by such Participant. 6.3 Terms of Restricted Stock Deferrals. (a) Grants of Restricted Stock. The number of shares of Restricted Stock which shall be granted pursuant to an Annual Retainer deferral shall be derived according to the following formula: Number of Shares = Amount of Deferral ------------------------------------------------------- Fair Market Value of Shares at Grant Date Awards of Restricted Stock under this Plan shall be made on the Grant Date which falls within the first (1st) calendar year following the calendar year in which the applicable deferral election was made. (b) Restricted Stock Agreement. Each Restricted Stock grant shall be evidenced by a Restricted Stock Agreement that shall specify the Period of Restriction, or Periods, the number of Restricted Stock Shares granted, and such other provisions as the Committee shall determine. (c) Transferability. Except as provided in this Section 6.3(c), the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated (other than pursuant to Section 10.1 herein) until the end of the applicable Period of Restriction, as specified in the Restricted Stock Agreement. The Period of Restriction for Shares of Restricted Stock awarded pursuant to this Article 6 shall end six (6) months following the Grant Date on which such Shares were issued. All rights with respect to the Restricted Stock granted to a Director under the Plan shall be available during his or her lifetime only to such Director. (d) Certificate Legend. Each certificate representing Shares of Restricted Stock granted pursuant to the Plan may bear the following legend: "The sale or other transfer of the Shares of Stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Del Webb Corporation 1995 Director Stock Plan, and in a Restricted Stock Agreement. A copy of the Plan and such Restricted Stock Agreement may be obtained from the Secretary of Del Webb Corporation." (e) Removal of Restrictions. Except as otherwise provided in this Plan, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the Period of Restriction. Once the Shares are released from the restrictions, the Director shall be entitled to have the legend required by Section 6.3(d) removed from his or her Share certificate. (f) Voting Rights. During the Period of Restriction, Directors holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares. (g) Dividends and Other Distributions. During the Period of Restriction, Directors holding Shares of Restricted Stock granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those Shares while they are so held. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. (h) Termination of Service on Board of Directors Due to Death, Disability, or Retirement. In the event that a Director's service on the Board terminates prior to the end of the Period of Restriction by reason of death, Disability, or retirement from the Board after attaining age 72, then the percentage vesting of the Shares of Restricted Stock shall be determined according to a fraction; the numerator of which is the number of full weeks of service on the Board between the applicable Grant Date and the date the Director's service on the Board terminates, and the denominator of which is twenty-six (26). Within thirty (30) days after termination of service on the Board, the Director (or his or her legal representative) shall return to the Company all of the certificates representing Shares of Restricted Stock. As soon as practicable thereafter, the Company shall issue a new certificate representing the number of vested Shares to which the Director is entitled. (i) Termination of Service on Board of Directors for Other Reasons. If the service of a Director on the Board terminates prior to the end of the Period of Restriction for reasons other than death, Disability, or retirement from the Board after attaining age 72, then all Shares of Restricted Stock that are not vested as of the date the Director's service on the Board terminates shall be forfeited to the Company (and shall once again become available for grant under the Plan). Within thirty (30) days after the termination of service on the Board, the Director shall return to the Company all of the certificates representing his or her Shares of Restricted Stock. ARTICLE 7. ANNUAL OPTION GRANTS 7.1 Annual Grant of Options. Subject to the limitation on the number of Shares which may be awarded under this Plan, each Nonemployee Director shall be granted an Option to purchase two thousand (2,000) Shares upon each November 20 of each calendar year commencing in 1995 (less the number of shares granted to the Director under the Del Webb Corporation Director Stock Plan during each such calendar year). 7.2 Limitation on Grant of Options. Other than the grant of Options set forth in Article 6 and in Section 7.1, no additional Options shall be granted under this Plan. 7.3 Individual Award Agreement. Each Option grant shall be evidenced by an Individual Award Agreement that will not include any terms or conditions that are inconsistent with the terms and conditions of this Plan. 7.4 Option Price. The purchase price per Share available for purchaser under an Option granted pursuant to this Article 7 shall be equal to the Fair Market Value of such Share on the date the Option is granted. 