Exhibit 10.1
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT
          This THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(“Amendment”), dated as of December 22, 2008, among M.D.C. HOLDINGS, INC., a
Delaware corporation (the “Borrower”), the Lenders that are identified on the
signature pages hereto and JPMORGAN CHASE BANK, N.A., as Administrative Agent
(the “Administrative Agent”).
RECITALS
          WHEREAS, the Borrower, the Lenders identified on the signature pages
hereto, certain other Lenders and Administrative Agent are parties to that
certain Second Amended and Restated Credit Agreement dated as of March 22, 2006
(as amended by the First Amendment to Second Amended and Restated Credit
Agreement dated October 24, 2007 and Second Amendment to Second Amended and
Restated Credit Agreement dated January 24, 2008 and as it may be amended,
renewed and restated from time to time, the “Credit Agreement”) (all capitalized
terms not defined herein shall have the meanings given such terms in the Credit
Agreement);
          WHEREAS, the Borrower and the Lenders desire to amend the Credit
Agreement for the purposes hereinafter set forth;
          NOW, THEREFORE, for good and valuable consideration, the parties
hereto hereby agree as follows:
     1. Aggregate Commitment. Effective as of the Amendment Effective Date (as
hereinafter defined), the Aggregate Commitment is hereby reduced, on a pro rata
basis among the Lenders, to $800,000,000 and Schedule 2 of the Credit Agreement
is amended and restated in its entirety and replaced by Schedule 2 attached
hereto.
     2. Definitions.
     (a) Effective as of the Amendment Effective Date (defined below), the
following definitions are added to Article I of the Credit Agreement:
     “Adjusted Cash Flow from Operations” means, for any period of four
consecutive fiscal quarters of the Borrower ending on any date of determination,
without duplication, the sum of (a) the cash generated by (or used in) operating
activities, as calculated on the quarterly financial statements for the Borrower
and the Guarantors (specifically excluding the Non-Guarantor Subsidiaries), on a
consolidated basis for such period, as determined in accordance with Agreement
Accounting Principles, such amount being reflected in the line item designated
“Net cash (used in) provided by operating activities” on the Borrower’s
quarterly financial statements, plus (b) Consolidated Interest Incurred.
     “Applicable ABR Margin” means, at any date of determination, the margin
indicated in Section 2.11 as the “Applicable ABR Margin.”

 

--------------------------------------------------------------------------------

 

     “Borrowing Base Availability” means, at any time, the amount (if any) by
which the Borrowing Base exceeds Consolidated Senior Debt Borrowings.
     “Cash Flow/Liquidity Test” is defined in Section 9.6.
     “Defaulting Lender” means any Lender, as determined by the Administrative
Agent, that has (a) failed to fund any portion of its Loans or participations in
Facility Letters of Credit or Swing Line Loans within three (3) Business Days of
the date required to be funded by it hereunder, (b) notified the Borrower, the
Administrative Agent, an Issuing Bank, the Swing Line Lender or any Lender in
writing that it does not intend to comply with any of its funding obligations
under this Agreement or has made a public statement to the effect that it does
not intend to comply with its funding obligations under this Agreement,
(c) failed, within three (3) Business Days after request by the Administrative
Agent, to confirm that it will comply with the terms of this Agreement relating
to its obligations to fund prospective Loans and participations in then
outstanding Facility Letters of Credit and Swing Line Loans, (d) otherwise
failed to pay over to the Administrative Agent or any other Lender any other
amount required to be paid by it hereunder within three Business Days of the
date when due, unless the subject of a good faith dispute, or (e) (i) become or
is insolvent or has a parent company that has become or is insolvent or
(ii) become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment.
     “Interest Coverage Ratio” is defined in Section 9.2(b).
     (b) Effective as of the Amendment Effective Date, the following definitions
in Article I of the Credit Agreement are hereby amended and restated in their
entirety as follows:
     “ABR Advance” means an Advance which bears interest at the Alternate Base
Rate plus the Applicable ABR Margin.
     “ABR Loan” means a Loan which bears interest at the Alternate Base Rate
plus the Applicable ABR Margin.
     “Aggregate Commitment” means the aggregate of the Commitments of all
Lenders, as increased or reduced from time to time pursuant to the terms hereof.
As of December 22, 2008, the Aggregate Commitment is $800,000,000.
     “Alternate Base Rate” means, for any day, a rate per annum equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1% and (c) the Adjusted LIBO
Rate for a one month Interest Period on such day (or if such day is not a
Business Day, the immediately preceding Business Day) plus 1%, provided that,
for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on
the rate appearing on the Reuters BBA Libor Rates

2

--------------------------------------------------------------------------------

 

