Exhibit 4.1


 




 





EXECUTION COPY


 


KIMBALL HILL, INC.,


 


THE GUARANTORS

named herein


 


and


 


U.S. BANK NATIONAL ASSOCIATION, as Trustee


 






 


INDENTURE


 


Dated as of December 19, 2005


 






 


101⁄2% Senior Subordinated Notes due 2012




 





 

















 


CROSS-REFERENCE TABLE


 


	
  TIA

  	
   

  	
  Indenture

  
	
  Section

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  310

  	
  (a)(1)

  	
  7.10

  
	
   

  	
  (a)(2)

  	
  7.10

  
	
   

  	
  (a)(3)

  	
  N.A.

  
	
   

  	
  (a)(4)

  	
  N.A.

  
	
   

  	
  (a)(5)

  	
  N.A.

  
	
   

  	
  (b)

  	
  7.08; 7.10;
  12.02

  
	
   

  	
  (b)(1)

  	
  7.10

  
	
   

  	
  (c)

  	
  N.A.

  
	
  311

  	
  (a)

  	
  7.11

  
	
   

  	
  (b)

  	
  7.11

  
	
   

  	
  (c)

  	
  N.A.

  
	
  312

  	
  (a)

  	
  2.06

  
	
   

  	
  (b)

  	
  12.03

  
	
   

  	
  (c)

  	
  12.03

  
	
  313

  	
  (a)

  	
  7.06

  
	
   

  	
  (b)(1)

  	
  N.A.

  
	
   

  	
  (b)(2)

  	
  7.06

  
	
   

  	
  (c)

  	
  7.06; 12.02

  
	
   

  	
  (d)

  	
  7.06

  
	
  314

  	
  (a)

  	
  4.02; 4.04;
  12.02

  
	
   

  	
  (b)

  	
  N.A.

  
	
   

  	
  (c)(1)

  	
  12.04

  
	
   

  	
  (c)(2)

  	
  12.04

  
	
   

  	
  (c)(3)

  	
  N.A.

  
	
   

  	
  (d)

  	
  N.A.

  
	
   

  	
  (e)

  	
  12.05

  
	
   

  	
  (f)

  	
  N.A.

  
	
  315

  	
  (a)

  	
  7.01(b)

  
	
   

  	
  (b)

  	
  7.05; 12.02

  
	
   

  	
  (c)

  	
  7.01(a)

  
	
   

  	
  (d)

  	
  7.01(c)

  
	
   

  	
  (e)

  	
  6.12

  
	
  316

  	
  (a) (last
  sentence)

  	
  2.10

  
	
   

  	
  (a)(1)(A)

  	
  6.05

  
	
   

  	
  (a)(1)(B)

  	
  6.04

  
	
   

  	
  (a)(2)

  	
  N.A.

  
	
   

  	
  (b)

  	
  6.08

  
	
   

  	
  (c)

  	
  8.04

  
	
  317

  	
  (a)(1)

  	
  6.09

  
	
   

  	
  (a)(2)

  	
  6.10

  
	
   

  	
  (b)

  	
  2.05; 7.12

  
	
  318

  	
  (a)

  	
  12.01

  



 






N.A. means Not Applicable


Note:                                     This
Cross-Reference Table shall not, for any purpose, be deemed to be a part of the
Indenture


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE ONE

  	
   

  
	
   

  	
   

  	
   

  
	
  DEFINITIONS AND INCORPORATION BY
  REFERENCE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
  Definitions

  	
  1

  
	
  SECTION 1.02.

  	
  Other Definitions

  	
  34

  
	
  SECTION 1.03.

  	
  Incorporation by Reference of Trust Indenture Act

  	
  35

  
	
  SECTION 1.04.

  	
  Rules of Construction

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE TWO

  	
   

  
	
   

  	
   

  	
   

  
	
  THE NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01.

  	
  Amount of Notes

  	
  36

  
	
  SECTION 2.02.

  	
  Form and Dating

  	
  37

  
	
  SECTION 2.03.

  	
  Execution and Authentication

  	
  37

  
	
  SECTION 2.04.

  	
  Registrar and Paying Agent

  	
  38

  
	
  SECTION 2.05.

  	
  Paying Agent To Hold Money in Trust

  	
  38

  
	
  SECTION 2.06.

  	
  Holder Lists

  	
  39

  
	
  SECTION 2.07.

  	
  Transfer and Exchange

  	
  39

  
	
  SECTION 2.08.

  	
  Replacement Notes

  	
  40

  
	
  SECTION 2.09.

  	
  Outstanding Notes

  	
  40

  
	
  SECTION 2.10.

  	
  Treasury Notes

  	
  41

  
	
  SECTION 2.11.

  	
  Temporary Notes

  	
  41

  
	
  SECTION 2.12.

  	
  Cancellation

  	
  42

  
	
  SECTION 2.13.

  	
  Defaulted Interest

  	
  42

  
	
  SECTION 2.14.

  	
  CUSIP Number

  	
  42

  
	
  SECTION 2.15.

  	
  Deposit of Moneys

  	
  42

  
	
  SECTION 2.16.

  	
  Book-Entry Provisions for Global Notes

  	
  42

  
	
  SECTION 2.17.

  	
  Special Transfer Provisions

  	
  45

  
	
  SECTION 2.18.

  	
  Computation of Interest

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE THREE

  	
   

  
	
   

  	
   

  	
   

  
	
  REDEMPTION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.

  	
  Election To Redeem; Notices to Trustee

  	
  47

  
	
  SECTION 3.02.

  	
  Selection by Trustee of Notes To Be Redeemed

  	
  47

  
	
  SECTION 3.03.

  	
  Notice of Redemption

  	
  47

  
	
  SECTION 3.04.

  	
  Effect of Notice of Redemption

  	
  48

  
	
  SECTION 3.05.

  	
  Deposit of Redemption Price

  	
  49

  



 


i

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 3.06.

  	
  Notes Redeemed in Part

  	
  49

  
	
   

  	
   

  	
   

  
	
  ARTICLE FOUR

  	
   

  
	
   

  	
   

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01.

  	
  Payment of Notes

  	
  49

  
	
  SECTION 4.02.

  	
  Reports to Holders

  	
  50

  
	
  SECTION 4.03.

  	
  Waiver of Stay, Extension or Usury Laws

  	
  52

  
	
  SECTION 4.04.

  	
  Compliance Certificate

  	
  52

  
	
  SECTION 4.05.

  	
  Taxes

  	
  53

  
	
  SECTION 4.06.

  	
  Limitations on Additional Indebtedness

  	
  53

  
	
  SECTION 4.07.

  	
  Limitations on Layering Indebtedness

  	
  56

  
	
  SECTION 4.08.

  	
  Limitations on Restricted Payments

  	
  56

  
	
  SECTION 4.09.

  	
  Limitations on Asset Sales

  	
  59

  
	
  SECTION 4.10.

  	
  Limitations on Transactions with Affiliates

  	
  61

  
	
  SECTION 4.11.

  	
  Limitations on Liens

  	
  63

  
	
  SECTION 4.12.

  	
  Conduct of Business

  	
  63

  
	
  SECTION 4.13.

  	
  Additional Note Guarantees

  	
  63

  
	
  SECTION 4.14.

  	
  Limitations on Dividend and Other Restrictions Affecting Restricted
  Subsidiaries

  	
  64

  
	
  SECTION 4.15.

  	
  Limitations on Designation of Unrestricted Subsidiaries

  	
  66

  
	
  SECTION 4.16.

  	
  [Intentionally Omitted]

  	
  67

  
	
  SECTION 4.17.

  	
  Maintenance of Properties; Insurance; Compliance with Law

  	
  67

  
	
  SECTION 4.18.

  	
  Payments for Consent

  	
  67

  
	
  SECTION 4.19.

  	
  Legal Existence

  	
  68

  
	
  SECTION 4.20.

  	
  Change of Control Offer

  	
  68

  
	
   

  	
   

  	
   

  
	
  ARTICLE FIVE

  	
   

  
	
   

  	
   

  	
   

  
	
  SUCCESSOR CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01.

  	
  Limitations on Mergers, Consolidations, Etc.

  	
  69

  
	
  SECTION 5.02.

  	
  Successor Person Substituted

  	
  71

  
	
   

  	
   

  	
   

  
	
  ARTICLE SIX

  	
   

  
	
   

  	
   

  	
   

  
	
  DEFAULTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01.

  	
  Events of Default

  	
  71

  
	
  SECTION 6.02.

  	
  Acceleration

  	
  73

  
	
  SECTION 6.03.

  	
  Other Remedies

  	
  74

  
	
  SECTION 6.04.

  	
  Waiver of Past Defaults and Events of Default

  	
  74

  



 


ii

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 6.05.

  	
  Control by Majority

  	
  74

  
	
  SECTION 6.06.

  	
  Limitation on Suits

  	
  75

  
	
  SECTION 6.07.

  	
  No Personal Liability of Directors, Officers, Employees and
  Stockholders

  	
  75

  
	
  SECTION 6.08.

  	
  Rights of Holders To Receive Payment

  	
  75

  
	
  SECTION 6.09.

  	
  Collection Suit by Trustee

  	
  75

  
	
  SECTION 6.10.

  	
  Trustee May File Proofs of Claim

  	
  76

  
	
  SECTION 6.11.

  	
  Priorities

  	
  76

  
	
  SECTION 6.12.

  	
  Undertaking for Costs

  	
  77

  
	
  SECTION 6.13.

  	
  Restoration of Rights and Remedies

  	
  77

  
	
   

  	
   

  	
   

  
	
  ARTICLE SEVEN

  	
   

  
	
   

  	
   

  	
   

  
	
  TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01.

  	
  Duties of Trustee

  	
  77

  
	
  SECTION 7.02.

  	
  Rights of Trustee

  	
  79

  
	
  SECTION 7.03.

  	
  Individual Rights of Trustee

  	
  80

  
	
  SECTION 7.04.

  	
  Trustee’s Disclaimer

  	
  80

  
	
  SECTION 7.05.

  	
  Notice of Defaults

  	
  80

  
	
  SECTION 7.06.

  	
  Reports by Trustee to Holders

  	
  81

  
	
  SECTION 7.07.

  	
  Compensation and Indemnity

  	
  81

  
	
  SECTION 7.08.

  	
  Replacement of Trustee

  	
  82

  
	
  SECTION 7.09.

  	
  Successor Trustee by Consolidation, Merger, etc.

  	
  83

  
	
  SECTION 7.10.

  	
  Eligibility; Disqualification

  	
  83

  
	
  SECTION 7.11.

  	
  Preferential Collection of Claims Against Issuer

  	
  83

  
	
  SECTION 7.12.

  	
  Paying Agents

  	
  84

  
	
   

  	
   

  	
   

  
	
  ARTICLE EIGHT

  	
   

  
	
   

  	
   

  	
   

  
	
  AMENDMENTS, SUPPLEMENTS AND WAIVERS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.01.

  	
  Without Consent of Holders

  	
  84

  
	
  SECTION 8.02.

  	
  With Consent of Holders

  	
  85

  
	
  SECTION 8.03.

  	
  Compliance with Trust Indenture Act

  	
  87

  
	
  SECTION 8.04.

  	
  Revocation and Effect of Consents

  	
  87

  
	
  SECTION 8.05.

  	
  Notation on or Exchange of Notes

  	
  87

  
	
  SECTION 8.06.

  	
  Trustee To Sign Amendments, etc.

  	
  88

  



 


iii

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE NINE

  	
   

  
	
   

  	
   

  	
   

  
	
  DISCHARGE OF INDENTURE; DEFEASANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01.

  	
  Discharge of Indenture

  	
   

  
	
  SECTION 9.02.

  	
  Legal Defeasance

  	
  88

  
	
  SECTION 9.03.

  	
  Covenant Defeasance

  	
  89

  
	
  SECTION 9.04.

  	
  Conditions to Legal Defeasance or Covenant Defeasance

  	
  89

  
	
  SECTION 9.05.

  	
  Deposited Money and U.S. Government Obligations To Be Held in Trust; Other
  Miscellaneous Provisions

  	
  90

  
	
  SECTION 9.06.

  	
  Reinstatement

  	
  91

  
	
  SECTION 9.07.

  	
  Moneys Held by Paying Agent

  	
  92

  
	
  SECTION 9.08.

  	
  Moneys Held by Trustee

  	
  92

  
	
   

  	
   

  	
   

  
	
  ARTICLE TEN

  	
   

  
	
   

  	
   

  	
   

  
	
  GUARANTEE OF NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.01.

  	
  Guarantee

  	
   

  
	
  SECTION 10.02.

  	
  Execution and Delivery of Guarantee

  	
  93

  
	
  SECTION 10.03.

  	
  Subordination of Note Guarantees

  	
  94

  
	
  SECTION 10.04.

  	
  Limitation of Guarantee

  	
  94

  
	
  SECTION 10.05.

  	
  Release of Guarantor

  	
  95

  
	
  SECTION 10.06.

  	
  Waiver of Subrogation

  	
  95

  
	
   

  	
   

  	
  95

  
	
  ARTICLE ELEVEN

  	
   

  
	
   

  	
   

  	
   

  
	
  SUBORDINATION OF NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.01.

  	
  Agreement to Subordinate

  	
  96

  
	
  SECTION 11.02.

  	
  Liquidation; Dissolution; Bankruptcy

  	
  96

  
	
  SECTION 11.03.

  	
  Default on Designated Senior Indebtedness

  	
  97

  
	
  SECTION 11.04.

  	
  Acceleration of Securities

  	
  98

  
	
  SECTION 11.05.

  	
  When Distribution Must Be Paid Over

  	
  98

  
	
  SECTION 11.06.

  	
  Notice by the Issuer

  	
  99

  
	
  SECTION 11.07.

  	
  Subrogation

  	
  99

  
	
  SECTION 11.08.

  	
  Relative Rights

  	
  99

  
	
  SECTION 11.09.

  	
  Subordination May Not Be Impaired by the Issuer

  	
  100

  
	
  SECTION 11.10.

  	
  Distribution or Notice to Representative

  	
  100

  
	
  SECTION 11.11.

  	
  Rights of Trustee and Paying Agent

  	
  100

  
	
  SECTION 11.12.

  	
  Authorization to Effect Subordination

  	
  101

  



 


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  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE TWELVE

  	
   

  
	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.01.

  	
  Trust Indenture Act Controls

  	
  101

  
	
  SECTION 12.02.

  	
  Notices

  	
  101

  
	
  SECTION 12.03.

  	
  Communications by Holders with Other Holders

  	
  103

  
	
  SECTION 12.04.

  	
  Certificate and Opinion as to Conditions Precedent

  	
  103

  
	
  SECTION 12.05.

  	
  Statements Required in Certificate and Opinion

  	
  103

  
	
  SECTION 12.06.

  	
  Rules by Trustee and Agents

  	
  104

  
	
  SECTION 12.07.

  	
  Business Days; Legal Holidays

  	
  104

  
	
  SECTION 12.08.

  	
  Governing Law

  	
  104

  
	
  SECTION 12.09.

  	
  No Adverse Interpretation of Other Agreements

  	
  104

  
	
  SECTION 12.10.

  	
  No Recourse Against Others

  	
  105

  
	
  SECTION 12.11.

  	
  Successors

  	
  105

  
	
  SECTION 12.12.

  	
  Multiple Counterparts

  	
  105

  
	
  SECTION 12.13.

  	
  Table of Contents, Headings, etc.

  	
  105

  
	
  SECTION 12.14.

  	
  Separability

  	
  105

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A.

  	
  Form of
  Note

  	
  A-1

  
	
  Exhibit B.

  	
  Form of
  Legend for Rule 144A Notes and Other Notes That Are Restricted Notes

  	
  B-1

  
	
  Exhibit C.