7.5 Duration of Options. Unless earlier terminated, forfeited, or surrendered pursuant to a provision of this Plan, each Option granted under this Article 7 shall expire on the tenth (10th) anniversary date of its grant. 7.6 Vesting of Shares Subject to Option. Participants shall be entitled to exercise Options granted under this Article 7 at any time and from time to time, within the time period beginning six (6) months after grant of the Option, and ending ten (10) years after grant of the Option, and according to the following vesting schedule: one-third of the Options shall vest on the anniversary date of date of grant of the Options, and one-third of the Options shall vest on each of the second and third anniversaries of the date of grant of the Options. 7.7 Payment. Options granted under this Article 7 shall be exercised in the manner set forth in Section 6.2(e) herein. 7.8 Restrictions on Share Transferability. To the extent necessary to ensure that Options granted under this Article 7 comply with applicable law, the Board shall impose restrictions on any Shares acquired pursuant to the exercise of an Option under this Article 7, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. 7.9 Termination of Employment Due to Death, Disability, or Retirement. In the event the service of a Participant on the Board is terminated by reason of death, Disability, or retirement from the Board after attaining age 72, and if a portion of the Participant's Award is not fully vested as of the date of termination of service on the Board, then the portion of the Participant's Award which is exercisable as of the date of termination of service on the Board shall be determined according to the guidelines set forth in Section 6.2(g) herein. 7.10 Termination of Service on the Board of Directors for Other Reasons. If the service of a Participant on the Board shall terminate for any reason other than for death, Disability or retirement from the Board after attaining age 72, any outstanding Options held by the Participant that are not exercisable as of the date of termination shall be governed by the guidelines set forth in Section 6.2(h) herein. 7.11 Nontransferability of Options. No Option granted under this Article 7 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, or pursuant to Section 10.1 herein. Further, all Options granted to a Participant under this Article 7 shall be exercisable during his or her lifetime only by such Participant. ARTICLE 8. CHANGE IN CONTROL In the event of a Change in Control of the Company, all Awards granted under this Plan that are still outstanding and not yet vested, shall become immediately one hundred percent (100%) vested in each Participant, as of the first date that the definition of Change in Control has been fulfilled, and shall remain as such for the remaining life of the Award, as such life is provided herein, and within the provisions of the related individual award agreements entered into with each Participant. All Options that are exercisable as of the effective date of the Change in Control shall remain as such for the remaining life of the Options. ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION 9.1 Amendment, Modification, and Termination. Subject to the terms set forth in this Section 9.1, the Committee may terminate, amend, or modify this Plan at any time and from time to time; provided, however, that shareholder approval is required for any Plan amendment that would materially increase the benefits accruing to Participants under this Plan, materially increase the number of securities which may be issued under this Plan, or materially modify the requirements with respect to eligibility for participation in this Plan; and provided, further, that Plan provisions relating to the amount, price, and timing of securities to be awarded under this Plan may not be amended more than once every six (6) months, other than to comport with changes in the Code or the regulations promulgated thereunder. 9.2 Awards Previously Granted. Unless required by law, no termination, amendment, or modification of this Plan shall in any manner adversely affect any Award previously granted under this Plan, without the written consent of the Participant holding such Award. ARTICLE 10. MISCELLANEOUS 10.1 Beneficiary Designation. Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in the event of his or her death. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during his or her lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. 10.2 Successors. All obligations of the Company under this Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 10.3 Requirements of Law. The granting of Awards under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision set forth in this Plan, the Committee may, at its sole discretion, terminate, amend, or modify this Plan in any way necessary to comply with the applicable requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission as interpreted pursuant to no-action letters and interpretive releases. 