Page 3750 (or on any successor or substitute page of such page) at approximately
11:00 a.m. London time on such day. Any change in the Alternate Base Rate due to
a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted
LIBO Rate shall be effective from and including the effective date of such
change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO
Rate, respectively.
     “Base LIBO Rate” means, with respect to any LIBOR Advance for any Interest
Period, the rate appearing on Reuters BBA Libor Rates Page 3750 (or on any
successor or substitute page of such page) providing rate quotations comparable
to those currently provided on such page of such page, as determined by
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market, at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the “Base LIBO Rate” with respect to
such LIBOR Advance for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of Administrative Agent in immediately
available funds in the London interbank market at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period.
     “Borrowing Base” means, with respect to an Inventory Valuation Date for
which it is to be determined, an amount equal to the sum (without duplication)
of the following assets of Borrower and each Guarantor (but only to the extent
that such assets are not subject to any Liens other than Permitted Liens):
(i) Unrestricted Cash in excess of $50,000,000, minus the amount by which
(a) the sum of (1) the outstanding balance of all Loans and (2) the aggregate
amounts paid by Issuing Banks on any Facility Letters of Credit that have not
been reimbursed by or on behalf of Borrower exceeds (b) the amount of cash
collateral deposited by Borrower pursuant to Section 2.24 then held by
Administrative Agent, provided, however, that the amount determined under this
clause (i) shall not be less than zero (0);
(ii) the Receivables, multiplied by ninety percent (90%); plus
(iii) the book value of Presold Units, multiplied by ninety percent (90%); plus
(iv) the book value of Spec Units (other than such Spec Units, if any, as are
excluded from the Borrowing Base pursuant to the provisions of Section 9.5),
multiplied by eighty percent (80%); plus
(v) the book value of Model Units, multiplied by eighty percent (80%); plus
(vi) the book value of Finished Lots (other than such Finished Lots, if any, as
are excluded from the Borrowing Base pursuant to the provisions of Section 9.4),
multiplied by seventy percent (70%); plus

3

--------------------------------------------------------------------------------

 

(vii) the book value of Land Under Development (other than such Land Under
Development, if any, as is excluded from the Borrowing Base pursuant to the
provisions of Section 9.4), multiplied by fifty percent (50%); plus
(viii) the book value of Entitled Land (other than such Entitled Land, if any,
as is excluded from the Borrowing Base pursuant to the provisions of
Section 9.4), multiplied by thirty percent (30%);
provided, however, that the aggregate (without duplication) of the amounts
calculated pursuant to clauses (vi), (vii) and (viii) shall not exceed at any
time forty percent (40%) of the Borrowing Base.
“Cash Equivalents” means:
(a) U.S. Treasury bills and notes;
(b) GNMA securities;
(c) debt, securities and obligations either issued by or insured by agencies of
the United States of America;
(d) commercial paper rated either “A1” or better by S&P or “P1” by Moody’s;
(e) Dutch Auction Preferred Stocks (DAP) rated either “AA” or better by S&P or
“Aa2” or better by Moody’s;
(f) certificates of deposit and time deposits issued by (i) any Lender (other
than a Defaulting Lender) or affiliate thereof or (ii) commercial banks, savings
banks or savings and loan associations whose short-term debt is rated either
“A1” or better by S&P or “P1” or better by Moody’s, or if such an institution is
a subsidiary whose short-term debt is unrated, then its parent corporation must
have such a rating;
(g) bankers acceptances issued by financial institutions that meet the
requirements for certificates of deposit or time deposits;
(h) deposits in institutions having the same qualifications required for
investments in certificates of deposit or time deposits;
(i) repurchase agreements collateralized by any of the items identified in
clauses (a) through (h) above; and
(j) money market accounts a majority of whose assets are composed of items
described by any of the foregoing clauses (a) through (i) through brokerage
firms deemed acceptable by Borrower’s management.
     “Financial Covenant Test” means each of the Consolidated Tangible Net Worth
Test, the Leverage Test and Cash Flow/Liquidity Test. Neither the covenant set
forth in

4

--------------------------------------------------------------------------------

 

Section 9.3 nor the Land-Owned Test or Spec Unit Inventory Test shall constitute
a Financial Covenant Test.
     “Leverage Ratio” means at any date, the ratio (expressed as a percentage)
of (i) (A) Consolidated Indebtedness less (B) Unrestricted Cash of the Borrower
and the Guarantors in excess of $50,000,000 but not to exceed $500,000,000 to
(ii) (A) the sum of Consolidated Indebtedness and Adjusted Consolidated Tangible
Net Worth less (B) Unrestricted Cash of the Borrower and the Guarantors in
excess of $50,000,000 but not to exceed $500,000,000. For avoidance of doubt,
the foregoing definition of “Leverage Ratio” applies wherever the term is used
in this Agreement, including without limitation Section 2.11 and Section 9.2.
     “Permitted Leverage Ratio” means either 55% or 50%, as determined from time
to time as provided in Section 9.2. The Permitted Leverage Ratio as of
December 31, 2008 shall be 50% and shall be subject to adjustment from time to
time thereafter as provided in Section 9.2.
     “Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. LIBOR Advances shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
     (c) Effective as of the Amendment Effective Date, the following defined
terms are deleted from Article I of the Credit Agreement: “Assessment Rate”;
“Base CD Rate”; and “Three-Month Secondary CD Rate.”
     3. Increases in Aggregate Commitment. Effective as of the Amendment
Effective Date, clause (C) of Section 2.5(d)(i) is amended and restated in its
entirety as follows:
     (C) the Aggregate Commitment shall not exceed $1,300,000,000.
     4. Changes in Interest Rate. Effective as of the Amendment Effective Date,
Section 2.10 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
     2.10 Changes in Interest Rate, etc. Each ABR Advance shall bear interest on
the outstanding principal amount thereof, for each day from and including the
date such Advance is made or is converted from a LIBOR Advance into an ABR
Advance pursuant to Section 2.9 to but excluding the date it becomes due or is
converted into a LIBOR Advance pursuant to Section 2.9 hereof, at a rate per
annum equal to the Alternate Base