  	
  Form of
  Legend for Regulation S Note

  	
  C-1

  
	
  Exhibit D.

  	
  Form of
  Legend for Global Note

  	
  D-1

  
	
  Exhibit E.

  	
  Form of
  Certificate To Be Delivered in Connection with Transfers to Non-QIB
  Accredited Investors

  	
  E-1

  
	
  Exhibit F.

  	
  Form of
  Certificate To Be Delivered in Connection with Transfers Pursuant to
  Regulation S

  	
  F-1

  
	
  Exhibit G.

  	
  Form of
  Guarantee

  	
  G-1

  



 


v

















 


INDENTURE, dated as of December 19, 2005,
among KIMBALL HILL, INC., a Maryland corporation, as issuer (the “Issuer”), the Guarantors (as hereinafter
defined) and U.S. BANK NATIONAL ASSOCIATION, as trustee (the “Trustee”).


 


Each party agrees as follows for the benefit
of the other parties and for the equal and ratable benefit of the Holders.


 


ARTICLE ONE


 


DEFINITIONS
AND INCORPORATION BY REFERENCE


 


SECTION 1.01.                   Definitions.


 


“Acquired
Indebtedness” means (1) with respect to any Person that becomes a
Restricted Subsidiary after the Issue Date, Indebtedness of such Person and its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
that was not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary and (2) with respect to the Issuer or any
Restricted Subsidiary, any Indebtedness of a Person (other than the Issuer or a
Restricted Subsidiary) existing at the time such Person is merged with or into
the Issuer or a Restricted Subsidiary, or Indebtedness expressly assumed by the
Issuer or any Restricted Subsidiary in connection with the acquisition of an
asset or assets from another Person, which Indebtedness was not, in any case,
incurred by such other Person in connection with, or in contemplation of, such
merger or acquisition.


 


“Additional
Notes” shall mean an unlimited principal amount of Notes having identical
terms and conditions to the Notes issued pursuant to Article Two and in
compliance with Section 4.06.


 


“Adjusted
Net Assets” of a Guarantor at any date shall mean the lesser of the amount
by which (x) the fair value of the property of such Guarantor exceeds the total
amount of liabilities, including, without limitation, contingent liabilities
(after giving effect to all other fixed and contingent liabilities), but
excluding liabilities under the Guarantee, of such Guarantor at such date and
(y) the present fair salable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Guarantor on its debts and all other fixed and contingent liabilities (after
giving effect to all other fixed and contingent liabilities and after giving
effect to any collection from any Subsidiary of such Guarantor in respect of
the obligations of such Guarantor under the Guarantee), excluding Indebtedness
in respect of the Guarantee, as they become absolute and matured.


 


“Affiliate”
of any Person means any other Person which directly or indirectly controls or
is controlled by, or is under direct or indirect common control with, the referent
Person.  


 

















 


For purposes of Section 4.10, Affiliates shall be deemed to
include, with respect to any Person, any other Person (1) which beneficially
owns or holds, directly or indirectly, 10% or more of any class of the Voting
Stock of the referent Person, (2) of which 10% or more of the Voting Stock
is beneficially owned or held, directly or indirectly, by the referenced Person
or (3) with respect to an individual, any immediate family member of such
Person.  For purposes of this definition,
“control” of a Person shall mean the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.


 


“Agent” means any Registrar, Paying
Agent or agent for service or notices and demands.


 


“amend” means to amend, supplement,
restate, amend and restate or otherwise modify; and “amendment” shall
have a correlative meaning.


 


“asset” means any asset or property.


 


“Asset Acquisition” means:


 


(1)           an Investment by the Issuer or any
Restricted Subsidiary in any other Person if, as a result of such Investment,
such Person shall become a Restricted Subsidiary, or shall be merged with or
into the Issuer or any Restricted Subsidiary, or


 


(2)           the acquisition by the Issuer or any Restricted
Subsidiary of all or substantially all of the assets of any other Person or any
division or line of business of any other Person (other than an acquisition of
real property interests in the ordinary course of business).


 


“Asset Sale” means any sale, issuance,
conveyance, transfer, lease, assignment or other disposition by the Issuer or
any Restricted Subsidiary to any Person other than the Issuer or any Restricted
Subsidiary (including by means of a Sale and Leaseback Transaction or a merger
or consolidation) (collectively, for purposes of this definition, a “transfer”),
in one transaction or a series of related transactions, of any assets
(including Equity Interests) of the Issuer or any of its Restricted
Subsidiaries other than in the ordinary course of business.  For purposes of this definition, the term “Asset
Sale” shall not include:


 


(1)           transfers of cash or Cash
Equivalents;


 


(2)           transfers of assets (including Equity
Interests) that are governed by and made in accordance with Section 5.01;


 


(3)           Permitted Investments and Restricted
Payments permitted under Section 4.08;


 


2

















 


(4)           the creation or realization of any
Permitted Lien;


 


(5)           transactions in the ordinary course
of business, including, without limitation, sales (directly or indirectly),
dedications and other donations to governmental authorities, leases and sales
and leasebacks of (A) homes, improved land and unimproved land, whether in
single or multiple lots, (B) real estate (including related amenities and
improvements) and (C) Equity Interests of a Subsidiary, the assets of
which consist entirely of amenities and improvements related to real estate and
real estate underlying such amenities and improvements;


 


(6)           dispositions of mortgage loans and
related assets and mortgage-backed securities in the ordinary course of a
mortgage lending business; and


 


(7)           any transfer or series of related
transfers that, but for this clause, would be Asset Sales, if after giving
effect to such transfers, the aggregate Fair Market Value of the assets
transferred in such transaction or any such series of related transactions does
not exceed $2.0 million.


 


“Bankruptcy Law” means Title 11 of the
United States Code, as amended, or any similar federal or state law for the
relief of debtors.


 


“Board of Directors” means, with
respect to any Person, (i) in the case of any corporation, the board of
directors of such Person, (ii) in the case of any limited liability company,
the board of managers of such Person, comparable management committee or the
functional equivalent of the foregoing, (iii) in the case of any
partnership, the board of directors of the general partner of such Person,
comparable management committee or the functional equivalent of the foregoing
and (iv) in any other case, the functional equivalent of the foregoing or,
in each case, other than for purposes of the definition of “Change of Control,”
any duly authorized committee of such body.


 


“Board Resolution” means a copy of a
resolution certified pursuant to an Officers’ Certificate to have been duly
adopted by the Board of Directors of the Issuer and to be in full force and
effect, and delivered to the Trustee.


 


“Borrowing Base” means,
at any time of determination, the sum of the following without duplication:


 


(1)           100% of all cash and Cash Equivalents
held by the Issuer or any Restricted Subsidiary;


 


(2)           70% of the book value of Developed
Land for which no construction has occurred;


 


3

















 


(3)           90% of the cost of the land and
construction costs including capitalized interest (as reasonably allocated by
the Issuer) for all Units for which there is an executed purchase contract with
a buyer not Affiliated with the Issuer, less any deposits, down payments or earnest
money;


 


(4)           80% of the cost of the land and
construction costs including capitalized interest (as reasonably allocated by
the Issuer) for all Units for which construction has begun and for which there
is not an executed purchase agreement with a buyer not Affiliated with the
Issuer; and


 


(5)           50% of the costs of Entitled Land
(other than Developed Land) on which improvements have not commenced, less
mortgage Indebtedness (other than under a Credit Facility) applicable to such
land.


 


“Business Day” means a day other than
a Saturday, Sunday or other day on which banking institutions in New York are
authorized or required by law to close.


 


“Capitalized Lease” means a lease
required to be capitalized for financial reporting purposes in accordance with
GAAP.


 


“Capitalized Lease Obligations” of any
Person means the obligations of such Person to pay rent or other amounts under
a Capitalized Lease, and the amount of such obligation shall be the capitalized
amount thereof determined in accordance with GAAP.


 


“Cash Equivalents” means:


 


(1)           marketable obligations with a
maturity of 360 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof;


 


(2)           demand and time deposits and
certificates of deposit or acceptances with a maturity of 180 days or less of
any financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than $500
million and is assigned at least a “B” rating by Thomson Financial BankWatch;


 


(3)           commercial paper maturing no more
than 180 days from the date of creation thereof issued by a corporation that is
not the Issuer or an Affiliate of the Issuer, and is organized under the laws
of any State of the United States of America or the District of Columbia and
rated at least A-1 by S&P or at least P-1 by Moody’s;


 


4

















 


(4)           repurchase obligations with a term of
not more than ten days for underlying securities of the types described in
clause (1) above entered into with any commercial bank meeting the
specifications of clause (2) above; and


 


(5)           investments in money market or other
mutual funds substantially all of whose assets comprise securities of the types
described in clauses (1) through (4) above.


 


“Change of Control” means the
occurrence of any of the following events:


 


(1)           prior to a Public Equity Offering
after the Issue Date, the Permitted Holders cease to own, or to have the power
to vote or direct the voting of, Voting Stock representing more than 50% of the
voting power of the total outstanding Voting Stock of the Issuer;


 


(2)           following a Public Equity Offering
after the Issue Date, any “person” or “group” (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that for purposes of this clause such
person or group shall be deemed to have “beneficial ownership” of all
securities that any such person or group has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly
or indirectly, of Voting Stock representing more than 35% of the voting power
of the total outstanding Voting Stock of the Issuer; provided, however, that such event shall not be deemed to be a Change
of Control so long as the Permitted Holders own Voting Stock representing in
the aggregate a greater percentage of the total voting power of the Voting
Stock of the Issuer than such other person or group;


 


(3)           following a Public Equity Offering
after the Issue Date, during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
(together with any new directors whose election to such Board of Directors or
whose nomination for election by the stockholders of the Issuer was approved by
a vote of the majority of the directors of the Issuer then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Issuer;


 


(4)           (a) all or substantially all of
the assets of the Issuer and the Restricted Subsidiaries are sold or otherwise
transferred to any Person other than a Wholly-Owned Restricted Subsidiary or
one or more Permitted Holders or (b) the Issuer consolidates or merges
with or into another Person other than a Permitted Holder or any Person other
than a Permitted Holder consolidates or merges with or into the Issuer, in
either case under this clause (3), in one transaction or a series of related
transactions in which immediately after the consummation thereof Persons owning
Voting Stock representing in the 


 


5

















 


aggregate 100%
of the total voting power of the Voting Stock of the Issuer immediately prior
to such consummation do not own Voting Stock representing a majority of the
total voting power of the Voting Stock of the Issuer or the surviving or
transferee Person; or


 


(5)           the Issuer shall adopt a plan of
liquidation or dissolution or any such plan shall be approved by the
stockholders of the Issuer.


 


“Consolidated Amortization Expense”
for any period means the amortization expense of the Issuer and the Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.


 


“Consolidated Cash Flow Available for
Fixed Charges” for any period means, without duplication, the sum of the
amounts for such period of


 


(1)           Consolidated Net Income, plus


 


(2)           in each case only to the extent (and
in the same proportion) deducted in determining Consolidated Net Income and
with respect to the portion of Consolidated Net Income attributable to any
Restricted Subsidiary only if a corresponding amount would be permitted at the
date of determination to be distributed to the Issuer by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders,


 


(a)           Consolidated Income
Tax Expense,


 


(b)           Consolidated
Amortization Expense (but only to the extent not included in Consolidated Interest
Expense),


 


(c)           Consolidated
Depreciation Expense,


 


(d)           Consolidated
Interest Expense and interest and other charges amortized to cost of sales of
residential units and land (or a similar caption), and


 


(e)           all other non-cash
items reducing Consolidated Net Income (excluding any non-cash charge that
results in an accrual of a reserve for cash charges in any future period) for
such period,


 


in each case
determined on a consolidated basis in accordance with GAAP, minus


 


(3)           the aggregate amount of all non-cash
items, determined on a consolidated basis, to the extent such items increased
Consolidated Net Income for such period (other 


 


6

















 


than the
reversal of a prior accrual or reserve for cash items previously excluded from
Consolidated Cash Flow Available for Fixed Charges under clause (e) above).


 


“Consolidated Depreciation Expense”
for any period means the depreciation expense of the Issuer and the Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.


 


“Consolidated Income Tax Expense” for
any period means the provision for taxes of the Issuer and the Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP.


 


“Consolidated Indebtedness” means, as
of any date, the total Indebtedness of the Issuer and the Restricted
Subsidiaries as of such date, determined on a consolidated basis.


 


“Consolidated Interest Expense” for
any period means the sum, without duplication, of the total interest expense
(other than interest and other charges amortized to cost of sales of
residential units and land (or a similar caption)) of the Issuer and the
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP and including without duplication,


 


(1)           imputed interest on Capitalized Lease
Obligations,


 


(2)           commissions, discounts and other fees
and charges owed with respect to letters of credit securing financial
obligations, bankers’ acceptance financing and receivables financings,


 


(3)           the net costs associated with Hedging
Obligations,


 


(4)           amortization of debt issuance costs,
debt discount or premium and other financing fees and expenses,


 


(5)           the interest portion of any deferred
payment obligations,


 


(6)           all other non-cash interest expense,


 


(7)           the product of (a) all dividend
payments on any series of Disqualified Equity Interests of the Issuer or any
Preferred Stock of any Restricted Subsidiary (other than any such Disqualified
Equity Interests or any Preferred Stock held by the Issuer or a Wholly-Owned
Restricted Subsidiary), multiplied by (b) a
fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local
statutory tax rate of the Issuer and the Restricted Subsidiaries, expressed as
a decimal,


 


(8)           all interest payable with respect to
discontinued operations, and


 


7

















 


(9)           all interest on any Indebtedness of
any other Person guaranteed by the Issuer or any Restricted Subsidiary.


 


“Consolidated Leverage Ratio” means,
as of the date of the transaction giving rise to the need to calculate the
Consolidated Leverage Ratio (the “Transaction Date”), the ratio of (i) Total
Indebtedness as of the Transaction Date, after giving effect to all incurrences
and repayments of Indebtedness on the Transaction Date, to (ii) Consolidated
Cash Flow Available for Fixed Charges for the most recent four consecutive full
fiscal quarters for which financial statements have been filed or required
under the Indenture to be filed with the Trustee (the “Four-Quarter Period”)
ending on or prior to the Transaction Date.


 


For purposes of this definition, Consolidated
Cash Flow Available for Fixed Charges shall be calculated:  (1) after giving effect on a pro forma
basis for the period of such calculation to any Asset Sale or Asset Acquisition
(including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of the Issuer or any Restricted Subsidiary
(including any Person who becomes a Restricted Subsidiary as a result of such
Asset Acquisition) incurring Acquired Indebtedness and also including any Consolidated
Cash Flow Available for Fixed Charges (including any pro forma expense and cost
reductions calculated on a basis consistent with Regulation S-X under the Exchange
Act) associated with any such Asset Acquisition) occurring during the
Four-Quarter Period or at any time subsequent to the last day of the
Four-Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition or other disposition (including the incurrence of, or
assumption or liability for, any such Indebtedness or Acquired Indebtedness) occurred
on the first day of the Four-Quarter Period; and (2) by increasing (or
decreasing if such amount is positive) Consolidated Cash Flow Available for
Fixed Charges by the amount of minority interests of third parties in the net
earnings of consolidated partnerships or other consolidated entities to the
extent such amount was deducted (or added if such amount is positive) in
determining Consolidated Net Income for the applicable period.