10.4 Governing Law. This Plan, and all agreements hereunder, shall be governed by the laws of the State of Delaware. EX-10.27 8 1995 EXECUTIVE MANAGEMENT INCENTIVE PLAN EXHIBIT 10.27 DEL WEBB CORPORATION 1995 EXECUTIVE MANAGEMENT INCENTIVE PLAN ARTICLE 1. ESTABLISHMENT, AND PURPOSE, AND DURATION 1.1 Establishment of the Plan. Del Webb Corporation, a Delaware corporation (the "Company"), hereby establishes an annual incentive plan to be known as the "Del Webb Corporation 1995 Executive Management Incentive Plan" (the "Plan"). 1.2 Purpose of the Plan. The Plan is designed to (i) recognize and reward on an annual basis select Company executives for their contributions to the overall success of the Company, and (ii) qualify compensation paid under the Plan as "performance-based compensation" as that term is defined in Section 162(m) of the Internal Revenue Code of 1986 (the "Code") and the regulations thereunder. 1.3 Duration of the Plan. Subject to approval by the Company's stockholders, the Plan will commence as of July 1, 1995. If the Plan is not approved by the Company's stockholders, the Plan will not be effective and any grants made under the Plan prior to that date will be void. No award may be made under the Plan after the date the Plan terminates, but awards made prior to that date may extend beyond that date. ARTICLE 2. DEFINITIONS AND CONSTRUCTION 2.1 Definitions. Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: (a) "Award" means the agreement of the Company to pay compensation to a Participant upon the attainment of specified Performance Goals. (b) "Award Agreement" means the written agreement evidencing the terms and conditions of an Award. (c) "Board" or "Board of Directors" means the Board of Directors of Del Webb Corporation. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (e) "Committee" means the Human Resources Committee of the Board or the committee appointed by the Board pursuant to Article 3 to administer the Plan. (f) "Company" means Del Webb Corporation, a Delaware corporation, or any successor thereto. (g) "Covered Employee" means an Employee who is a "covered employee" within the meaning of Section 162(m) of the Code. (h) "Director" means any individual who is a member of the Board of Directors of the Company. (i) "Employee" means any full-time, nonunion employee of the Company. Directors who are not otherwise employed by the Company shall not be considered Employees under this Plan. (j) "Participant" means a Covered Employee who is designated by the Committee to participate in the Plan for a Performance Period pursuant to Article 4. (k) "Performance Criteria" means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria that will be used to establish Performance Goals are limited to the following: pre- or after-tax net earnings, revenue growth, operating income, operating cash flow, return on net assets, return on shareholders' equity, return on assets, return on capital, Share price growth, shareholder returns, gross or net profit margin, earnings per Share, price per Share, and market share, any of which may be measured either in absolute terms, or as compared to any incremental increase, or as compared to results of a peer group. The Committee shall, within the time prescribed by Section 162(m) of the Code, define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant. (l) "Performance Goals" means, for a Performance Period, the goals established in writing by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Goal, the Goal may be expressed in terms of overall Company performance or the performance of an operating unit or community. The Committee, in its discretion, may, within the time prescribed by Section 162(m) of the Code, adjust or modify the calculation of Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants, (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development; and (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions. (m) "Performance Period" means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant's right to, and the payment of, compensation under the Plan. (n) "Shares" means the shares of common stock of Del Webb Corporation. 2.2 Severability. In the event that a court of competent jurisdiction determines that any portion of this Plan is in violation of any statute, common law, or public policy, then only the portions of this Plan that violate such statute, common law, or public policy shall be stricken. All portions of this Plan that do not violate any statute or public policy shall continue in full force and effect. Further, any court order striking any portion of this Plan shall modify the stricken terms as narrowly as possible to give as much effect as possible to the intentions of the parties under this Plan. ARTICLE 3. ADMINISTRATION 3.1 The Committee. The Plan shall be administered by the Human Resources Committee of the Board, or by any other Committee appointed by the Board consisting of not less than two (2) Directors who are not Employees. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors. 3.2 Authority of the Committee. The Committee shall have all the authority that is necessary or helpful to enable it to discharge its responsibilities under the Plan. Without limiting the generality of the preceding sentence, the Committee shall have the exclusive right to interpret the Plan, to determine eligibility for participation in the Plan, to decide all questions concerning eligibility for and the amount of Awards payable under the Plan, to establish and administer the Performance Goals and certify whether, and to what extent, they are attained, to construe any ambiguous provisions of the Plan, to correct any default, to supply any omission, to reconcile any inconsistency, to issue administrative guidelines as an aide to the administration of the Plan, to make regulations for carrying out the Plan, and to decide any and all questions arising in the administration, interpretation, and application of the Plan. 3.3 Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders or resolutions of the Board of Directors shall be final, conclusive, and binding on all persons, including the Company, its stockholders, Employees, Participants, and their estates and beneficiaries. 3.4 Section 162(m) Compliance. This Plan shall be administered to comply with Section 162(m) of the Code and, if any provisions of the Plan cause any Award to not qualify as performance-based compensation under Section 162(m) of the Code, that provision shall be stricken from this Plan, but the other provisions of this Plan shall remain in effect. Any action striking any portion of this Plan shall modify the stricken terms as narrowly as possible to give as much effect as possible to the intentions of the parties under this Plan. Furthermore, if any portion of the Plan or any Award Agreement conflicts with Section 162(m) or the regulations issued thereunder, the provisions of Section 162(m) and such regulations shall control. ARTICLE 4. ELIGIBILITY AND PARTICIPATION 4.1 Eligibility. Participation is limited in any fiscal year to Employees who the Committee concludes will be Covered Employees for such year. 4.2 Actual Participation. From among the Covered Employees eligible to participate each year, the Committee may select those to receive Awards in any one or more Performance Periods under the Plan. ARTICLE 5. FORM OF AWARDS. Awards shall be paid in cash. The Committee may, in its sole discretion, subject any Award to such terms, conditions, restrictions, or limitations (including but not limited to restrictions on transferability, vesting, termination of employment for cause or otherwise, or change of control) that the Committee deems to be appropriate, provided that such terms are not inconsistent with the terms of the Plan or Section 162(m) of the Code. All Awards will be evidenced by an Award Agreement. ARTICLE 6. DETERMINATION AND LIMITATION OF AWARDS. 6.1 Determination of Awards. Within the time prescribed by Section 162(m) of the Code for each Performance Period, the Committee shall, in its sole discretion, determine and establish: (a) the Performance Goals applicable to the Performance Period for each Participant; (b) the total dollar amount payable to each Participant under the Award based upon attaining the Performance Goals; and (c) such other terms and conditions of such Award as the Committee determines to be appropriate under the circumstances. Such determinations shall be reflected in the minutes of a Committee meeting, or in a written action adopted without the necessity of a meeting, and also shall be documented in the Award Agreement. 6.2 Limitations of Awards. If only one Performance Goal is established for a Performance Period, the Performance Goal for such Performance Period must be achieved in order for a Participant to receive payment for an Award for such Performance Period. If more than one Performance Goal is established for a Performance Period, one or more of the Performance Goals for such Performance Period must be achieved in order for a Participant to receive payment for an Award for such Performance Period, all as set forth in accordance with the terms of the Award Agreement. Furthermore, the Committee is authorized at any time during or after a Performance Period to reduce or eliminate (but not to increase) the amount of an Award payable to any Covered Employee for a Performance Period for any reason. 6.3 Maximum Awards. Notwithstanding any provision in the Plan to the contrary, the maximum Award payable to any Covered Employee under the Plan for a Performance Period shall be $2,000,000.00. 6.4 Employment Continuation. Unless otherwise determined by the Committee, provided in the Award Agreement, or required by applicable law, no payment pursuant to this Plan shall be made to a Participant unless the Participant is employed by the Company on the last day of the Performance Period. 