5

--------------------------------------------------------------------------------

 

Rate for such day, plus the Applicable ABR Margin. Changes in the rate of
interest on any Advance maintained as an ABR Advance will take effect
simultaneously with each change in the Alternate Base Rate (and will also take
effect upon any change in the Applicable ABR Margin in accordance with
Section 2.11). Each LIBOR Advance shall bear interest from and including the
first day of the Interest Period applicable thereto to (but not including) the
last day of such Interest Period at the interest rate determined as applicable
to such LIBOR Advance. No Interest Period may end after the Facility Termination
Date.
     5. Pricing. Effective as of the Amendment Effective Date, Section 2.11 of
the Credit Agreement is hereby amended and restated in its entirety as follows:
     2.11 Determination of Applicable LIBOR Rate Margin, Applicable ABR Margin
and Applicable Unused Commitment Rate.
     (a) Pricing Grid. The Applicable LIBOR Rate Margin, the Applicable ABR
Margin and the Applicable Unused Commitment Rate shall be determined by
reference to (i) the Rating and (ii) the Leverage Ratio in accordance with the
following table:

                                                                  LEVEL I    
LEVEL II     LEVEL III     LEVEL IV     LEVEL V     Rating     BBB+/Baa1
or above     BBB/Baa2     BBB-/Baa3     BB+/Ba1     BB/Ba2 or below
or no rating     Leverage Ratio     Less than or
equal to
30%     Greater than
30% and less
than or equal to
40%     Greater than
40% and less
than or equal to
50%     Greater than
50%     Greater than
50%    
Applicable
LIBOR Rate
Margin/Applicable
Letter of Credit
Rate
      1.25 %       1.50 %       1.75 %       2.00 %       2.25 %    
Applicable ABR
Margin
      0.25 %       0.50 %       0.75 %       1.00 %       1.25 %    
Applicable
Unused
Commitment Rate
      0.225 %       0.25 %       0.275 %       0.35 %       0.40 %    

     In the event of a difference of one level between (x) the Leverage Ratio
and (y) the Rating, the lower pricing shall apply (for purposes of
clarification, at any time that the Rating is at Level V and the Leverage Ratio
is greater than 50%, Level V pricing shall apply); if the difference is more
than one level, the level that is one level lower than the higher pricing shall
apply. Level II is the pricing level in effect as of December 22, 2008.
     (b) Adjustment. The Applicable Unused Commitment Rate and Applicable ABR
Margin shall be adjusted, as applicable from time to time, effective on (i) the
first Business Day after any change in the Rating or (ii) the fifth (5th)
Business Day following the delivery by Borrower, pursuant to Section 7.1(i) or
(ii), of annual or quarterly

6

--------------------------------------------------------------------------------

 

financial statements evidencing a change in the Leverage Ratio. The Applicable
LIBOR Rate Margin in respect of any LIBOR Advance shall be adjusted, as
applicable from time to time, effective on the first day of the Interest Period
for any LIBOR Advance after (i) any change in the Rating or (ii) the fifth (5th)
Business Day following the delivery by Borrower, pursuant to Section 7.1(i) or
(ii), of annual or quarterly financial statements evidencing a change in the
Leverage Ratio. In the event that any such financial statement is shown to be
inaccurate (regardless of whether this Agreement is in effect or any Loans or
Commitments are outstanding when such inaccuracy is discovered), and such
inaccuracy, if corrected, would have led to the application of a higher
Applicable LIBOR Rate Margin (and Applicable Letter of Credit Rate), Applicable
ABR Margin and Applicable Unused Commitment Rate for any period (an “Applicable
Period”) than the Applicable LIBOR Rate Margin (and Applicable Letter of Credit
Rate), Applicable ABR Margin and Applicable Unused Commitment Rate actually
applied for such Applicable Period, then (A) the Borrower shall immediately
deliver to the Administrative Agent a correct certificate and financial
statements under Section 7.1 for such Applicable Period, (B) the Applicable
LIBOR Rate Margin (and Applicable Letter of Credit Rate), Applicable ABR Margin
and Applicable Unused Commitment Rate shall be determined at such higher
Applicable LIBOR Rate Margin (and Applicable Letter of Credit Rate), Applicable
ABR Margin and Applicable Unused Commitment Rate for such Applicable Period, and
(C) the Borrower shall immediately pay to the Administrative Agent (for the
ratable benefit of the Lenders) the accrued additional interest and additional
fees owing as a result of such higher Applicable LIBOR Rate Margin (and
Applicable Letter of Credit Rate), Applicable ABR Margin and Applicable Unused
Commitment Rate.
     6. Interest Upon Event of Default. Effective as of the Amendment Effective
Date, the last sentence of Section 2.12 of the Credit Agreement is hereby
amended and restated in its entirety as follows:
During the continuance of an Event of Default, the Required Lenders may, at
their option, by notice to Borrower (which notice may be revoked at the option
of the Required Lenders notwithstanding any provision of Section 11.2 requiring
unanimous consent of Lenders to changes in interest rates), declare that
(i) each LIBOR Advance shall bear interest for the remainder of the applicable
Interest Period at the rate otherwise applicable to such Interest Period plus 2%
per annum and (ii) each ABR Advance shall bear interest at a rate per annum
equal to the Alternate Base Rate plus the Applicable ABR Margin plus 2% per
annum.
     7. Interest on Swing Line Loans. Effective as of the Amendment Effective
Date, Section 2.19(b) of the Credit Agreement is hereby amended and restated in
its entirety as follows:
     (b) Interest. Swing Line Advances shall bear interest at the Alternate Base
Rate, plus the Applicable ABR Margin.
     8. Defaulting Lender. Effective as of the Amendment Effective Date, the
following new Section 2.24 is hereby added to the Credit Agreement:

7

--------------------------------------------------------------------------------

 

     Section 2.24 Defaulting Lender. Notwithstanding any provision of this
Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the
following provisions shall apply for so long as such Lender is a Defaulting
Lender:
     (a) if any Swing Line Loan is outstanding or Facility LC Obligations exist
at the time a Lender is a Defaulting Lender, the Borrower shall within one
(1) Business Day following notice by the Administrative Agent (i) prepay such
Swing Line Loan or cash collateralize the Defaulting Lender’s ratable share of
such Swing Line Loan on terms satisfactory to the Swing Line Lender and
(ii) cash collateralize such Defaulting Lender’s ratable share of the Facility
LC Obligations in accordance with Section 4.10 for so long as any Facility LC
Obligations are outstanding; and
     (b) the Swing Line Lender shall not be required to fund any Swing Line Loan
and no Issuing Bank shall be required to issue, amend or increase any Facility
LC unless cash collateral has been provided by the Borrower in accordance with
Section 2.24(a).
     9. Letters of Credit. (a) Effective as of the Amendment Effective Date,
Section 4.2(ii) of the Credit Agreement is amended by deleting the reference to
“$500,000,000” and inserting in lieu thereof “$300,000,000.”
     (b) Effective as of the Amendment Effective Date, Section 4.10 of the
Credit Agreement is hereby amended and restated in its entirety as follows:
     4.10 Cash Collateralization. If any Event of Default shall occur and be
continuing, the Borrower shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the ratable benefit of
the Lenders (the “Facility LC Collateral Account”), the Collateral Shortfall
Amount from time to time required pursuant to Section 11.1. Without limitation
of the foregoing, if and when required pursuant to Section 2.24, Borrower shall
deposit in the Facility LC Collateral Account, the amount of the Defaulting
Lender’s ratable share of the Facility LC Obligations. Any deposit in the
Facility LC Collateral Account shall be held by the Administrative Agent as
collateral for the payment and performance of the obligations of the Borrower
under this Agreement. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over the Facility LC
Collateral Account. Borrower hereby pledges, assigns and grants to
Administrative Agent, on behalf of and for the ratable benefit of the Lenders, a
security interest in and to the Facility LC Collateral Account and all funds
that may from time to time be on deposit in the Facility LC Collateral Account
to secure the payment and performance of the obligations of the Borrower under
this Agreement and the other Loan Documents. Administrative Agent will invest
any funds on deposit from time to time in the Facility LC Collateral Account in
certificates of deposit of the Lender acting as Administrative Agent and having
a maturity not exceeding 30 days. Interest on such investment shall accumulate
in such Facility LC Collateral Account. Moneys in such Facility LC Collateral
Account shall be applied by the Administrative Agent to reimburse the Issuing
Bank for any draws on Facility Letters of Credit for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction
of the reimbursement obligations of the Borrower with respect to the Facility LC
Obligations at such time or, if

8

--------------------------------------------------------------------------------

 