 


“Consolidated Net Income” for any
period means the net income (or loss) of the Issuer and the Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP; provided that there shall be excluded
from such net income (to the extent otherwise included therein), without
duplication:


 


(1)           the net income (or loss) of any
Person (other than a Restricted Subsidiary) in which any Person other than the
Issuer and the Restricted Subsidiaries has an ownership interest, except to the
extent that cash in an amount equal to any such income has actually been
received by the Issuer or any of its Restricted Subsidiaries during such period;


 


(2)           except to the extent includible in
the consolidated net income of the Issuer pursuant to the foregoing clause (1),
the net income (or loss) of any Person that accrued prior to the date that (a) such
Person becomes a Restricted Subsidiary or is merged into or 


 


8

















 


consolidated
with the Issuer or any Restricted Subsidiary or (b) the assets of such
Person are acquired by the Issuer or any Restricted Subsidiary;


 


(3)           the net income of any Restricted
Subsidiary during such period to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of that income
is not permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary during such period;


 


(4)           for the purposes of calculating the
Restricted Payments Basket only, in the case of a successor to the Issuer by
consolidation, merger or transfer of its assets, any income (or loss) of the successor
prior to such merger, consolidation or transfer of assets;


 


(5)           other than for purposes of
calculating the Restricted Payments Basket, any gain (or loss), together with
any related provisions for taxes on any such gain (or the tax effect of any
such loss), realized during such period by the Issuer or any Restricted Subsidiary
upon (a) the acquisition of any securities, or the extinguishment of any
Indebtedness, of the Issuer or any Restricted Subsidiary or (b) any Asset
Sale by the Issuer or any Restricted Subsidiary;


 


(6)           non-cash compensation charges
resulting from stock options, restricted stock grants or other equity incentive
programs; and


 


(7)           other than for purposes of
calculating the Restricted Payments Basket, any extraordinary gain (or
extraordinary loss), together with any related provision for taxes on any such
extraordinary gain (or the tax effect of any such extraordinary loss), realized
by the Issuer or any Restricted Subsidiary during such period.


 


In addition, any return of capital with
respect to an Investment that increased the Restricted Payments Basket pursuant
to clause (3)(d) of the first paragraph of Section 4.08 or decreased
the amount of Investments outstanding pursuant to clause (16) of the definition
of “Permitted Investments” shall be excluded from Consolidated Net Income for
purposes of calculating the Restricted Payments Basket.


 


“Consolidated Net Worth” means, with
respect to any Person as of any date, the consolidated stockholders’ equity of
such Person, determined on a consolidated basis in accordance with GAAP, less
(without duplication) (1) any amounts thereof attributable to Disqualified
Equity Interests of such Person or its Subsidiaries or any amount attributable
to Unrestricted Subsidiaries and (2) all write-ups (other than write-ups
resulting from foreign currency translations and write-ups of tangible assets
of a going concern business made within twelve months after the acquisition of
such business) subsequent to the Issue Date in the book value of any asset
owned by such Person or a Subsidiary of such Person.


 


9

















 


“Consolidated Tangible Net Worth”
means, with respect to any Person as of any date, the Consolidated Net Worth of
such Person as of such date less (without duplication) all Intangible Assets of
such Person as of such date.


 


“Corporate Trust Office” means the
office of the Trustee at which at any particular time its corporate trust
business shall be principally administered, which office at the date of
execution is located at U.S. Bank National Association, Corporate Trust
Services, 60 Livingston Avenue, EP-MN-WS3C, St. Paul, Minnesota 55107.


 


“Credit Facilities” means (1) the
Sixth Amended and Restated Revolving Construction Loan Agreement, dated April 29,
2005, among the Issuer, the Subsidiary borrowers party thereto, the lenders
party thereto and Harris Trust and Savings Bank, as agent, (2) the Revolving
Loan Agreement, dated July 30, 2003, among the Issuer, the lenders party
thereto, RBC Centura Bank, as administrative agent and collateral agent, (3) the
Amended and Restated Revolving Loan Agreement, dated March 31, 2005, among
the Issuer, the Subsidiary borrowers party thereto, the lenders party thereto
and Bank of America, N.A., as administrative agent, and (4) the Amendment
and Restatement of Loan Agreement, dated January 31, 2003, among the Issuer,
the Subsidiary borrowers party thereto and RFC Construction Funding Corp., as
lender, in each case, including any notes, guarantees, collateral and security
documents, instruments and agreements executed in connection therewith
(including Hedging Obligations related to the Indebtedness incurred
thereunder), and in each case as amended or refinanced from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of borrowings or other
Indebtedness outstanding or available to be borrowed thereunder) all or any
portion of the Indebtedness under such agreements, and any successor or replacement
agreement or agreements with the same or any other agents, creditor, lender or
group of creditors or lenders.


 


“Custodian” means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.


 


“Default” means (1) any Event of
Default or (2) any event, act or condition that, after notice or the
passage of time or both, would be an Event of Default.


 


“Depository” means, with respect to
the Notes issued in the form of one or more Global Notes, The Depository Trust
Company or another Person designated as Depository by the Issuer, which Person
must be a clearing agency registered under the Exchange Act.


 


“Designated Senior Indebtedness” means
(1) Senior Indebtedness and Guarantor Senior Indebtedness under or in
respect of the Credit Facilities and (2) any other Indebtedness
constituting Senior Indebtedness or Guarantor Senior Indebtedness which, at the
time of determination, has an aggregate principal amount of at least $25.0
million and is specifically designated in the instrument evidencing such Senior
Indebtedness as “Designated Senior Indebtedness.”


 


10

















 


“Designation” has the meaning given to
this term in Section 4.15.


 


“Designation Amount” has the meaning given to this term in Section 4.15.


 


“Developed Land” means all Entitled
Land of the Issuer and its Restricted Subsidiaries which is undergoing active
development or is ready for vertical construction.


 


“Directly Related
Assets” means, with respect to any particular
property, assets directly related thereto or derived therefrom, such as
proceeds (including insurance proceeds), products, rents, and profits thereof
and improvements and accessions thereto.


 


“Disqualified Equity Interests” of any
Person means any Equity Interests of such Person that, by its terms, or by the
terms of any related agreement or of any security into which it is convertible,
puttable or exchangeable, is, or upon the happening of any event or the passage
of time would be, required to be redeemed by such Person, whether or not at the
option of the holder thereof, or matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, in whole or in part, on or prior to
the date which is 91 days after the final maturity date of the Notes; provided, however, that
any class of Equity Interests of such Person that, by its terms, authorizes
such Person to satisfy in full its obligations with respect to the payment of
dividends or upon maturity, redemption (pursuant to a sinking fund or
otherwise) or repurchase thereof or otherwise by the delivery of Equity
Interests that are not Disqualified Equity Interests, and that is not
convertible, puttable or exchangeable for Disqualified Equity Interests or
Indebtedness, will not be deemed to be Disqualified Equity Interests so long as
such Person satisfies its obligations with respect thereto solely by the
delivery of Equity Interests that are not Disqualified Equity Interests; provided, further, however, that
any Equity Interests that would not constitute Disqualified Equity Interests
but for provisions thereof giving holders thereof (or the holders of any
security into or for which such Equity Interests are convertible, exchangeable
or exercisable) the right to require the Issuer to redeem such Equity Interests
upon the occurrence of a change in control occurring prior to the final maturity
date of the Notes shall not constitute Disqualified Equity Interests if the
change in control provisions applicable to such Equity Interests are no more
favorable to such holders than the provisions of Section 4.20 and such
Equity Interests specifically provide that the Issuer will not redeem any such
Equity Interests pursuant to such provisions prior to the Issuer’s purchase of
the Notes as required pursuant to the provisions of Section 4.20.  Equity Interests in the form of common stock
of the Issuer held (whether individually or jointly with spouses or other
family members) by officers, directors or employees or former officers,
directors or employees (or by transferees, by trusts established by them or for
the benefit of them, spouses or other family members, by estates or by
beneficiaries under their trusts or estates), that are or may be required to be
repurchased upon their death, disability, retirement, severance or termination
of employment or service shall not constitute Disqualified Equity Interests for
purposes of this Indenture.


 


“Entitled Land” means
all land of the Issuer and its Restricted Subsidiaries (a) on which Units
may be constructed or which may be utilized for commercial, retail or industrial



 


11

















 


uses, in each case, under applicable laws and regulations and (b) the
intended use by the Issuer for which is permissible under the applicable
regional plan, development agreement or applicable zoning ordinance.


 


“Equity Interests” of any Person means
(1) any and all shares or other equity interests (including common stock,
preferred stock, limited liability company interests and partnership interests)
in such Person and (2) all rights to purchase, warrants or options
(whether or not currently exercisable), participations or other equivalents of
or interests in (however designated) such shares or other equity interests in
such Person.


 


“Exchange Act” means the U.S.
Securities Exchange Act of 1934, as amended.


 


“Exchange Securities” has the meaning
provided in the Registration Rights Agreement.


 


“Excluded Subsidiary” means any
Mortgage Subsidiary or any Subsidiary that is not a Wholly-Owned Restricted
Subsidiary.


 


“Existing Non-Wholly Owned Restricted
Subsidiaries” means (1) Golf Plaza Office Park Partnership, (2) KH
SRAV I, LLC, (3) Regency Oaks Limited Partnership, (4) Sunridge Park
Limited Partnership, (5) Terramina LLC and (6) Wynndam, LLC.


 


“Fair Market Value” means, with
respect to any asset, the price (after taking into account any liabilities
relating to such assets) that would be negotiated in an arm’s-length transaction
for cash between a willing seller and a willing and able buyer, neither of
which is under any compulsion to complete the transaction, as such price is
determined in good faith by the Board of Directors of the Issuer or a duly
authorized committee thereof, as evidenced by a resolution of such Board or
committee.


 


“GAAP” means generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards Board
or in such other statements by such other entity as may be approved by a
significant segment of the accounting profession of the United States, as in
effect on the Issue Date.


 


“guarantee” means a direct or indirect
guarantee by any Person of any Indebtedness of any other Person and includes
any obligation, direct or indirect, contingent or otherwise, of such
Person:  (1) to purchase or pay (or
advance or supply funds for the purchase or payment of) Indebtedness of such
other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm’s-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise); or (2) entered into for
purposes of assuring in any other manner the obligee of such Indebtedness of 


 


12

















 


the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part).  “guarantee,”
when used as a verb, and “guaranteed” have correlative meanings.


 


“Guarantor Senior Indebtedness” means,
with respect to any Guarantor, the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of such Guarantor, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes.


 


Without limiting the generality of the
foregoing, “Guarantor Senior Indebtedness” shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on, and all other amounts owing in respect of:


 


(1)           all monetary obligations of every
nature of such Guarantor under, or with respect to, the Credit Facilities,
including, without limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees, expenses and indemnities
(and guarantees thereof); and


 


(2)           all Hedging Obligations in respect of
the Credit Facilities;


 


in each case
whether outstanding on the Issue Date or thereafter incurred.


 


Notwithstanding
the foregoing, “Guarantor Senior Indebtedness” shall not include:


 


(1)           any Indebtedness of such Guarantor to
the Issuer or any of its Subsidiaries;


 


(2)           Indebtedness to, or guaranteed on
behalf of, any director, officer or employee of the Issuer or any of its
Subsidiaries (including, without limitation, amounts owed for compensation);


 


(3)           obligations to trade creditors and
other amounts incurred (but not under the Credit Facilities) in connection with
obtaining goods, materials or services;


 


(4)           Indebtedness represented by
Disqualified Equity Interests;


 


(5)           any liability for taxes owed or owing
by such Guarantor;


 


13

















 


(6)           that portion of any Indebtedness
incurred in violation of Section 4.06 (but, as to any such obligation, no
such violation shall be deemed to exist for purposes of this clause (6) if
the holder(s) of such obligation or their representative shall have received an
officers’ certificate of such Guarantor to the effect that the incurrence of
such Indebtedness does not (or, in the case of revolving credit indebtedness,
that the incurrence of the entire committed amount thereof at the date on which
the initial borrowing thereunder is made would not) violate such provisions of
this Indenture);


 


(7)           Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of
Title 11, United States Code, is without recourse to such Guarantor; and


 


(8)           any Indebtedness which is, by its
express terms, subordinated in right of payment to any other Indebtedness of
such Guarantor.


 


“Guarantors” means each Restricted
Subsidiary of the Issuer on the Issue Date (other than the Existing Non-Wholly
Owned Restricted Subsidiaries and KH Financial, L.P.), and each other Person
that is required to become a Guarantor by the terms of this Indenture after the
Issue Date, in each case, until such Person is released from its Note
Guarantee.


 


“Hedging Obligations” of any Person
means the obligations of such Person pursuant to (1) any interest rate
swap agreement, interest rate collar agreement or other similar agreement or arrangement
designed to protect such Person against fluctuations in interest rates, (2) agreements
or arrangements designed to protect such Person against fluctuations in foreign
currency exchange rates in the conduct of its operations, or (3) any
forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in commodity prices.


 


“Holder” means any registered holder,
from time to time, of the Notes.


 


“incur” means, with respect to any
Indebtedness or Obligation, incur, create, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to such Indebtedness or Obligation; provided that (1) the
Indebtedness of a Person existing at the time such Person became a Restricted
Subsidiary shall be deemed to have been incurred by such Restricted Subsidiary
and (2) neither the accrual of interest nor the accretion of original
issue discount shall be deemed to be an incurrence of Indebtedness.


 


“Indebtedness” of any Person at any
date means, without duplication:


 


(1)           all liabilities, contingent or
otherwise, of such Person for borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof);


 


14

















 


(2)           all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments;


 


(3)           all obligations of such Person in
respect of letters of credit or other similar instruments (or reimbursement
obligations with respect thereto);


 


(4)           all obligations of such Person to pay
the deferred and unpaid purchase price of property or services, except trade
payables and accrued expenses incurred by such Person in the ordinary course of
business in connection with obtaining goods, materials or services;


 


(5)           the maximum fixed redemption or
repurchase price of all Disqualified Equity Interests of such Person;


 


(6)           all Capitalized Lease Obligations of
such Person;


 


(7)           all Indebtedness of others secured by
a Lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person;


 


(8)           all Indebtedness of others guaranteed
by such Person to the extent of such guarantee; provided
that Indebtedness of the Issuer or its Subsidiaries that is guaranteed by the
Issuer or the Issuer’s Subsidiaries shall only be counted once in the
calculation of the amount of Indebtedness of the Issuer and its Subsidiaries on
a consolidated basis;


 


(9)           to the extent not otherwise included
in this definition, Hedging Obligations of such Person;


 


(10)         all obligations of such Person under
conditional sale or other title retention agreements relating to assets
purchased by such Person; and


 


(11)         the liquidation value of Preferred
Stock of a Subsidiary of such Person issued and outstanding and held by any
Person other than such Person (or one of its Wholly-Owned Restricted
Subsidiaries).


 


Notwithstanding the foregoing, (a) earn-outs
or similar profit sharing arrangements provided for in acquisition agreements
which are determined on the basis of future operating earnings or other similar
performance criteria (which are not determinable at the time of acquisition) of
the acquired assets or entities and (b) accrued expenses, trade payables,
liabilities related to inventory not owned, customer deposits or deferred
income taxes arising in the ordinary course of business shall not be considered
Indebtedness.  Any Indebtedness which is
incurred at a discount to the principal amount at maturity thereof shall be
deemed to have been incurred at the accreted value thereof as of such
date.  The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described 


 


15

















 


above, the maximum liability of such Person for any such contingent obligations
at such date and, in the case of clause (7), the lesser of (a) the Fair
Market Value of any asset subject to a Lien securing the Indebtedness of others
on the date that the Lien attaches and (b) the amount of the Indebtedness
secured.  For purposes of clause (5), the
“maximum fixed redemption or repurchase price” of any Disqualified Equity
Interests that do not have a fixed redemption or repurchase price shall be calculated
in accordance with the terms of such Disqualified Equity Interests as if such
Disqualified Equity Interests were redeemed on any date on which an amount of Indebtedness
outstanding shall be required to be determined pursuant to this Indenture.