6.5 Deferrals of Payments. In the exercise of its discretion, the Committee may allow a Participant to elect to defer the receipt of all or any portion of an Award. Such deferral shall be made pursuant to the terms and conditions set forth in the Del Webb Corporation Deferred Compensation Plan. ARTICLE 7. RIGHTS OF EMPLOYEES 7.1 Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. 7.2 Participation. No Employee shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. ARTICLE 8. AMENDMENT, MODIFICATION, AND TERMINATION The Committee may suspend or terminate the Plan at any time with or without prior notice. In addition, the Committee may from time to time and with or without prior notice, amend or modify the Plan in any manner, but may not without shareholder approval adopt any amendment that would require the vote of shareholders of the Company pursuant to Section 162(m) of the Code. ARTICLE 9. WITHHOLDING The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any grant, exercise, or payment made under or as a result of this Plan. ARTICLE 10. SUCCESSORS All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. ARTICLE 11. REQUIREMENTS OF LAW 11.1 Requirements of Law. The granting of Awards under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies as may be required. 11.2 Governing Law. The Plan, and all agreements hereunder, shall be governed by the laws of the State of Delaware. EX-21 9 ACTIVE SUBSIDIARIES ACTIVE SUBSIDIARIES AND ASSOCIATED COMPANIES OF DEL WEBB CORPORATION as of August 30, 1995 Asset One Corp. DW Aviation Co. Asset Four Corp. Fairmount Mortgage, Inc. Coventry of California, Inc. Kingswood Parke Community Del Webb California Corp. Association (Non-Profit) Del Webb Architectural Services, Inc. The Foothills Community Association Del Webb Commercial Properties (Non-Profit) Corporation The Glen Harbor Business Park Del Webb Communities, Inc. Property Owners Association Del Webb Community Management Co. (Non-Profit) Del Webb Conservation Holding Corp. Marina Operations Corp. Del Webb Construction Services Co. New Mexico Asset Corporation Del Webb Home Construction, Inc. North Central Development Co. Del Webb Homes, Inc. Del Webb Kingswood Parke, Inc. Sun City Hilton Head Community Del Webb Lakeview Corporation Association, Inc. (Non-Profit) Del Webb Midatlantic Corp. Sun City Palm Springs Charities, Del Webb Property Corp. Inc. (Non-Profit) Del Webb Southwest Corp. Sun City Palm Springs Community Association (Non-Profit) Del Webb's Contracting Services Inc. Sun City Roseville Community Del Webb's Contracting Services of Association, Inc. (Non-Profit) Tucson, Inc. Sun City Sales Corporation Del Webb's Coventry Homes Construction Sun City Summerlin Community Co. Association, Inc. (Non-Profit) Del Webb's Coventry Homes, Inc. Sun City Title Agency Co. Del Webb's Coventry Homes of Nevada, Sun City Vistoso Community Inc. Association, Inc. (Non-Profit) Del Webb's Coventry Homes Construction Sun State Insulation Co., Inc. of Tucson Co. Del Webb's Coventry Homes of Tucson, Terravita Commercial Corp. Inc. Terravita Community Association, Del Webb's Stetson Hills, Inc. Inc. (Non-Profit) Del Webb's Sun City Realty, Inc. Terravita Corp. Terravita Home Construction Co. Del E. Webb Cactus Development Corp. Trovas Company Del E. Webb Development Co., L.P. Trovas Construction Co. Del E. Webb Finance Company Del E. Webb Financial Corporation Del E. Webb Foothills Corporation Del E. Webb Glen Harbor Development Corporation Del E. Webb Jordan Development Corp. Del E. Webb McIntyre Development Corp. Del E. Webb McQueen Development Corp. Del E. Webb Power Development Corp. Del E. Webb Spring Creek Corporation EX-23 10 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 Consent of Independent Certified Public Accountants --------------------------------------------------- The Board of Directors Del Webb Corporation: We consent to incorporation by reference in the Registration Statements (Nos. 33-12023, 2-78336, 33-32309, 33-10228, 33-46720, 33-46704, 33-6564 and 33-52725 on Forms S-8 and No. 33-60089 on Form S-3) of Del Webb Corporation of our report dated August 18, 1995, relating to the consolidated balance sheets of Del Webb Corporation and subsidiaries as of June 30, 1995 and 1994 and the related consolidated statements of earnings, shareholders' equity and cash flows and related schedule for each of the years in the three-year period ended June 30, 1995 which appears in the June 30, 1995 annual report on Form 10-K of Del Webb Corporation. Our report refers to a change in the method of accounting for income taxes. KPMG Peat Marwick LLP Phoenix, Arizona September 5, 1995 EX-27 11 ARTICLE 5 FDS FOR 10-K
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1995 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE YEAR ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS YEAR JUN-30-1995 JUL-01-1994 JUN-30-1995 1 18,900 0 21,995 0 828,752 0 47,528 18,202 925,050 0 491,258 16 0 0 229,326 925,050 800,574 803,119 645,985 646,052 113,235 0 0 43,832 15,341 28,491 0 0 0 28,491 1.87 0