the maturity of the Loans has been accelerated (but subject to the consent of
Lenders whose ratable share of Facility LC Obligations represents greater than
66-2/3% of the total Facility LC Obligations), be applied to satisfy other
obligations of the Borrower under this Agreement. If the Borrower is required to
provide an amount of cash collateral as a result of the occurrence of an Event
of Default, such amount (to the extent not applied as aforesaid) shall be
promptly returned to the Borrower upon written request after all Events of
Default have been cured or waived. If the Borrower is required to provide an
amount of cash collateral pursuant to Section 2.24, such amount (to the extent
not applied as aforesaid) shall, upon written request, be promptly returned to
the Borrower from time to time to the extent the amount deposited shall exceed
the Defaulting Lender’s ratable share of the Facility LC Obligations or if such
Lender shall cease to be a Defaulting Lender.
     10. Financial Reporting. Effective as of the Amendment Effective Date,
Section 7.1(viii) of the Credit Agreement is hereby amended and replaced in its
entirety as follows:
     (viii) Within sixty (60) days after the end of each of the first three
quarterly periods, and within one hundred (100) days after the end, of each
fiscal year, a certificate of an Authorized Officer of Borrower as to Borrower’s
compliance with the Financial Covenant Tests and (without regard to whether
compliance is required under Sections 9.4, 9.5 and 9.6) the Land-Owned Test, the
Spec Unit Inventory Test and Cash Flow/Liquidity Test in the form of Exhibit F
hereto.
     11. Consolidated Tangible Net Worth Test. Effective as of the Amendment
Effective Date, Section 9.1 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
     9.1 Consolidated Tangible Net Worth Test. Consolidated Tangible Net Worth
shall not be less than (i) $850,000,000 plus (ii) fifty percent (50%) of
consolidated net income of Borrower and the Guarantors earned after
September 30, 2008 (excluding any quarter in which there is a loss but applying
consolidated net income of Borrower and the Guarantors thereafter first to such
loss before determining fifty percent (50%) of such amount for purposes of this
calculation) plus (iii) fifty percent (50%) of the net proceeds or other
consideration received by Borrower for capital stock issued by Borrower after
September 30, 2008, minus (iv) the lesser of (A) the aggregate amount paid by
Borrower after September 30, 2008 to repurchase its common stock and (B)
$300,000,000, (the foregoing covenant, as adjusted as provided in the next
succeeding sentence, is herein referred to as the “Consolidated Tangible Net
Worth Test”). Notwithstanding the foregoing, in the event that Borrower shall at
any time engage in an Acquisition for a purchase price equaling or exceeding
$100,000,000, Borrower may irrevocably elect, by notice to the Administrative
Agent given prior to the last day of the fiscal quarter in which such
Acquisition occurs, to adjust minimum Consolidated Tangible Net Worth for the
Consolidated Tangible Net Worth Test to the following amount: (i) 80% of the
Consolidated Tangible Net Worth immediately following the closing of such
Acquisition, plus (ii) an amount equal to 50% of the consolidated net income of
Borrower and Guarantors earned after the closing of such Acquisition (excluding
any quarter in which there is a loss but applying net income thereafter first to
such loss before determining

9

--------------------------------------------------------------------------------

 

50% of such amount for purposes of this calculation), plus (iii) 50% of the net
proceeds or other consideration received by Borrower for any capital stock
issued after the closing of such Acquisition, minus (iv) the lesser of (A) the
aggregate amount paid by Borrower after the closing of such Acquisition to
repurchase its common stock and (B) the amount (but not less than zero) obtained
by subtracting from $300,000,000 the aggregate amount (if any) paid by Borrower
to repurchase its common stock after September 30, 2008 and prior to such
Acquisition. Borrower may make the election under the preceding sentence only if
it makes the corresponding election under Section 9.3 at the same time.
Borrower’s compliance with the Consolidated Tangible Net Worth Test shall be
measured on a quarterly basis, based on the financial statements delivered to
Administrative Agent pursuant to Section 7.1. Borrower’s failure to satisfy the
Consolidated Tangible Net Worth Test shall not constitute an Event of Default or
an Unmatured Event of Default; provided, however, that if Borrower fails to
satisfy the Consolidated Tangible Net Worth Test at the end of any fiscal
quarter, then the Term Out Period shall commence on the first day following such
fiscal quarter as provided in Section 2.22.
     12. Leverage Ratio. Effective as of the Amendment Effective Date,
Section 9.2 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
     9.2 Leverage Test; Interest Coverage Test.
     (a) Leverage Test. The Leverage Ratio shall not exceed the then applicable
Permitted Leverage Ratio (the “Leverage Test”).
     (b) Interest Coverage Test; Decrease of Permitted Leverage Ratio. If at any
time at which the Permitted Leverage Ratio is 55% Borrower shall fail to
maintain, for two (2) consecutive fiscal quarters, a ratio (the “Interest
Coverage Ratio”), determined as of the last day of each fiscal quarter for the
four-quarter period ending on such day, of (i) EBITDA for such period to
(ii) Consolidated Interest Incurred for such period, of at least 2.00 to 1.0
(the “Interest Coverage Test”), then the Permitted Leverage Ratio for the same
fiscal quarter with respect to which Borrower shall have so failed the Interest
Coverage Test (i.e., the second of such two (2) consecutive fiscal quarters,
which quarter is herein referred to as the “Coverage Test Failure Quarter”),
shall be decreased to 50%. In no event shall the Permitted Leverage Ratio be
less than 50%.
     (c) Increase of Permitted Leverage Ratio. If at any time at which the
Permitted Leverage Ratio is 50% Borrower shall satisfy the Interest Coverage
Test (which for purposes of this Section 9.2(c) shall be deemed satisfied only
if, on the same day on which Borrower satisfies the Interest Coverage Test,
Borrower is also in compliance with the Leverage Test), then the Permitted
Leverage Ratio, effective as of the fiscal quarter immediately following the
fiscal quarter with respect to which Borrower shall have so satisfied the
Interest Coverage Test, shall be increased to 55%. In no event shall the
Permitted Leverage Ratio exceed 55%.
     (d) Effectiveness of Change in Permitted Leverage Ratio. The decrease of
the Permitted Leverage Ratio from 55% to 50% provided for in Section 9.2(b)
shall be