 


Notwithstanding the above, this Indenture
does not restrict any Unrestricted Subsidiary from incurring Indebtedness nor
will Indebtedness of any Unrestricted Subsidiaries be included in the
Consolidated Leverage Ratio hereunder, as long as the Unrestricted Subsidiary
incurring such Indebtedness remains an Unrestricted Subsidiary.


 


“Indenture” means this Indenture as
amended, restated or supplemented from time to time.


 


“Independent Director” means a
director of the Issuer who is not an officer or employee of the Issuer or any
Subsidiary of the Issuer and, in connection with any transaction, is
disinterested with respect to such transaction.


 


“Independent Financial Advisor” means
an accounting, appraisal or investment banking firm of nationally recognized
standing that is, in the reasonable judgment of the Issuer’s Board of Directors,
qualified to perform the task for which it has been engaged and disinterested
and independent with respect to the Issuer and its Affiliates; provided, however, that
the prior rendering of service to the Issuer or an Affiliate of the Issuer shall
not, by itself, disqualify the advisor.


 


“Initial Purchasers” means J.P. Morgan
Securities Inc. and Harris Nesbitt Corp.


 


“Institutional Accredited Investor”
means an institution that is an “accredited investor” as that term is defined
in Rule 501(a)(1), (2), (3) or (7) promulgated under the
Securities Act.


 


“Intangible Assets” means, with
respect to any Person, all unamortized debt discount and expense, unamortized
deferred charges, goodwill, patents, trademarks, service marks, trade names,
copyrights, write-ups of assets over their carrying value (other than write-ups
which occurred prior to the Issue Date and other than, in connection with the
acquisition of an asset, the write-up of the value of such asset to its Fair
Market Value in accordance with GAAP on the date of acquisition) and all other
items which would be treated as intangibles on the consolidated balance sheet
of such Person prepared in accordance with GAAP.


 


16

















 


“interest” means, with respect to the
Notes, interest and Liquidated Damages, if any, on the Notes.


 


“Interest Payment Dates” means each June 15
and December 15, commencing June 15, 2006.


 


“Investments” of any Person means:


 


(1)           all direct or indirect investments by
such Person in any other Person in the form of loans, advances or capital
contributions or other credit extensions constituting Indebtedness of such
other Person, and any guarantee of Indebtedness of any other Person;


 


(2)           all purchases (or other acquisitions
for consideration) by such Person of Indebtedness, Equity Interests or other
securities of any other Person;


 


(3)           all other items that would be
classified as investments on a balance sheet of such Person prepared in
accordance with GAAP; and


 


(4)           the Designation of any Subsidiary as
an Unrestricted Subsidiary.


 


Except as
otherwise expressly specified in this definition, the amount of any Investment
(other than an Investment made in cash) shall be the Fair Market Value thereof
on the date such Investment is made.  The
amount of Investment pursuant to clause (4) shall be the Designation
Amount determined in accordance with Section 4.15.  If the Issuer or any Subsidiary sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary, the Issuer shall be deemed to have made an Investment on
the date of any such sale or other disposition equal to the Fair Market Value
of the Equity Interests of and all other Investments in such Subsidiary not
sold or disposed of, which amount shall be determined by the Board of Directors
of the Issuer.  Notwithstanding the
foregoing, redemptions of Equity Interests of the Issuer shall be deemed not to
be Investments.


 


“Issue Date” means December 19,
2005, the date on which the Notes are originally issued.


 


“Issuer” means the party named as such
in the first paragraph of this Indenture until a successor replaces such party
pursuant to Article Five and thereafter means the successor.


 


“Issuer Request” means any written
request signed in the name of the Issuer by the Chairman of the Board of
Directors, any Vice Chairman, the Chief Executive Officer, the President, any
Vice President, the Chief Financial Officer or the Treasurer of the Issuer and
attested to by the Secretary or any Assistant Secretary of the Issuer.


 


17

















 


“Lien” means, with respect to any
asset, any mortgage, deed of trust, lien (statutory or other), pledge, lease,
easement, restriction, covenant, charge, security interest or other encumbrance
of any kind or nature in respect of such asset, whether or not filed, recorded
or otherwise perfected under applicable law, including any conditional sale or
other title retention agreement, and any lease in the nature thereof, any
option or other agreement to sell, and any filing of, or agreement to give, any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction (other than cautionary filings in respect of operating
leases).


 


“Liquidated Damages” has the meaning
set forth in the Registration Rights Agreement.


 


“Moody’s” means Moody’s Investors
Service, Inc., and its successors.


 


“Mortgage Subsidiary” means any
Restricted Subsidiary engaged primarily in the mortgage origination and lending
business.


 


“Net Available Proceeds” means, with
respect to any Asset Sale, the proceeds thereof in the form of cash or Cash
Equivalents, net of


 


(1)           brokerage commissions and other fees
and expenses (including fees and expenses of legal counsel, accountants and
investment banks) of such Asset Sale;


 


(2)           provisions for taxes payable as a
result of such Asset Sale (after taking into account any available tax credits
or deductions and any tax sharing arrangements);


 


(3)           amounts required to be paid to any
Person (other than the Issuer or any Restricted Subsidiary) owning a beneficial
interest in the assets subject to the Asset Sale or having a Lien thereon;


 


(4)           payments of unassumed liabilities
(not constituting Indebtedness) relating to the assets sold at the time of, or
within 30 days after the date of, such Asset Sale; and


 


(5)           appropriate amounts to be provided by
the Issuer or any Restricted Subsidiary, as the case may be, as a reserve
required in accordance with GAAP against any liabilities associated with such
Asset Sale and retained by the Issuer or any Restricted Subsidiary, as the case
may be, after such Asset Sale, including pensions and other postemployment
benefit liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale, all as reflected
in an Officers’ Certificate delivered to the Trustee; provided,
however, that any amounts remaining
after adjustments, revaluations or liquidations of such reserves shall
constitute Net Available Proceeds.


 


18






 













 


“Non-Recourse
Indebtedness” with respect to any Person means Indebtedness of such Person
for which (1) the sole legal recourse for collection of principal and
interest on such Indebtedness is against the specific property identified in
the instruments evidencing or securing such Indebtedness and such property was
acquired with the proceeds of such Indebtedness or such Indebtedness was incurred
within 90 days after the acquisition of such property and (2) no other
assets of such Person may be realized upon in collection of principal or
interest on such Indebtedness.


 


“Non-U.S.
Person” means a Person who is not a U.S. person, as defined in Regulation
S.


 


“Notes”
means the 101⁄2% Senior Subordinated Notes due 2012 issued by the Issuer,
including, without limitation, the Exchange Securities, treated as a single
class of securities, as amended from time to time in accordance with the terms
hereof, that are issued pursuant to this Indenture.


 


“Obligation”
means any principal, interest, penalties, fees, indemnification, reimbursements,
costs, expenses, damages and other liabilities payable under the documentation
governing any Indebtedness.


 


“Offer”
has the meaning set forth in the definition of “Offer to Purchase.”


 


“Offer
Expiration Date” has the meaning set forth in the definition of “Offer to
Purchase.”


 


“Offer to
Purchase” means a written offer (the “Offer”) sent by or on behalf
of the Issuer by first-class mail, postage prepaid, to each Holder at its
address appearing in the register for the Notes on the date of the Offer
offering to purchase up to the principal amount of Notes specified in such
Offer at the purchase price specified in such Offer (as determined pursuant to
this Indenture).  Unless otherwise
required by applicable law, the Offer shall specify an expiration date (the “Offer
Expiration Date”) of the Offer to Purchase, which shall be not less than 30
Business Days nor more than 60 days after the date of such Offer, and a
settlement date (the “Purchase Date”) for purchase of Notes to occur no
later than three Business Days after the Offer Expiration Date.  The Offer shall contain all the information
required by applicable law to be included therein.  The Offer shall also contain information
concerning the business of the Issuer and its Subsidiaries which the Issuer in
good faith believes will enable such Holders to make an informed decision with
respect to the Offer to Purchase.  Such
information shall include, at a minimum, (i) the most recent annual and
quarterly financial statements and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” contained in the document
required to be delivered to Holders pursuant to Section 4.02 (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Issuer’s
business subsequent to the date of the latest of such financial statements
referred to in clause (i) (including a description of the events requiring
the Issuer to make 


 


19

















 


the Offer to Purchase), (iii) if
applicable, appropriate pro forma financial information concerning the Offer to
Purchase and the events requiring the Issuer to make the Offer to Purchase and (iv) any
other information required by applicable law to be included therein.  The Offer shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the
Offer to Purchase.  The Offer shall also
state:


 


(1)           the Section of this Indenture
pursuant to which the Offer to Purchase is being made;


 


(2)           the Offer Expiration Date and the
Purchase Date;


 


(3)           the aggregate principal amount of the
outstanding Notes offered to be purchased by the Issuer pursuant to the Offer
to Purchase (including, if less than 100%, the manner by which such amount has
been determined pursuant to the Section of this Indenture requiring the
Offer to Purchase) (the “Purchase Amount”);


 


(4)           the purchase price to be paid by the
Issuer for each $1,000 aggregate principal amount of Notes accepted for payment
(the “Purchase Price”);


 


(5)           that the Holder may tender all or any
portion of the Notes registered in the name of such Holder and that any portion
of a Note tendered must be tendered in an integral multiple of $1,000 principal
amount;


 


(6)           the place or places where Notes are
to be surrendered for tender pursuant to the Offer to Purchase;


 


(7)           that interest on any Note not
tendered or tendered but not purchased by the Issuer pursuant to the Offer to
Purchase will continue to accrue;


 


(8)           that on the Purchase Date the
Purchase Price will become due and payable upon each Note being accepted for
payment pursuant to the Offer to Purchase and that interest thereon shall cease
to accrue on and after the Purchase Date;


 


(9)           that each Holder electing to tender
all or any portion of a Note pursuant to the Offer to Purchase will be required
to surrender such Note, with the form entitled “Option of Holder to Elect
Purchase” on the reverse of the Note completed, at the place or places
specified in the Offer prior to the close of business on the Offer Expiration
Date (such Note being, if the Issuer so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer duly executed by, the Holder thereof or its attorney duly authorized in
writing);


 


(10)         that Holders will be entitled to
withdraw all or any portion of Notes tendered if the Issuer receives, not later
than the close of business on the fifth Business Day 


 


20

















 


preceding the Offer Expiration Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder tendered, the certificate number of the Note the
holder tendered and a statement that such Holder is withdrawing all or a
portion of its tender;


 


(11)         that (a) if Notes in an aggregate
principal amount less than or equal to the Purchase Amount are duly tendered
and not withdrawn pursuant to the Offer to Purchase, the Issuer shall purchase
all such Notes and (b) if Notes in an aggregate principal amount in excess
of the Purchase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Issuer shall purchase Notes having an aggregate principal amount
equal to the Purchase Amount on a pro  rata basis (with such
adjustments as may be deemed appropriate so that only Notes in denominations of
$1,000 principal amount or integral multiples thereof shall be purchased); and


 


(12)         that in the case of any Holder whose Note
is purchased only in part, the Issuer shall execute and deliver to the Holder
of such Note without service charge, a new Note or Notes, of any authorized
denomination as requested by such Holder, in an aggregate principal amount
equal to and in exchange for the unpurchased portion of the Note so tendered.


 


An Offer to
Purchase shall be governed by and effected in accordance with the provisions
above pertaining to any Offer.


 


On or before
the Purchase Date, the Issuer shall (i) accept for payment Notes or
portions thereof tendered and not withdrawn pursuant to the Offer, (ii) deposit
with the Trustee U.S. Dollars sufficient to pay the Purchase Price, plus
accrued interest, if any, of all Notes to be purchased and (iii) deliver
to the Trustee Notes so accepted together with an Officers’ Certificate stating
the Notes or portions thereof being purchased by the Issuer.  The Trustee shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the Purchase Price,
plus accrued interest, if any, thereon.


 


“Offering
Memorandum” means the Offering Memorandum dated December 14, 2005
pursuant to which the Notes were offered.


 


“Officer”
means any of the following of the Issuer: 
the Chairman of the Board of Directors, the Chief Executive Officer, the
Chief Financial Officer, the President, any Vice President, the Treasurer or
the Secretary.


 


“Officers’
Certificate” means a certificate signed by two Officers.


 


“Opinion of
Counsel” means a written opinion reasonably satisfactory in form and
substance to the Trustee from legal counsel, which counsel is reasonably
acceptable to the Trustee, stating the matters required by Section 12.05
and delivered to the Trustee.


 


21

















 


“Pari Passu
Indebtedness” means any Indebtedness of the Issuer or any Guarantor that
ranks pari passu as to payment with the Notes
or the Note Guarantees, as applicable.


 


“Permitted
Business” means the types of businesses engaged in by the Issuer and its
Subsidiaries on the Issue Date as described in the Offering Memorandum and
businesses that are reasonably related thereto or reasonable extensions thereof
(including, without limitation, land acquisition and development, mortgage
financing, insurance brokerage, home alarm, pest control, title and other
ancillary businesses).


 


“Permitted
Holders” means (1) David K. Hill, Diane G. Hill, their immediate family
members (as defined by the New York Stock Exchange’s listing requirements) or
the respective spouses and former spouses (including widows and widowers),
heirs or lineal descendants of any of the foregoing; (2) an estate,
trust (including a revocable trust, declaration of trust or a voting trust),
guardianship, other legal representative relationship or custodianship for the
primary benefit of one or more individuals described in clause (1) above
or controlled by one or more individuals described in clause (1) above; (3) a
corporation, partnership, limited liability company, foundation, charitable
organization or other entity if a majority of the voting power and, if
applicable, a majority of the value of the equity ownership of such
corporation, partnership, limited liability company, foundation, charitable
organization or other entity is directly or indirectly owned by or for the
primary benefit of one or more individuals or entities described in clauses (1) or
(2) above; and (4) a corporation, partnership, limited liability
company, foundation, charitable organization or other entity controlled
directly or indirectly by one or more individuals or entities described in
clauses (1), (2) or (3) above.


 


“Permitted
Investment” means:


 


(1)           Investments by the Issuer or any
Restricted Subsidiary in (a) any Guarantor, (b) in any Person that is
or will become immediately after such Investment a Guarantor or that will merge
or consolidate into the Issuer or a Guarantor or (c) any Existing
Non-Wholly Owned Restricted Subsidiary; provided that,
in the case of this clause (c), any such Investment is made in the form of an
unsubordinated loan or advance and is evidenced by a note issued by the applicable
Existing Non-Wholly Owned Restricted Subsidiary to the Person making such
Investment;


 


(2)           Investments in the Issuer by any
Restricted Subsidiary;


 


(3)           loans and advances to directors,
employees and officers of the Issuer and the Restricted Subsidiaries for bona
fide business purposes or to purchase Equity Interests of the Issuer not in
excess of $2.0 million at any one time outstanding;


 


(4)           Hedging Obligations incurred pursuant
to clause (4) of the second paragraph of Section 4.06;


 


22

















 


(5)           Cash Equivalents;


 


(6)           receivables owing to the Issuer or
any Restricted Subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms
may include such concessionary trade terms as the Issuer or any such Restricted
Subsidiary deems reasonable under the circumstances;


 


(7)           Investments in mortgage loans and related
assets originated by a Mortgage Subsidiary in the ordinary course of a mortgage
lending business;


 


(8)           Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy, insolvency, reorganization, workout or
recapitalization of such trade creditors or customers;


 


(9)           Investments made by the Issuer or any
Restricted Subsidiary as a result of consideration received in connection with
an Asset Sale made in compliance with Section 4.09;


 


(10)         lease, utility and other similar
deposits in the ordinary course of business;


 


(11)         Investments made by the Issuer or a
Restricted Subsidiary for consideration consisting only of Qualified Equity
Interests of the Issuer;


 


(12)         stock, obligations or securities
received in settlement of debts created in the ordinary course of business and
owing to the Issuer or any Restricted Subsidiary or in satisfaction of
judgments;


 


(13)         Investments in existence on the Issue
Date;


 


(14)         Investments made by the Issuer or any
Restricted Subsidiary in joint ventures in a Permitted Business with
unaffiliated third parties in an aggregate amount at any one time outstanding
not to exceed 30% of the Issuer’s Consolidated Tangible Net Worth at such time
(with each Investment being valued as of the date made and without regard to
subsequent changes in value);


 


(15)         completion guarantees entered into in
the ordinary course of business; and


 


(16)         other Investments in an aggregate
amount not to exceed $25.0 million at any one time outstanding (with each
Investment being valued as of the date made and without regard to subsequent
changes in value).


 


The amount of
Investments outstanding at any time pursuant to clause (16) above shall be
deemed to be reduced:


 


23

















 


(a)           upon the disposition or repayment of
or return on any Investment made pursuant to clause (16) above, by an amount
equal to the return of capital with respect to such Investment to the Issuer or
any Restricted Subsidiary (to the extent not included in the computation of
Consolidated Net Income), less the cost of the disposition of such Investment
and net of taxes; and


 


(b)           upon a Redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary, by an amount equal to the
lesser of (x) the Fair Market Value of the Issuer’s proportionate interest in
such Subsidiary immediately following such Redesignation, and (y) the aggregate
amount of Investments in such Subsidiary that increased (and did not previously
decrease) the amount of Investments outstanding pursuant to clause (16) above.


 


“Permitted
Junior Securities” means:


 


(1)           Equity Interests in the Issuer or any
Guarantor; or


 


(2)           debt securities issued pursuant to a
confirmed plan of reorganization that are subordinated in right of payment to (a) all
Senior Indebtedness and Guarantor Senior Indebtedness and (b) any debt
securities issued in exchange for Senior Indebtedness to substantially the same
extent as, or to a greater extent than, the Notes and the Note Guarantees are
subordinated to Senior Indebtedness and Guarantor Senior Indebtedness under
this Indenture.


 


“Permitted
Liens” means the following types of Liens:


 


(1)           (a) statutory Liens of landlords
and Liens of carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen and other Liens imposed by law incurred in the ordinary course of
business and (b) Liens for taxes, assessments or governmental charges or
claims, in either case, for sums not yet delinquent or being contested in good
faith, if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made in respect thereof;


 


(2)           Liens incurred or deposits made in
the ordinary course of business in connection with workers’ compensation,
unemployment insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);


 


(3)           Liens upon specific items of
inventory or other goods and proceeds of any Person securing such Person’s
obligations in respect of bankers’ acceptances issued or created for the
account of such Person to facilitate the purchase, shipment or storage of such
inventory or other goods;


 


24

















 


(4)           Liens securing reimbursement
obligations with respect to commercial letters of credit which encumber
documents and other assets relating to such letters of credit and products and
proceeds thereof;


 


(5)           Liens encumbering deposits made to
secure obligations arising from statutory, regulatory, contractual or warranty
requirements of the Issuer or any Restricted Subsidiary, including rights of
offset and setoff;


 


(6)           bankers’ Liens, rights of setoff and
other similar Liens existing solely with respect to cash and Cash Equivalents
on deposit in one or more accounts maintained by the Issuer or any Restricted
Subsidiary, in each case granted in the ordinary course of business in favor of
the bank or banks with which such accounts are maintained, securing amounts
owing to such bank with respect to cash management and operating account arrangements,
including those involving pooled accounts and netting arrangements; provided that in no case shall any such Liens secure (either
directly or indirectly) the repayment of any Indebtedness;


 


(7)           leases or subleases (or any Liens
related thereto) granted to others that do not materially interfere with the
ordinary course of business of the Issuer or any Restricted Subsidiary;


 


(8)           Liens arising from filing Uniform
Commercial Code financing statements regarding leases;


 


(9)           Liens securing all of the Notes and
Liens securing any Note Guarantee;


 


(10)         Liens existing on the Issue Date;


 


(11)         Liens in favor of the Issuer or a
Guarantor;


 


(12)         Liens securing Senior Indebtedness or
Guarantor Senior Indebtedness permitted to be incurred under this Indenture;


 


(13)         Liens securing Non-Recourse
Indebtedness of the Issuer or any Restricted Subsidiary permitted to be
incurred under this Indenture; provided that
such Liens apply only to the property financed out of the net proceeds of such
Non-Recourse Indebtedness within 90 days after the incurrence of such Non-Recourse
Indebtedness;


 


(14)         Liens securing Purchase Money
Indebtedness permitted to be incurred under this Indenture; provided that such Liens apply only to (a) the property
acquired, constructed or improved with the proceeds of such Purchase Money
Indebtedness within 90 days after the incurrence of such Purchase Money Indebtedness
and (b) Directly Related Assets;


 


25

















 


(15)         Liens securing Acquired Indebtedness
permitted to be incurred under this Indenture; provided
that the Liens do not extend to assets not subject to such Lien at the time of
acquisition (other than improvements thereon) and are no more favorable to the
lienholders than those securing such Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Issuer or a Restricted
Subsidiary;


 


(16)         Liens on mortgage loans and related
assets securing Indebtedness of any Mortgage Subsidiary under warehouse lines
of credit and purchase and sale agreements and repurchase agreements permitted
to be incurred under this Indenture;


 


(17)         Liens on assets of a Person existing at
the time such Person is acquired or merged with or into or consolidated with
the Issuer or any such Restricted Subsidiary (and not created in anticipation
or contemplation thereof);


 


(18)         attachment or judgment Liens not giving
rise to a Default and which are being contested in good faith by appropriate
proceedings;


 


(19)         easements, rights-of-way, restrictions
and other similar charges or encumbrances not materially interfering with the
ordinary course of business of the Issuer and its Subsidiaries;


 


(20)         zoning restrictions, licenses,
restrictions on the use of real property or minor irregularities in title
thereto, which do not materially impair the use of such real property in the
ordinary course of business of the Issuer and its Subsidiaries or the value of
such real property for the purpose of such business;


 


(21)         Liens securing Hedging Obligations
otherwise permitted to be incurred pursuant to this Indenture; and


 


(22)         any right of first refusal, right of
first offer, option, contract or other agreement to sell an asset; provided, however,
such sale is not otherwise prohibited under this Indenture.


 


“Permitted
Unrestricted Subsidiary Indebtedness” means Indebtedness of an Unrestricted
Subsidiary:


 


(1)           as to which neither the Issuer nor
any Restricted Subsidiary (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise,
or (c) constitutes the lender; and


 


(2)           no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would 


 


26

















 


permit upon notice, lapse of time or both any holder of any other
Indebtedness (other than the Notes) of the Issuer or any Restricted Subsidiary
to declare a default on the other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity.


 


“Person”
means any individual, corporation, partnership, limited liability company,
joint venture, incorporated or unincorporated association, joint-stock company,
trust, unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.


 


“Physical
Notes” means certificated Notes in registered form in substantially the
form set forth in Exhibit A.


 


“Plan of
Liquidation” with respect to any Person, means a plan that provides for,
contemplates or the effectuation of which is preceded or accompanied by
(whether or not substantially contemporaneously, in phases or otherwise):  (1) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of such Person otherwise
than as an entirety or substantially as an entirety; and (2) the
distribution of all or substantially all of the proceeds of such sale, lease,
conveyance or other disposition of all or substantially all of the remaining
assets of such Person to creditors and holders of Equity Interests of such Person.


 


“Preferred
Stock” means, with respect to any Person, any and all preferred or
preference stock or other equity interests (however designated) of such Person
whether now outstanding or issued after the Issue Date.


 


“principal”
means, with respect to the Notes, the principal of, and premium, if any, on the
Notes.


 


“Private
Placement Legend” means the legend initially set forth on the Rule 144A
Notes and Other Notes that are Restricted Notes in the form set forth in Exhibit B.


 


“Public Equity Offering” means an underwritten public offering of Qualified Equity
Interests of the Issuer pursuant to an effective registration statement filed
under the Securities Act.


 


 “Purchase Amount” has the meaning set
forth in the definition of “Offer to Purchase.”


 


“Purchase
Date” has the meaning set forth in the definition of “Offer to Purchase.”


 


 “Purchase Money Indebtedness” means
Indebtedness, including Capitalized Lease Obligations, of the Issuer or any
Restricted Subsidiary incurred for the purpose of financing 


 


27

















 


all or any part of the purchase
price of property, plant or equipment used in the business of the Issuer or any
Restricted Subsidiary or the cost of installation, construction or improvement
thereof (whether through the direct acquisition of such assets or the
acquisition of Equity Interests of any Person owning exclusively such assets); provided, however, that (1) the amount of such Indebtedness
shall not exceed such purchase price or cost, (2) such Indebtedness shall
not be secured by any asset other than the specified asset being financed or,
in the case of real property or fixtures, including additions and improvements,
the real property to which such asset is attached and (3) such
Indebtedness shall be incurred within 90 days after such acquisition of such
asset by the Issuer or such Restricted Subsidiary or such installation,
construction or improvement.


 


“Purchase
Price” has the meaning set forth in the definition of “Offer to Purchase.”


 


“Qualified
Equity Interests” means Equity Interests of the Issuer other than Disqualified
Equity Interests; provided that such Equity
Interests shall not be deemed Qualified Equity Interests to the extent sold or
owed to a Subsidiary of the Issuer or financed, directly or indirectly, using
funds (1) borrowed from the Issuer or any Subsidiary of the Issuer until
and to the extent such borrowing is repaid or (2) contributed, extended,
guaranteed or advanced by the Issuer or any Subsidiary of the Issuer
(including, without limitation, in respect of any employee stock ownership or
benefit plan).


 


“Qualified
Equity Offering” means the issuance and sale of Qualified Equity Interests
of the Issuer to Persons other than any Permitted Holder or any other Person
who is, prior to such issuance and sale, an Affiliate of the Issuer.


 


“Qualified
Institutional Buyer” or “QIB” shall have the meaning specified in Rule 144A
promulgated under the Securities Act.


 


“Receivables”
means an amount owed with respect to completed sales of housing units, lots and
parcels (whether or not entitled) sold to an unaffiliated purchaser.


 


“redeem”
means to redeem, repurchase, purchase, defease, retire, discharge or otherwise
acquire or retire for value; and “redemption” shall have a correlative
meaning.


 


“Redemption
Date” when used with respect to any Note to be redeemed means the date
fixed for such redemption pursuant to the terms of the Notes.


 


“refinance”
means to refinance, repay, prepay, replace, renew or refund.


 


“Refinancing
Indebtedness” means Indebtedness of the Issuer or a Restricted Subsidiary
issued in exchange for, or the proceeds from the issuance and sale or
disbursement of which are used substantially concurrently to redeem or
refinance in whole or in part, or constituting 


 


28

















 


an amendment of, any
Indebtedness of the Issuer or any Restricted Subsidiary (the “Refinanced
Indebtedness”) in a principal amount not in excess of the principal amount
(or accreted value, in the case of Indebtedness issued at a discount) of the Refinanced
Indebtedness so repaid or amended (plus the amount of any premium paid and the
amount of reasonable expenses incurred by the Issuer or any Restricted
Subsidiary in connection with such repayment or amendment); provided that:


 


(1)           if the Refinanced Indebtedness was
subordinated to or pari passu with the Notes or the Note Guarantees, as the
case may be, then such Refinancing Indebtedness, by its terms, is expressly pari passu with (in the case of Refinanced Indebtedness that
was pari passu with) or subordinate in right of payment to (in the case of
Refinanced Indebtedness that was subordinated to) the Notes or the Note
Guarantees, as the case may be, at least to the same extent as the Refinanced
Indebtedness;


 


(2)           the Refinancing Indebtedness is
scheduled to mature either (a) no earlier than the Refinanced Indebtedness
being repaid or amended or (b) after the maturity date of the Notes; and


 


(3)           the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the
maturity date of the Notes has a Weighted Average Life to Maturity at the time
such Refinancing Indebtedness is incurred that is equal to or greater than the
Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness
being repaid that is scheduled to mature on or prior to the maturity date of
the Notes.


 


“Registration
Rights Agreement” means the
registration rights agreement dated as of the Issue Date among the Issuer, the
Guarantors and the Initial Purchasers.


 


“Regulation S” means
Regulation S promulgated under the Securities Act.


 


“Representative”
means any agent or representative in respect of any Designated Senior
Indebtedness; provided that if, and for so long
as, any Designated Senior Indebtedness lacks such representative, then the
Representative for such Designated Senior Indebtedness shall at all times
constitute the holders of a majority in outstanding principal amount of such Designated
Senior Indebtedness.


 


“Responsible
Officer” when used with respect to the Trustee, means an officer or
assistant officer assigned to the corporate trust department of the Trustee (or
any successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.


 


“Restricted
Note” has the same meaning as “Restricted Security” set forth in Rule 144(a)(3) promulgated
under the Securities Act; provided that
the Trustee shall be entitled to request 


 


29

















 


and conclusively rely upon an
Opinion of Counsel with respect to whether any Note is a Restricted Note.


 


 “Restricted Payment” means any of the
following:


 


(1)           the declaration or payment of any
dividend or any other distribution on Equity Interests of the Issuer or any
Restricted Subsidiary or any payment made to the direct or indirect holders (in
their capacities as such) of Equity Interests of the Issuer or any Restricted
Subsidiary, including, without limitation, any payment in respect of Equity Interests
in connection with any merger or consolidation involving the Issuer, but
excluding (a) dividends or distributions payable solely in Qualified
Equity Interests and (b) in the case of Restricted Subsidiaries, dividends
or distributions payable to the Issuer or to a Restricted Subsidiary and pro rata
dividends or distributions payable to minority stockholders of any Restricted
Subsidiary;


 


(2)           the redemption of any Equity
Interests of the Issuer or any Restricted Subsidiary, including, without
limitation, any payment in respect of Equity Interests in connection with any
merger or consolidation involving the Issuer, but excluding any such Equity
Interests held by the Issuer or any Restricted Subsidiary;


 


(3)           any Investment other than a Permitted
Investment; or


 


(4)           any payment or redemption prior to
the scheduled maturity or prior to any scheduled repayment of principal or
sinking fund payment, as the case may be, in respect of Subordinated Indebtedness.


 


“Restricted
Subsidiary” means any Subsidiary of the Issuer other than an Unrestricted
Subsidiary.


 


“Rule 144”
means Rule 144 promulgated under the Securities Act.


 


“Rule 144A”
means Rule 144A promulgated under the Securities Act.


 


“S&P”
means Standard & Poor’s Ratings Services, a division of the
McGraw-Hill Companies, Inc., and its successors.


 


“Sale and
Leaseback Transaction” means, with respect to any Person, an arrangement
with any bank, insurance company or other lender or investor or to which such
lender or investor is a party, providing for the leasing by such Person of any
asset of such Person which has been or is being sold or transferred by such
Person to such lender or investor or to any Person to whom funds have been or
are to be advanced by such lender or investor on the security of such asset.


 


30

















 


“SEC”
means the U.S. Securities and Exchange Commission.


 


“Secretary’s
Certificate” means a certificate signed by the Secretary of the Issuer.


 


“Securities
Act” means the U.S. Securities Act of 1933, as amended.


 


“Senior
Indebtedness” means the principal of, premium, if any, and interest (including
any interest accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on any Indebtedness of
the Issuer, whether outstanding on the Issue Date or thereafter created,
incurred or assumed, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Notes.