10

--------------------------------------------------------------------------------

 

effective as of the Coverage Test Failure Quarter as provided in Section 9.2(b),
and the Permitted Leverage Ratio of 50% shall remain in effect thereafter unless
and until increased to 55% as provided in Section 9.2(c). Any increase in the
Permitted Leverage Ratio from 50% to 55% shall be effective as of the fiscal
quarter next succeeding the fiscal quarter in which Borrower satisfies the
Interest Coverage Test as provided in Section 9.2(c), and the Permitted Leverage
Ratio of 55% shall remain in effect thereafter unless and until decreased to 50%
as provided in Section 9.2(b).
     (e) Measure of Compliance. Borrower’s satisfaction of the Interest Coverage
Test shall be measured on a quarterly basis, based on the financial statements
delivered to Administrative Agent pursuant to Section 7.1. A failure to satisfy
the Leverage Test or the Interest Coverage Test shall not constitute an Event of
Default or an Unmatured Event of Default; provided, however, if Borrower fails
to satisfy the Leverage Test for two (2) consecutive fiscal quarters (the first
of which may be the Coverage Test Failure Quarter), then the Term Out Period
shall commence on the day following such fiscal quarter as provided in
Section 2.22.
     13. Consolidated Tangible Net Worth Floor. Effective as of the Amendment
Effective Date, Section 9.3 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
     9.3 Consolidated Tangible Net Worth Floor. Consolidated Tangible Net Worth
shall not be less than (i) $650,000,000, plus (ii) an amount equal to 50% of the
quarterly consolidated net income of Borrower and Guarantors earned after
September 30, 2008 (excluding any quarter in which there is a loss but applying
consolidated net income thereafter first to such loss before determining 50% of
such amount for purposes of this calculation), plus (iii) 50% of the net
proceeds or other consideration received by Borrower for any capital stock
issued after September 30, 2008. Notwithstanding the foregoing, in the event
that Borrower shall at any time engage in an Acquisition for a purchase price
equaling or exceeding $100,000,000, Borrower may irrevocably elect, by notice to
the Administrative Agent given prior to the last day of the fiscal quarter in
which such Acquisition occurs, to adjust the minimum Consolidated Tangible Net
Worth for this covenant to the following amount: (i) 50% of Consolidated
Tangible Net Worth immediately following the closing of such Acquisition,
(ii) an amount equal to 50% of the consolidated net income of Borrower and
Guarantors earned after the closing of such Acquisition (excluding any quarter
in which there is a loss but applying net income thereafter first to such loss
before determining 50% of such amount for purposes of this calculation) and
(iii) 50% of the net proceeds or other consideration received by Borrower for
any capital stock issued after the closing of such Acquisition. Borrower may
make the election under the preceding sentence only if it makes the
corresponding election under Section 9.1 at the same time. Borrower’s compliance
with the foregoing covenant shall be measured on a quarterly basis, based on the
financial statements delivered to Administrative Agent pursuant to Section 7.1.
     14. Cash Flow/Liquidity Test. Effective as of the Amendment Effective Date,
the following new Section 9.6 is hereby added to the Credit Agreement:

11

--------------------------------------------------------------------------------

 

     9.6 Cash Flow/Liquidity Test. If the Borrower shall fail to maintain for
any fiscal quarter ending on and after December 31, 2008 an Interest Coverage
Ratio equal to or greater than 1.50 to 1.00 for the period of four consecutive
fiscal quarters then ended, then as of the end of such fiscal quarter and as of
the end of all fiscal quarters thereafter until the Interest Coverage Ratio is
greater than or equal to 1.50 to 1.00, the Borrower shall either maintain (i) a
ratio of (A) Adjusted Cash Flow from Operations to (B) Consolidated Interest
Incurred of greater than or equal to 1.50 to 1.00 or (ii) a sum of (x) Borrowing
Base Availability plus (y) Unrestricted Cash, to the extent such Unrestricted
Cash is not included in calculating Borrowing Base Availability, less
(z) principal payments due on Consolidated Indebtedness within the next
succeeding four fiscal quarters, equal to or greater than $500,000,000 (the
“Cash Flow/Liquidity Test”). Borrower’s compliance with the Cash Flow/Liquidity
Test shall be measured on a quarterly basis, based on the financial statements
delivered to Administrative Agent pursuant to Section 7.1. Borrower’s failure to
satisfy the Cash Flow/Liquidity Test shall not constitute an Event of Default or
an Unmatured Event of Default; provided, however, that if Borrower fails to
satisfy the Cash Flow/Liquidity Test at the end of any fiscal quarter, then the
Term Out Period shall commence on the first day following such fiscal quarter as
provided in Section 2.22.
     15. Remedies. Effective as of the Amendment Effective Date, Section 11.1(d)
of the Credit Agreement is hereby deleted.
     16. Compliance Certificate. The form of Compliance Certificate attached as
Exhibit F to the Credit Agreement is hereby amended (a) to conform to the
changes in Sections 9.1, 9.2 and 9.3 provided for above and (b) to incorporate
compliance with the Cash Flow/Liquidity Test.
     17. Conditions Precedent. This Amendment shall be effective as of the date
(“Amendment Effective Date”) upon which the following conditions are satisfied:
     (a) The Administrative Agent shall have received from the Borrower and the
Required Lenders a counterpart of this Amendment signed on behalf of each such
party.
     (b) The Administrative Agent shall have received from the Guarantors the
Consent and Agreement of Guarantors substantially in the form attached hereto as
Exhibit A.
     (c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably request
relating to the organization or formation, existence and good standing of the
Borrower, the authorization of this Amendment and any other legal matters
relating to the Borrower, the Credit Agreement or this Amendment, all in form
and substance satisfactory to the Administrative Agent and its counsel.
     (d) The Administrative Agent shall have received all fees and other amounts
due and payable on or prior to the Amendment Effective Date, including
reimbursement or payment of all out-of-pocket expenses required to be reimbursed
or paid by the Borrower hereunder.
          The Administrative Agent shall notify the Borrower and the Lenders of
the Amendment Effective Date, and such notice shall be conclusive and binding.