 


Without
limiting the generality of the foregoing, “Senior Indebtedness” shall include
the principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of:


 


(1)           all monetary obligations of every
nature under, or with respect to, the Credit Facilities, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities (and
guarantees thereof); and


 


(2)           all Hedging Obligations in respect of
the Credit Facilities;


 


in each case
whether outstanding on the Issue Date or thereafter incurred.


 


Notwithstanding
the foregoing, “Senior Indebtedness” shall not include:


 


(1)           any Indebtedness of the Issuer to any
of its Subsidiaries;


 


(2)           Indebtedness to, or guaranteed on
behalf of, any director, officer or employee of the Issuer or any of its
Subsidiaries (including, without limitation, amounts owed for compensation);


 


(3)           obligations to trade creditors and
other amounts incurred (but not under the Credit Facilities) in connection with
obtaining goods, materials or services;


 


(4)           Indebtedness represented by
Disqualified Equity Interests;


 


(5)           any liability for taxes owed or owing
by the Issuer;


 


31

















 


(6)           that portion of any Indebtedness
incurred in violation of Section 4.06 (but, as to any such obligation, no
such violation shall be deemed to exist for purposes of this clause (6) if
the holder(s) of such obligation or their representative shall have received an
Officers’ Certificate of the Issuer to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit indebtedness, that
the incurrence of the entire committed amount thereof at the date on which the
initial borrowing thereunder is made would not) violate such provisions of this
Indenture);


 


(7)           Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of
Title 11, United States Code, is without recourse to the Issuer; and


 


(8)           any Indebtedness which is, by its
express terms, subordinated in right of payment to any other Indebtedness of
the Issuer.


 


“Significant
Subsidiary” means (1) any Restricted Subsidiary that would be a “significant
subsidiary” as defined in Regulation S-X promulgated pursuant to the Securities
Act as such Regulation is in effect on the Issue Date and (2) any
Restricted Subsidiary that, when aggregated with all other Restricted
Subsidiaries that are not otherwise Significant Subsidiaries and as to which
any event described in clause (7) or (8) of Section 6.01 has
occurred and is continuing, would constitute a Significant Subsidiary under
clause (1) of this definition.


 


“Subordinated
Indebtedness” means Indebtedness of the Issuer or any Restricted Subsidiary
that is subordinated in right of payment to the Notes or the Note Guarantees,
respectively.


 


“Subsidiary”
means, with respect to any Person:


 


(1)           any corporation, limited liability
company, partnership, association or other business entity (a) of which
more than 50% of the total voting power of the Equity Interests (or, if such
entity has no Equity Interests with voting power, the most comparable ownership
interests in such entity) entitled (without regard to the occurrence of any
contingency) to vote in the election of the Board of Directors thereof are at
the time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination thereof) or (b) that
is or is required to be included in the consolidated financial statements of
that Person in accordance with GAAP (other than, in the case of this clause
(b), to the extent consolidated or required to be consolidated solely as a
result of the application of Revised Interpretation No. 46, “Consolidation
of Variable Interest Entities” issued by the Financial Accounting Standards
Board in December 2003); and


 


(2)           any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general 


 


32

















 


partners of
which are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).


 


Unless
otherwise specified, “Subsidiary” refers to a Subsidiary of the Issuer.


 


“Total Assets” means, with respect
to any Person, the aggregate of all assets of such Person and its Restricted Subsidiaries
as would be shown on the consolidated balance sheet of such Person other than
inventory not owned.


 


“Total
Indebtedness” means, as of any date, total consolidated Indebtedness of the
Issuer and the Restricted Subsidiaries as of such date to the extent such
Indebtedness (1) would be required to be recorded as a liability on a
consolidated balance sheet of the Issuer and the Restricted Subsidiaries
prepared in accordance with GAAP or (2) constitutes Indebtedness of a Person
(other than a Restricted Subsidiary) with respect to which there is recourse
against the Company or any Restricted Subsidiary or any of their assets and
that would be required to be recorded as a liability on a consolidated balance
sheet of such Person prepared in accordance with GAAP.


 


“Trust
Indenture Act” or “TIA” means the Trust Indenture Act of 1939, as
amended.


 


“Trustee”
means the party named as such in this Indenture until a successor replaces it
pursuant to this Indenture and thereafter means the successor.


 


“Unit” means a residence, whether single or part of a multifamily
building, whether completed or under construction, held by the Issuer or any
Restricted Subsidiary for sale or rental in the ordinary course of business; provided, however, that
the number of Units that are rental Units at the time of determination shall
not exceed 25% of the total Units sold or rented by the Issuer and its
Restricted Subsidiaries during the immediately preceding twelve month period.


 


“Unrestricted
Subsidiary” means (1) any Subsidiary that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors of the
Issuer in accordance with Section 4.15 and (2) any Subsidiary of an
Unrestricted Subsidiary.


 


“U.S.
Government Obligations” means direct non-callable obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.


 


“Voting
Stock” with respect to any Person, means securities of any class of Equity
Interests of such Person entitling the holders thereof (whether at all times or
only so long as no senior class of stock or other relevant equity interest has
voting power by reason of any contingency) to vote in the election of members
of the Board of Directors of such Person.


 


33

















 


“Weighted
Average Life to Maturity” when applied to any Indebtedness at any date,
means the number of years obtained by dividing (1) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment by (2) the then outstanding principal amount of
such Indebtedness.


 


“Wholly-Owned
Restricted Subsidiary” means a Restricted Subsidiary of which 100% of the
Equity Interests (except for directors’ qualifying shares or certain minority
interests owned by other Persons solely due to local law requirements that
there be more than one stockholder, but which interest is not in excess of what
is required for such purpose) are owned directly by the Issuer or through one
or more Wholly-Owned Restricted Subsidiaries.


 


SECTION 1.02.                                                         Other
Definitions.


 


The definitions of the
following terms may be found in the sections indicated as follows:


 


	
  Term

  	
   

  	
  Defined in Section

  
	
  “Affiliate
  Transaction”

  	
   

  	
  4.10

  	
   

  
	
  “Agent
  Members”

  	
   

  	
  2.16

  	
  (a)

  
	
  “Business
  Day”

  	
   

  	
  12.07

  	
   

  
	
  “Change of
  Control Date”

  	
   

  	
  4.20

  	
   

  
	
  “Change of
  Control Offer”

  	
   

  	
  4.20

  	
   

  
	
  “Change of
  Control Payment Date”

  	
   

  	
  4.20

  	
   

  
	
  “Change of
  Control Purchase Price”

  	
   

  	
  4.20

  	
   

  
	
  “Covenant
  Defeasance”

  	
   

  	
  9.03

  	
   

  
	
  “Designation”

  	
   

  	
  4.15

  	
   

  
	
  “Event of
  Default”

  	
   

  	
  6.01

  	
   

  
	
  “Excess
  Proceeds”

  	
   

  	
  4.09

  	
   

  
	
  “Global
  Notes”

  	
   

  	
  2.16

  	
  (a)

  
	
  “Legal
  Defeasance”

  	
   

  	
  9.02

  	
   

  
	
  “Legal
  Holiday”

  	
   

  	
  12.07

  	
   

  
	
  “Other
  Notes”

  	
   

  	
  2.02

  	
   

  
	
  “Paying
  Agent”

  	
   

  	
  2.04

  	
   

  
	
  “Public
  Reporting Date”

  	
   

  	
  4.02

  	
   

  
	
  “Ratio
  Exception”

  	
   

  	
  4.06

  	
   

  
	
  “Redesignation”

  	
   

  	
  4.15

  	
   

  
	
  “Registrar”

  	
   

  	
  2.04

  	
   

  
	
  “Regulation
  S Global Notes”

  	
   

  	
  2.16

  	
  (a)

  
	
  “Regulation
  S Notes”

  	
   

  	
  2.02

  	
   

  
	
  “Restricted
  Global Note”

  	
   

  	
  2.16

  	
  (a)

  



 


34

















 


	
  “Restricted Payments Basket”

  	
   

  	
  4.08

  	
   

  
	
  “Rule 144A Notes”

  	
   

  	
  2.02

  	
   

  



 


SECTION 1.03.                                                         Incorporation
by Reference of Trust Indenture Act.


 


Whenever this
Indenture refers to a provision of the TIA, the portion of such provision
required to be incorporated herein in order for this Indenture to be qualified
under the TIA is incorporated by reference in and made a part of this
Indenture.  The following TIA terms used
in this Indenture have the following meanings:


 


“indenture
securities” means the Notes.


 


“indenture
securityholder” means a Holder or Noteholder.


 


“indenture
to be qualified” means this Indenture.


 


“indenture
trustee” or “institutional trustee” means the Trustee.


 


“obligor on
the indenture securities” means the Issuer, the Guarantors or any other
obligor on the Notes.


 


All other
terms used in this Indenture that are defined by the TIA, defined in the TIA by
reference to another statute or defined by SEC rule have the meanings
therein assigned to them.


 


SECTION 1.04.                                                         Rules of
Construction.


 


Unless the
context otherwise requires:


 


(1)           a
term has the meaning assigned to it herein, whether defined expressly or by
reference;


 


(2)           “or”
is not exclusive;


 


(3)           words
in the singular include the plural, and in the plural include the singular;


 


(4)           words
used herein implying any gender shall apply to both genders;


 


(5)           “herein”,
“hereof” and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other Subsection;


 


35

















 


(6)           unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP as in effect from time to time, applied on a basis
consistent with the most recent audited consolidated financial statements of
the Issuer;


 


(7)           “$,”
“U.S. Dollars” and “United States Dollars” each refer to United States dollars,
or such other money of the United States that at the time of payment is legal
tender for payment of public and private debts; and


 


(8)           whenever
in this Indenture there is mentioned, in any context, principal, interest or
any other amount payable under or with respect to any Note, such mention shall
be deemed to include mention of the payment of Additional Interest to the
extent that, in such context, Additional Interest is, was or would be payable
in respect thereof.


 


ARTICLE TWO


 


THE NOTES


 


SECTION 2.01.                                                         Amount
of Notes.


 


The Trustee
shall authenticate (i) Notes for original issue on the Issue Date in the
aggregate principal amount not to exceed $203,000,000 and (ii) subject to Section 4.06,
Additional Notes in an unlimited principal amount, upon a written order of the
Issuer in the form of an Officers’ Certificate of the Issuer.  The Officers’ Certificate shall specify the
amount of Notes to be authenticated, the date on which the Notes are to be
authenticated, and the names and delivery instructions for each Holder of the
Notes.


 


Upon receipt
of a written order of the Issuer in the form of an Officers’ Certificate, the
Trustee shall authenticate Notes in substitution for Notes originally issued to
reflect any name change of the Issuer. 
Any Additional Notes shall be part of the same issue as the Notes being
issued on the date hereof and will vote on all matters as one class with the
Notes being issued on the date hereof, including, without limitation, waivers,
amendments, redemptions and Offers to Purchase. 
For the purposes of this Indenture, except for Section 4.06,
references to the Notes include Additional Notes, if any.


 


Upon receipt
of an Issuer Request and an Officers’ Certificate certifying that a
registration statement relating to an exchange offer specified in the
Registration Rights Agreement or any registration rights agreement relating to
the Additional Notes is effective or that the conditions precedent to a private
exchange thereunder have been met, the Trustee shall authenticate an additional
series of Notes for issuance in exchange for the Notes tendered for exchange 


 


36

















 


pursuant to such exchange offer
registered under the Securities Act. 
Exchange Securities may have such distinctive series designations and
such changes in the form thereof as are specified in the Issuer Request referred
to in the preceding sentence.


 


SECTION 2.02.                                                         Form and
Dating.


 


The Notes and
the Trustee’s certificate of authentication with respect thereto shall be
substantially in the form set forth in Exhibit A, which is
incorporated in and forms a part of this Indenture.  The Notes may have notations, legends or
endorsements required by law, rule or usage to which the Issuer is
subject.  Without limiting the generality
of the foregoing, Notes offered and sold to Qualified Institutional Buyers in
reliance on Rule 144A (“Rule 144A Notes”) shall bear the
legend and include the form of assignment set forth in Exhibit B,
Notes offered and sold in offshore transactions in reliance on Regulation S (“Regulation
S Notes”) shall bear the legend and include the form of assignment set
forth in Exhibit C, and Notes offered and sold to Institutional
Accredited Investors in transactions exempt from registration under the
Securities Act not made in reliance on Rule 144A or Regulation S (“Other
Notes”) may be represented by a Restricted Global Note or, if such an
investor may not hold an interest in the Restricted Global Note, a Physical
Note, in each case, bearing the Private Placement Legend.  Each Note shall be dated the date of its authentication.


 


The terms and
provisions contained in the Notes shall constitute, and are expressly made, a
part of this Indenture and, to the extent applicable, the Issuer, the Guarantors
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and agree to be bound thereby.


 


The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.


 


SECTION 2.03.                                                         Execution
and Authentication.


 


Two Officers
shall sign, or one Officer shall sign and one Officer (each of whom shall, in
each case, have been duly authorized by all requisite corporate actions) shall
attest to, the Notes for the Issuer by manual or facsimile signature.


 


If an Officer
whose signature is on a Note was an Officer at the time of such execution but
no longer holds that office at the time the Trustee authenticates the Note, the
Note shall be valid nevertheless.


 


No Note shall
be entitled to any benefit under this Indenture or be valid or obligatory for
any purpose unless there appears on such Note a certificate of authentication
substantially in the form provided for herein executed by the Trustee by manual
signature, and such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
hereunder.  Notwithstanding the foregoing,
if any Note 


 


37

















 


shall have been authenticated
and delivered hereunder but never issued and sold by the Issuer, and the Issuer
shall deliver such Note to the Trustee for cancellation as provided in Section 2.12,
for all purposes of this Indenture such Note shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.


 


The Trustee
may appoint an authenticating agent reasonably acceptable to the Issuer to
authenticate the Notes.  Unless otherwise
provided in the appointment, an authenticating agent may authenticate the Notes
whenever the Trustee may do so.  Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent.  An
authenticating agent has the same rights as an Agent to deal with the Issuer
and Affiliates of the Issuer.  Each
Paying Agent is designated as an authenticating agent for purposes of this Indenture.


 


The Notes
shall be issuable only in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000.


 


SECTION 2.04.                                                         Registrar
and Paying Agent.


 


The Issuer
shall maintain an office or agency (which shall be located in the Borough of
Manhattan in The City of New York, State of New York) where Notes may be
presented for registration of transfer or for exchange (the “Registrar”),
and an office or agency where Notes may be presented for payment (the “Paying
Agent”) and an office or agency where notices and demands to or upon the
Issuer, if any, in respect of the Notes and this Indenture may be served.  The Registrar shall keep a register of the
Notes and of their transfer and exchange. 
The Issuer may have one or more additional Paying Agents.  The term “Paying Agent” includes any additional
Paying Agent.  Neither the Issuer nor any
Affiliate thereof may act as Paying Agent.


 


The Issuer
shall enter into an appropriate agency agreement, which shall incorporate the
provisions of the TIA, with any Agent that is not a party to this
Indenture.  The agreement shall implement
the provisions of this Indenture that relate to such Agent.  The Issuer shall notify the Trustee of the
name and address of any such Agent.  If
the Issuer fails to maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such and shall be entitled to
appropriate compensation in accordance with Section 7.07. The Issuer or
any Wholly Owned Subsidiary may act as Paying Agent, Registrar, co-registrar or
transfer agent.


 


The Issuer
initially appoints the Trustee as Registrar, Paying Agent and Agent for service
of notices and demands in connection with the Notes and this Indenture.


 


SECTION 2.05.                                                         Paying
Agent To Hold Money in Trust.


 


Prior to each
due date of the principal or interest on any Notes, the Issuer shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due.  Each Paying Agent shall
hold in trust for the benefit of the Holders or the Trustee all money held by
the Paying Agent for the payment of principal of or premium or interest on the 


 


38

















 


Notes (whether such money has
been paid to it by the Issuer or any other obligor on the Notes or the
Guarantors), and the Issuer and the Paying Agent shall notify the Trustee of
any default by the Issuer (or any other obligor on the Notes) in making any
such payment.  If the Issuer or a
Subsidiary of the Issuer serves as Paying Agent, it shall segregate the money
held by it as Paying Agent and hold it as a separate trust fund.  Money held in trust by the Paying Agent need
not be segregated except as required by law and in no event shall the Paying
Agent be liable for any interest on any money received by it hereunder.  The Issuer at any time may require the Paying
Agent to pay all money held by it to the Trustee and account for any funds
disbursed and the Trustee may at any time during the continuance of any Event
of Default specified in Section 6.01(1) or (2), upon written request
to the Paying Agent, require such Paying Agent to pay forthwith all money so
held by it to the Trustee and to account for any funds disbursed by the Paying
Agent.  Upon making such payment, the
Paying Agent shall have no further liability for the money delivered to the
Trustee.


 


SECTION 2.06.                                                         Holder
Lists.


 


The Trustee
shall preserve in as current a form as is reasonably practicable the most
recent list available to it of the names and addresses of the Holders.  If the Trustee is not the Registrar, the
Issuer shall furnish to the Trustee at least five Business Days before each
Interest Payment Date, and at such other times as the Trustee may reasonably
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of the Holders.


 


SECTION 2.07.                                                         Transfer
and Exchange.


 


Subject to
Sections 2.16 and 2.17, when Notes are presented to the Registrar with a
request from the Holder of such Notes to register a transfer or to exchange
them for an equal principal amount of Notes of other authorized denominations,
the Registrar shall register the transfer as requested if the requirements of
this Indenture are met.  Every Note
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or be accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Registrar, duly executed by the Holder
thereof or his attorneys duly authorized in writing.  To permit registrations of transfers and exchanges,
the Issuer shall issue and execute and the Trustee shall authenticate new Notes
(and the Guarantors shall execute the guarantee thereon) evidencing such
transfer or exchange at the Registrar’s request.  No service charge shall be made to the Holder
for any registration of transfer or exchange. 
The Issuer may require from the Holder payment of a sum sufficient to
cover any transfer taxes or other governmental charge that may be imposed in
relation to a transfer or exchange, but this provision shall not apply to any
exchange pursuant to Section 2.11, 3.06, 4.09, 4.20 or 8.05 (in which
events the Issuer shall be responsible for the payment of such taxes).  The Registrar shall not be required to
exchange or register a transfer of any Note for a period of 15 days immediately
preceding the mailing of notice of redemption of Notes 


 


39

















 


to be redeemed or of any Note
selected, called or being called for redemption except the unredeemed portion
of any Note being redeemed in part.


 


Any Holder of
the Global Note shall, by acceptance of such Global Note, agree that transfers
of the beneficial interests in such Global Note may be effected only through a
book entry system maintained by the Holder of such Global Note (or its agent),
and that ownership of a beneficial interest in the Global Note shall be
required to be reflected in a book entry.


 


Each Holder of
a Note agrees to indemnify the Issuer and the Trustee against any liability
that may result from the transfer, exchange or assignment of such Holder’s Note
in violation of any provision of this Indenture and/or applicable U.S. Federal
or state securities law.


 


Except as
expressly provided herein, neither the Trustee nor the Registrar shall have any
duty to monitor the Issuer’s compliance with or have any responsibility with
respect to the Issuer’s compliance with any Federal or state securities laws.


 


SECTION 2.08.                                                         Replacement
Notes.


 


If a mutilated
Note is surrendered to the Registrar or the Trustee, or if the Holder of a Note
claims that the Note has been lost, destroyed or wrongfully taken, the Issuer
shall issue and the Trustee shall authenticate a replacement Note (and the
Guarantors shall execute the guarantee thereon) if the Holder of such Note
furnishes to the Issuer and the Trustee evidence reasonably acceptable to them
of the ownership and the destruction, loss or theft of such Note and if the
requirements of Section 8-405 of the New York Uniform Commercial Code as
in effect on the date of this Indenture are met.  If required by the Trustee or the Issuer, an
indemnity bond shall be posted by such Holder, sufficient in the judgment of
both to protect the Issuer, the Guarantors, the Trustee or any Paying Agent
from any loss that any of them may suffer if such Note is replaced.  The Issuer and the Trustee may charge such
Holder for their reasonable out-of-pocket expenses in replacing such Note
(including, without limitation, attorneys’ fees and disbursements) in replacing
such Note.  Every replacement Note shall
constitute a contractual obligation of the Issuer.


 


SECTION 2.09.                                                         Outstanding
Notes.


 


The Notes
outstanding at any time are all Notes that have been authenticated by the
Trustee except for (a) those cancelled by it, (b) those delivered to
it for cancellation, (c) to the extent set forth in Sections 9.01 and
9.02, on or after the date on which the conditions set forth in Section 9.01
or 9.02 have been satisfied, those Notes theretofore authenticated and
delivered by the Trustee hereunder and (d) those described in this Section 2.09
as not outstanding.  Subject to Section 2.10,
a Note does not cease to be outstanding because the Issuer or one of its
Affiliates holds the Note.


 


40

















 


If a Note is
replaced pursuant to Section 2.08, it ceases to be outstanding unless the
Trustee and the Issuer receives proof satisfactory to it that the replaced Note
is held by a bona fide purchaser in whose hands such Note is a legal, valid and
binding obligation of the Issuer.


 


If the Paying
Agent segregates and holds in trust, in its capacity as such, on any redemption
date or maturity date, money sufficient to pay all accrued interest and
principal with respect to the Notes payable on that date and is not prohibited
from paying such money to the Holders thereof pursuant to the terms of this
Indenture, then on and after that date such Notes cease to be outstanding and
interest on them ceases to accrue.


 


SECTION 2.10.                                                         Treasury
Notes.


 


In determining
whether the Holders of the required principal amount of Notes have concurred in
any declaration of acceleration or notice of default or direction, waiver or consent
or any amendment, modification or other change to this Indenture, Notes owned
by the Issuer or any other Affiliate of the Issuer shall be disregarded as
though they were not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent or any amendment, modification or other change to this Indenture,
only Notes as to which a Responsible Officer of the Trustee has received an
Officers’ Certificate stating that such Notes are so owned shall be so
disregarded.  Notes so owned which have
been pledged in good faith shall not be disregarded if the pledgee established
to the satisfaction of the Trustee the pledgee’s right so to act with respect
to the Notes and that the pledgee is not the Issuer, a Guarantor, any other
obligor on the Notes or any of their respective Affiliates.


 


SECTION 2.11.                                                         Temporary
Notes.


 


Until
definitive Notes are prepared and ready for delivery, the Issuer may prepare
and the Trustee shall authenticate temporary Notes.  Temporary Notes shall be substantially in the
form of definitive Notes but may have variations that the Issuer considers
appropriate for temporary Notes.  Without
unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate
definitive Notes in exchange for temporary Notes.  Until such exchange, temporary Notes shall be
entitled to the same rights, benefits and privileges as definitive Notes.


 


SECTION 2.12.                                                         Cancellation.


 


The Issuer at
any time may deliver Notes to the Trustee for cancellation.  The Registrar and the Paying Agent shall
forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange or payment.  The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall (subject to
the record-retention requirements of the Exchange Act) destroy cancelled
Notes.  The Trustee shall deliver a
certificate of such destruction to the Issuer. 
The Issuer may not reissue or resell, or issue new Notes to replace,
Notes that the Issuer has redeemed or paid, or that have been delivered to the
Trustee for cancellation.


 


41

















 


SECTION 2.13.                                                         Defaulted
Interest.


 


If the Issuer
defaults on a payment of interest on the Notes, it shall pay the defaulted
interest, plus (to the extent permitted by law) any interest payable on the
defaulted interest, in accordance with the terms hereof, to the Persons who are
Holders on a subsequent special record date, which date shall be at least five
Business Days prior to the payment date. 
The Issuer shall fix such special record date and payment date in a
manner satisfactory to the Trustee. The Issuer shall promptly mail to each
Holder a notice that states the special record date, the payment date and the
amount of defaulted interest, and interest payable on defaulted interest, if
any, to be paid.  The Issuer may make
payment of any defaulted interest in any other lawful manner not inconsistent
with the requirements (if applicable) of any securities exchange on which the
Notes may be listed and, upon such notice as may be required by such exchange,
if, after written notice given by the Issuer to the Trustee of the proposed
payment pursuant to this sentence, such manner of payment shall be deemed
practicable by the Trustee.


 


SECTION 2.14.                                                         CUSIP
Number.


 


The Issuer in
issuing the Notes may use a “CUSIP” number, ISIN and “Common Code” number (in
each case if then generally in use), and if so, such CUSIP number, ISIN and
Common Code number shall be included in notices of redemption or exchange as a
convenience to Holders; provided that
any such notice may state that no representation is made as to the correctness
or accuracy of such number either as printed in the notice or on the Notes, and
that reliance may be placed only on the other identification numbers printed on
the Notes.  The Issuer shall promptly
notify the Trustee of any such CUSIP number, ISIN and Common Code number used
by the Issuer in connection with the issuance of the Notes and of any change in
the CUSIP number, ISIN and Common Code number.


 


SECTION 2.15.                                                         Deposit
of Moneys.


 


Prior to 10:00 a.m.,
New York City time, on each Interest Payment Date and maturity date, the Issuer
shall have deposited with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date or
maturity date, as the case may be, in a timely manner which permits the Trustee
to remit payment to the Holders on such Interest Payment Date or maturity date,
as the case may be.  The principal and
interest on Global Notes shall be payable to the Depository or its nominee, as
the case may be, as the sole registered owner and the sole holder of the Global
Notes represented thereby.  The principal
and interest on Physical Notes shall be payable, either in person or by mail,
at the office of the Paying Agent.


 


SECTION 2.16.                                                         Book-Entry
Provisions for Global Notes.


 


(a)               Rule 144A
Notes initially shall be represented by one or more notes in registered, global
form without interest coupons (collectively, the “Restricted Global Note”).  


 


42

















 


Regulation S Notes initially
shall be represented by one or more notes in registered, global form without
interest coupons (collectively, the “Regulation S Global Note,” and,
together with the Restricted Global Note and any other global notes
representing Notes, the “Global Notes”). 
The Global Notes shall bear legends as set forth in Exhibit D.  The Global Notes initially shall (i) be
registered in the name of the Depository or the nominee of such Depository, in
each case for credit to an account of an Agent Member, (ii) be delivered
to the Trustee as custodian for such Depository and (iii) bear legends as
set forth in Exhibit B with respect to Restricted Global Notes and Exhibit C
with respect to Regulation S Global Notes.


 


Members of, or
direct or indirect participants in, the Depository (“Agent Members”)
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under
the Global Notes, and the Depository may be treated by the Issuer, the Trustee
and any agent of the Issuer or the Trustee as the absolute owner of the Global
Note for all purposes whatsoever. 
Notwithstanding the foregoing, nothing herein shall prevent the Issuer,
the Trustee or any agent of the Issuer or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.


 


(b)              Transfers
of Global Notes shall be limited to transfer in whole, but not in part, to the
Depository, its successors or their respective nominees.  Interests of beneficial owners in the Global
Notes may be transferred or exchanged for Physical Notes in accordance with the
rules and procedures of the Depository and the provisions of Section 2.17.  In addition, a Global Note shall be
exchangeable for Physical Notes if (i) the Depository (x) notifies the
Issuer that it is unwilling or unable to continue as depository for such Global
Note and the Issuer thereupon fails to appoint a successor depository within 90
days thereof or (y) has ceased to be a clearing agency registered under the
Exchange Act and the Issuer thereupon fails to appoint a successor depository
within 90 days thereof or (ii) there shall have occurred and be continuing
an Event of Default with respect to the Notes. 
In all cases, Physical Notes delivered in exchange for any Global Note
or beneficial interests therein shall be registered in the names, and issued in
any approved denominations, requested by or on behalf of the Depository (in
accordance with its customary procedures).


 


(c)               In connection
with any transfer or exchange of a portion of the beneficial interest in any
Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall
(if one or more Physical Notes are to be issued) reflect on its books and
records the date and a decrease in the principal amount of the Global Note in
an amount equal to the principal amount of the beneficial interest in the
Global Note to be transferred, and the Issuer shall execute, and the Trustee
shall upon receipt of a written order from the Issuer authenticate and make
available for delivery, one or more Physical Notes of like tenor and amount.


 


43

















 


(d)              In connection
with the transfer of Global Notes as an entirety to beneficial owners pursuant
to paragraph (b), the Global Notes shall be deemed to be surrendered to the Trustee
for cancellation, and the Issuer shall execute, and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the Depository
in writing in exchange for its beneficial interest in the Global Notes, an
equal aggregate principal amount of Physical Notes of authorized denominations.


 


(e)               Any Physical
Note constituting a Restricted Note delivered in exchange for an interest in a
Global Note pursuant to paragraph (b), (c) or (d) shall,
except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section 2.17,
bear the Private Placement Legend or, in the case of the Regulation S Global
Note, the legend set forth in Exhibit C, in each case, unless the
Issuer determines otherwise in compliance with applicable law.


 


(f)               On or prior to
the 40th day after the later of the commencement of the offering of the Notes
represented by the Regulation S Global Note and the issue date of such Notes
(such period through and including such 40th day, the “Restricted Period”),
a beneficial interest in a Regulation S Global Note may be transferred to a
Person who takes delivery in the form of an interest in the corresponding
Restricted Global Note only upon receipt by the Trustee of a written
certification from the transferor to the effect that such transfer is being
made (i)(a) to a Person whom the transferor reasonably believes is a Qualified
Institutional Buyer in a transaction meeting the requirements of Rule 144A
or (b) pursuant to another exemption from the registration requirements
under the Securities Act which is accompanied by an Opinion of
Counsel regarding the availability of such exemption and (ii) in
accordance with all applicable securities laws of any state of the United
States or any other jurisdiction.


 


(g)              Beneficial
interests in the Restricted Global Note may be transferred to a Person who
takes delivery in the form of an interest in the Regulation S Global
Note, whether before or after the expiration of the Restricted Period, only if
the transferor first delivers to the Trustee a written certificate to the
effect that such transfer is being made in accordance with Rule 903 or 904
of Regulation S or Rule 144 (if available).


 


(h)              Any beneficial
interest in one of the Global Notes that is transferred to a Person who takes
delivery in the form of an interest in another Global Note shall, upon
transfer, cease to be an interest in such Global Note and become an interest in
such other Global Note and, accordingly, shall thereafter be subject to all
transfer restrictions and other procedures applicable to beneficial interests
in such other Global Note for as long as it remains such an interest.


 


(i)                The Holder of any Global Note may grant
proxies and otherwise authorize any Person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or the Notes.


 


44

















 


SECTION 2.17.                                         Special
Transfer Provisions.