12

--------------------------------------------------------------------------------

 

     18. Representations and Warranties. The Borrower hereby represents and
warrants that as of the date hereof:
     (a) The representations and warranties of the Borrower in the Credit
Agreement are true and correct in all material respects.
     (b) There exists no Event of Default or Unmatured Event of Default.
     19. Release. In consideration of this Amendment, Borrower hereby fully and
unconditionally releases and forever discharges Administrative Agent and each
Lender and their respective directors, officers, employees, subsidiaries,
branches, affiliates, attorneys, agents, representatives, successors and assigns
and all persons, firms, corporations and organizations acting on their behalf
(collectively, the “Released Parties”), of and from any and all claims,
allegations, causes of action, costs or demands and liabilities pertaining to or
arising out of the Credit Agreement, from the beginning of the world to the
Amendment Effective Date, whether known or unknown, liquidated or unliquidated,
fixed or contingent, asserted or unasserted, foreseen or unforeseen, matured or
unmatured, suspected or unsuspected, anticipated or unanticipated, which
Borrower has, had, claims to have or to have had or hereafter claims to have or
have had against the Released Parties by reason of any act or omission on the
part of the Released Parties, or any of them, occurring prior to the Amendment
Effective Date, including all such loss or damage of any kind heretofore
sustained or that may arise as a consequence of the dealings among the parties
up to and including the Amendment Effective Date, including the administration
or enforcement of the Credit Agreement (collectively, all of the foregoing are
the “Claims”). Borrower represents and warrants that it has no knowledge of any
Claim against the Released Parties or of any facts or acts or omissions of the
Released Parties which on the date hereof would be the basis of a Claim by it
against the Released Parties which is not released hereby, and Borrower
represents and warrants that the foregoing constitutes a full and complete
release of all Claims by or on behalf of Borrower. The inclusion of a release
provision in this Amendment shall not give rise to any inference that but for
such release, any Claim otherwise would exist.
     20. Ratification. The Credit Agreement, as amended hereby, and the other
Loan Documents are hereby ratified and remain in full force and effect.
     21. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one agreement and any
of the parties hereto may execute this Amendment by signing any such
counterpart.
     22. Choice of Law. This Amendment and the other Loan Documents shall be
construed in accordance with the internal laws (but without regard to the
conflict of laws provisions other than Section 5-1401 of the New York General
Obligations Law ) of the State of New York, but giving effect to federal laws
applicable to national banks.

13

--------------------------------------------------------------------------------

 

          IN WITNESS WHEREOF, the Borrower and the undersigned Lenders have
caused this Amendment to be duly executed as of the date first above written.

            Borrower:

M.D.C. HOLDINGS, INC.
      By:   /s/ Christopher M. Anderson         Name:   Christopher M. Anderson 
      Title:   Senior Vice President and
Chief Financial Officer   

14

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO THIRD AMENDMENT TO SECOND AMENDED AND
RESTATED CREDIT AGREEMENT WITH M.D.C. HOLDINGS, INC.

            Lenders:

JPMORGAN CHASE BANK, N.A.,
As Lender and Administrative Agent
      By:   /s/ Vanessa Chiu         Name:   Vanessa Chiu        Title:   Vice
President     

15

--------------------------------------------------------------------------------

 

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            WACHOVIA BANK, NATIONAL
ASSOCIATION
      By:   /s/ Nathan R. Rantala         Name:   Nathan R. Rantala       
Title:   Director   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            CITICORP NORTH AMERICA, INC.
      By:   /s/ Marni McManus         Name:   Marni McManus        Title:  
Director   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            THE ROYAL BANK OF SCOTLAND plc
      By:   /s/ Scott MacVicar         Name:   Scott MacVicar        Title:  
Vice President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            SUNTRUST BANK
      By:   /s/ W. John Wendler         Name:   W. John Wendler        Title:  
Senior Vice President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            U.S. BANK NATIONAL ASSOCIATION
      By:   /s/ Sandra A. Sauer         Name:   Sandra A. Sauer        Title:  
Vice President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            BANK OF AMERICA, N.A.
      By:   /s/ Eyal Namordi         Name:   Eyal Namordi        Title:   Senior
Vice President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            GUARANTY BANK
      By:   /s/ Dan Killian         Name:   Dan Killian        Title:   Sr. Vice
President     

 

--------------------------------------------------------------------------------

 

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
JPMorgan Chase Bank, N.A. is the purchaser of the Commitment and Loans under the
Credit Agreement referenced above from the Federal Deposit Insurance Corporation
acting as receiver for Washington Mutual Bank, formerly known as Washington
Mutual Bank, F.A. and is the successor owner of the Commitment and Loans.

            JPMORGAN CHASE BANK, N.A.
      By:   /s/ Gary Handcox         Name:   Gary Handcox        Title:   Senior
Vice President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            BNP PARIBAS
      By:   /s/ Curt Price         Name:   Curt Price        Title:   Managing
Director              By:   /s/ Andy Strait         Name:   Andy Strait       
Title:   Managing Director   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            CALIFORNIA BANK & TRUST
      By:   /s/ Paul H. Bodek         Name:   Paul H. Bodek        Title:   Vice
President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            COMERICA BANK
      By:   /s/ Adam Sheets         Name:   Adam Sheets        Title:  
Assistant Vice President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            REGIONS BANK
      By:   /s/ Daniel McClurkin         Name:   Daniel McClurkin       
Title:   Vice President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            BANK OF THE WEST, a California
banking corporation
      By:   /s/ Jan Manista         Name:   Jan Manista        Title:   Vice
President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            CALYON NEW YORK BRANCH
      By:   /s/ Robert Smith         Name:   Robert Smith        Title:  
Managing Director              By:   /s/ David Cagle         Name:   David
Cagle        Title:   Managing Director   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            KEYBANK NATIONAL ASSOCIATION
      By:   /s/ Candice King         Name:   Candice King        Title:   Vice
President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            MIZUHO CORPORATE BANK, LTD.
      By:   /s/ Noel P. Purcell         Name:   Noel P. Purcell        Title:  
Authorized Signatory   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            NATIXIS
      By:   /s/ Natalie Trojan         Name:   Natalie Trojan        Title:  
Director              By:   /s/ Timothée Delpont         Name:   Timothée
Delpont        Title:   Associate   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            PNC BANK, NATIONAL ASSOCIATION
      By:   /s/ Douglas G. Paul         Name:   Douglas G. Paul        Title:  
Senior Vice President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            RBC BANK (USA)
      By:   /s/ Traniece Peterson         Name:   Traniece Peterson       
Title:   Vice President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            CITY NATIONAL BANK
      By:   /s/ Xavier Barrera         Name:   Xavier Barrera        Title:  
Vice President   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            COMPASS BANK
      By:   /s/ Larry A. Olsen         Name:   Larry A. Olsen        Title:  
EVP   

 

--------------------------------------------------------------------------------

 

         

SIGNATURE PAGE TO M.D.C. HOLDINGS, INC.
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            FIFTH THIRD BANK
      By:   /s/ Garland Robeson         Name:   Garland Robeson        Title:  
Assistant Vice President   

 

--------------------------------------------------------------------------------

 

         

Exhibit A to Amendment
CONSENT AND AGREEMENT OF GUARANTORS
     THIS CONSENT AND AGREEMENT OF GUARANTORS (“Consent”) is executed and
delivered as of December 22, 2008, by the undersigned (the “Guarantors”), in
favor of the “Lenders” under that certain Second Amended and Restated Credit
Agreement dated March 22, 2006, among M.D.C. Holdings, Inc., the Lenders from
time to time parties thereto and JPMorgan Chase Bank, N.A., in its capacity as
Administrative Agent. Such Second Amended and Restated Credit Agreement, as it
has been and may be amended, modified or supplemented from time to time, is
hereinafter referred to as the “Credit Agreement.” Unless otherwise defined
herein, capitalized terms used herein shall have the meanings ascribed to them
in the Credit Agreement.
WITNESSETH:
     WHEREAS, the Guarantors have executed and delivered a Second Amended and
Restated Guaranty dated March 22, 2006 in favor of the Lenders under the Credit
Agreement (the “Guaranty”); and
     WHEREAS, the Borrower, the Administrative Agent and the Required Lenders
have entered into that certain Third Amendment to Second Amended and Restated
Credit Agreement of even date herewith amending the Credit Agreement (the
“Amendment”); and
     WHEREAS, it is a condition to the Amendment that the Guarantors shall have
executed this Consent;
     NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantors hereby consent to
the Amendment and agree that the Guaranty continues in full force and effect
with respect to the undersigned Guarantors and further confirm that the
representations and warranties of Guarantors under the Guaranty are true and
correct in all material respects as of the date hereof.

 

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, this Consent has been duly executed by the Guarantors
as of the day and year first set forth above.
[Guarantors]