 


(a)                             Transfers
to Non-QIB Institutional Accredited Investors and Non-U.S. Persons. The
following provisions shall apply with respect to the registration of any proposed
transfer of a Note constituting a Restricted Note to any Institutional
Accredited Investor which is not a QIB or to any Non-U.S. Person:


 


(i)                                the
Registrar shall register the transfer of any Note constituting a Restricted
Note, whether or not such Note bears the Private Placement Legend, if (x) the requested
transfer is after December 19, 2007 or such other date as such Note shall
be freely transferable under Rule 144 as certified in an Officers’
Certificate or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the
proposed transferee has delivered to the Registrar a certificate substantially
in the form of Exhibit E hereto or (2) in the case of a
transfer to a Non-U.S. Person (including a QIB), the proposed transferor has
delivered to the Registrar a certificate substantially in the form of Exhibit F
hereto; provided that in the case of any
transfer of a Note bearing the Private Placement Legend for a Note not bearing
the Private Placement Legend, the Registrar has received an Officers’
Certificate authorizing such transfer; and


 


(ii)                             if
the proposed transferor is an Agent Member holding a beneficial interest in a
Global Note, upon receipt by the Registrar of (x) the certificate, if any,
required by paragraph (i) above and (y) instructions given in accordance
with the Depository’s and the Registrar’s procedures,


 


whereupon (a) the
Registrar shall reflect on its books and records the date and (if the transfer
does not involve a transfer of outstanding Physical Notes) a decrease in the
principal amount of a Global Note in an amount equal to the principal amount of
the beneficial interest in a Global Note to be transferred, and (b) the
Registrar shall reflect on its books and records the date and an increase in
the principal amount of a Global Note in an amount equal to the principal
amount of the beneficial interest in the Global Note transferred or the Issuer
shall execute and the Trustee shall authenticate and make available for
delivery one or more Physical Notes of like tenor and amount.


 


(b)                            Transfers
to QIBs. The following provisions shall apply with respect to the
registration or any proposed registration of transfer of a Note constituting a
Restricted Note to a QIB (excluding transfers to Non-U.S. Persons):


 


(i)                                the
Registrar shall register the transfer if such transfer is being made by a
proposed transferor who has checked the box provided for on such Holder’s Note
stating, or has otherwise advised the Issuer and the Registrar in writing, that
the sale has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on such Holder’s Note
stating, or has otherwise advised the Issuer 


 


45

















 


and the Registrar in writing, that it is purchasing the Note for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a QIB within the meaning of Rule 144A,
and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Issuer as
it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A; and


 


(ii)                             if
the proposed transferee is an Agent Member, and the Notes to be transferred
consist of Physical Notes which after transfer are to be evidenced by an
interest in the Global Note, upon receipt by the Registrar of instructions
given in accordance with the Depository’s and the Registrar’s procedures, the
Registrar shall reflect on its books and records the date and an increase in
the principal amount of the Global Note in an amount equal to the principal
amount of the Physical Notes to be transferred, and the Trustee shall cancel
the Physical Notes so transferred.


 


(c)                             Private
Placement Legend. Upon the registration of transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
registration of transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless (i) it has received the Officers’ Certificate
required by paragraph (a)(i)(y) of this Section 2.17, (ii) there is delivered
to the Registrar an Opinion of Counsel reasonably satisfactory to the Issuer and
the Trustee to the effect that neither such legend nor the related restrictions
on transfer are required in order to maintain compliance with the provisions of
the Securities Act or (iii) such Note has been sold pursuant to an
effective registration statement under the Securities Act and the Registrar has
received an Officers’ Certificate from the Issuer to such effect.


 


(d)                            General.
By its acceptance of any Note bearing the Private Placement Legend, each Holder
of such Note acknowledges the restrictions on transfer of such Note set forth
in this Indenture and in the Private Placement Legend and agrees that it will
transfer such Note only as provided in this Indenture.


 


The Registrar shall retain for a period of two years copies of all
letters, notices and other written communications received pursuant to Section 2.16
or this Section 2.17. The Issuer shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable notice to the Registrar.


 


SECTION 2.18.                                         Computation
of Interest.


 


Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.


 


46

















 


ARTICLE THREE



REDEMPTION


 


SECTION 3.01.                                         Election
To Redeem; Notices to Trustee.


 


If the Issuer elects to redeem Notes pursuant to paragraph 6 of the
Notes, at least 45 days prior to the Redemption Date (unless a shorter notice
shall be agreed to in writing by the Trustee) but not more than 65 days before
the Redemption Date, the Issuer shall notify the Trustee in writing of the
Redemption Date, the principal amount of Notes to be redeemed and the redemption
price, and deliver to the Trustee an Officers’ Certificate stating that such
redemption will comply with the conditions contained in paragraph 6 of the
Notes. Notice given to the Trustee pursuant to this Section 3.01 may not
be revoked after the time that notice is given to Holders pursuant to Section 3.03.


 


SECTION 3.02.                                         Selection
by Trustee of Notes To Be Redeemed.


 


In the event that less than all of the Notes are to be redeemed
pursuant to a redemption made pursuant to paragraph 6 of the Notes,
selection of the Notes for redemption shall be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not then listed on a
national security exchange, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that
no Notes of a principal amount of $1,000 or less shall be redeemed in part. If
a partial redemption is made pursuant to the second paragraph of paragraph 6 of
the Notes, selection of the Notes or portions thereof for redemption shall be
made by the Trustee only on a pro rata basis
or on as nearly a pro rata basis as is practicable
(subject to the procedures of the Depository), unless that method is otherwise
prohibited. The Trustee shall promptly notify the Issuer of the Notes selected
for redemption and, in the case of any Notes selected for partial redemption,
the principal amount thereof to be redeemed. The Trustee may select for
redemption portions of the principal of the Notes that have denominations
larger than $1,000. For all purposes of this Indenture unless the context
otherwise requires, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption. The Issuer may acquire
Notes by means other than redemption, whether pursuant to an Issuer tender
offer, open market purchase or otherwise, provided such
acquisition does not otherwise violate the other terms of this Indenture.


 


SECTION 3.03.                                         Notice
of Redemption.


 


At least 30 days, and no more than 60 days, before a Redemption Date,
the Issuer shall mail, or cause to be mailed, a notice of redemption by first-class mail
to each Holder of Notes to be redeemed at his or her last address as the same
appears on the registry books maintained by the Registrar pursuant to Section 2.04.


 


47

















 


The notice shall identify the Notes to be redeemed (including the CUSIP
numbers ISIN and Common Code numbers, if any thereof) and shall state:


 


(1)                             the
Redemption Date;


 


(2)                             the
redemption price and the amount of premium and accrued interest to be paid;


 


(3)                             if
any Note is being redeemed in part, the portion of the principal amount of such
Note to be redeemed and that, after the Redemption Date and upon surrender of
such Note, a new Note or Notes in principal amount equal to the unredeemed
portion will be issued;


 


(4)                             the
name and address of the Paying Agent;


 


(5)                             that
Notes called for redemption must be surrendered to the Paying Agent to collect
the redemption price;


 


(6)                             that
unless the Issuer defaults in making the redemption payment, interest on Notes
called for redemption ceases to accrue on and after the Redemption Date;


 


(7)                             the
provision of paragraph 6 of the Notes, as the case may be, pursuant to
which the Notes called for redemption are being redeemed; and


 


(8)                             the
aggregate principal amount of Notes that are being redeemed.


 


At the Issuer’s
written request made at least five Business Days prior to the date on which
notice is to be given, the Trustee shall give the notice of redemption prepared
by the Issuer, in the Issuer’s name and at the Issuer’s sole expense. In such
event, the Issuer shall provide the Trustee with the information required by
this Section 3.03.


 


SECTION 3.04.                                         Effect
of Notice of Redemption.


 


Once the
notice of redemption described in Section 3.03 is mailed, Notes called for
redemption become due and payable on the Redemption Date and at the redemption
price, including any premium, plus interest accrued to the Redemption Date. Upon
surrender to the Paying Agent, such Notes shall be paid at the redemption
price, including any premium, plus interest accrued to the Redemption Date, provided that if the Redemption Date is after a regular
record date and on or prior to the Interest Payment Date, the accrued interest
shall be payable to the Holder of the redeemed Notes registered on the relevant
record date, and provided, further,
that if a Redemption Date is a Legal Holiday, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from such
Redemption Date to such succeeding 


 


48

















 


Business Day.
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.


 


SECTION 3.05.                                         Deposit
of Redemption Price.


 


On or prior to
10:00 A.M., New York City time, on each Redemption Date, the Issuer shall
deposit with the Paying Agent in immediately available funds money sufficient
to pay the redemption price of, including premium, if any, and accrued interest
on all Notes to be redeemed on that date other than Notes or portions thereof
called for redemption on that date which have been delivered by the Issuer to
the Trustee for cancellation.


 


On and after
any Redemption Date, if money sufficient to pay the redemption price of,
including premium, if any, and accrued interest on Notes called for redemption
shall have been made available in accordance with the preceding paragraph, the
Notes called for redemption will cease to accrue interest and the only right of
the Holders of such Notes will be to receive payment of the redemption price of
and, subject to the first proviso in Section 3.04, accrued and unpaid
interest on such Notes to the Redemption Date. If any Note surrendered for
redemption shall not be so paid, interest will be paid, from the Redemption
Date until such redemption payment is made, on the unpaid principal of the Note
and any interest not paid on such unpaid principal, in each case, at the rate
and in the manner provided in the Notes.


 


SECTION 3.06.                                         Notes
Redeemed in Part.


 


Upon surrender
of a Note that is redeemed in part, the Issuer shall execute and the Trustee
shall authenticate for the Holder thereof a new Note equal in principal amount
to the unredeemed portion of the Note surrendered.


 


ARTICLE FOUR


 


COVENANTS


 


SECTION 4.01.                                         Payment
of Notes.


 


The Issuer
shall pay the principal of and interest (including all Additional Interest as
provided in the Registration Rights Agreement) on the Notes on the dates and in
the manner provided in the Notes and this Indenture. An installment of
principal or interest shall be considered paid on the date it is due if the
Trustee or Paying Agent holds on that date money designated for and sufficient
to pay such installment.


 


49

















 


The Issuer
shall pay interest on overdue principal (including post-petition interest in a
proceeding under any Bankruptcy Law), and overdue interest, to the extent lawful,
at the rate specified in the Notes.


 


SECTION 4.02.                                         Reports
to Holders.


 


Prior to the
consummation of the exchange offer or the effectiveness of the shelf
registration statement pursuant to the Registration Rights Agreement (the “Public
Reporting Date”), so long as any Notes are outstanding, the Issuer shall
furnish without cost to each Holder and file with the Trustee:


 


(1)                             within
90 days after the end of each fiscal year of the Issuer:


 


(w)                          audited
year-end consolidated financial statements of the Issuer and its Subsidiaries
(including balance sheets, statements of operations, and statements of cash
flows which would be required from an SEC registrant in a Form 10-K)
prepared in accordance with GAAP;


 


(x)                              the
information described in Item 303 of Regulation S-K under the
Securities Act with respect to such period, to the extent such information
would otherwise be required to be filed in an Annual Report on Form 10-K;


 


(y)                            a
presentation of EBITDA of the Issuer substantially consistent with the
presentation thereof in the Offering Memorandum and derived from such financial
statements referred to in clause (w) above; and


 


(z)                              all
pro forma and historical information in respect of any significant transaction
(as determined in accordance with Rule 3-05 of Regulation S-X under
the Securities Act) consummated more than 75 days prior to the date such
information is furnished for the time periods for which such financial
information would be required (if the Issuer were subject to the filing
requirements of the Exchange Act) in a filing on Form 8-K with the
Commission at such time; and


 


(2)                             within
45 days after the end of each of the first three fiscal quarters of each fiscal
year of the Issuer:


 


(w)                          unaudited
quarterly consolidated financial statements of the Issuer and its Subsidiaries
(including balance sheets, statements of operations, and statements of cash
flows which would be required from an SEC registrant in a Form 10-Q)
prepared in accordance with GAAP, subject to normal year-end adjustments.


 


50

















 


(x)                              the
information described in Item 303 of Regulation S-K under the
Securities Act with respect to such period to the extent such information would
otherwise be required to be filed in a Quarterly Report on Form 10-Q;


 


(y)                            a
presentation of EBITDA of the Issuer substantially consistent with the
presentation thereof in the Offering Memorandum and derived from such financial
statements referred to in clause (w) above; and


 


(z)                              all
pro forma and historical financial information in respect of any significant
transaction (as determined in accordance with Rule 3-05 of Regulation S-X
under the Securities Act) consummated more than 75 days prior to the date such
information is furnished to the extent not previously provided and for the time
periods such financial information would be required (if the Issuer were
subject to the filing requirements of the Exchange Act) in a filing on Form 8-K
with the Commission at such time.


 


Whether or not
required by the SEC, following the Public Reporting Date, so long as any Notes
are outstanding, the Issuer shall furnish to the Holders of Notes, or file
electronically with the SEC through the SEC’s Electronic Data Gathering,
Analysis and Retrieval System (or any successor system), within the time
periods that would be applicable to the Issuer if it were subject to Section 13(a) or
15(d) of the Exchange Act:


 


(A)                         all quarterly and annual
financial information that would be required to be contained in a filing with
the SEC on Forms 10-Q and 10-K if the Issuer were required to file these Forms,
including a “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and, with respect to the annual information only, a report
on the annual financial statements by the Issuer’s independent auditors; and


 


(B)                           all current reports that
would be required to be filed with the SEC on Form 8-K if the Issuer were
required to file these reports.


 


In addition,
whether or not required by the SEC, after the Public Reporting Date, the Issuer
shall file a copy of all of the information and reports referred to in clauses (A) and
(B) of the preceding paragraph with the SEC for public availability within
the time periods that would be applicable to the Issuer if it were subject to Section 13(a) or
15(d) of the Exchange Act (unless the SEC will not accept the filing) and
make the information available to securities analysts and prospective investors
upon request.


 


At any time
that any of Issuer’s Subsidiaries are Unrestricted Subsidiaries that individually
or collectively constitute a Significant Subsidiary, the quarterly and annual
financial information required by the preceding paragraphs shall include a
reasonably detailed presentation, either on the face of the financial
statements or in the footnotes thereto, of the financial condition and results
of operations of the Issuer and its Restricted Subsidiaries, taken as a whole, 


 


51

















 


separate from
the financial condition and results of operations of the Unrestricted
Subsidiaries of the Issuer.


 


Prior to the
Public Reporting Date, the Issuer shall use its reasonable best efforts to (i) participate
in quarterly conference calls to discuss results of operations with Holders and
(ii) provide S&P and Moody’s (and their respective successors) with
information on a periodic basis as S&P or Moody’s, as the case may be,
shall reasonably require in order to maintain public ratings of the Notes. In
addition, for so long as any Notes remain outstanding, the Issuer shall furnish
to the Holders and to securities analysts and prospective investors, upon their
request, the information described above as well as all information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act.


 


SECTION 4.03.                                         Waiver
of Stay, Extension or Usury Laws.


 


Each of the
Issuer and the Guarantors covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, or plead (as a defense or
otherwise) or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law which would
prohibit or forgive any of the Issuer and the Guarantors from paying all or any
portion of the principal of, premium, if any, and/or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture;
and (to the extent that they may lawfully do so) each of the Issuer and
the Guarantors hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.


 


SECTION 4.04.                                         Compliance
Certificate.


 


(a)                             The
Issuer shall deliver to the Trustee, within 120 days after the end of each
fiscal year, an Officers’ Certificate stating that a review of the activities
of the Issuer and its Subsidiaries during such fiscal year has been made under
the supervision of the signing Officers with a view to determining whether the
Issuer and the Guarantors have kept, observed, performed and fulfilled their
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge, the Issuer
and the Guarantors have kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and are not in default in the performance
or observance of any of the terms, provisions and conditions hereof (or, if a
Default shall have occurred, describing all such Defaults of which he or she may have
knowledge and what action they are taking or propose to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest, if any, on the Notes is prohibited or if such event has occurred,
a description of the event and what action the Issuer and the Guarantors is
taking or propose to take with respect thereto.


 


52

















 


(b)                            The
Issuer and the Guarantors shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default,
an Officers’ Certificate specifying such Default and what action the Issuer and
the Guarantors are taking or propose to take with respect thereto.


 


(c)                             The
Issuer’s fiscal year currently ends on September 30. The Issuer shall
provide written notice to the Trustee of any change in its fiscal year.


 


SECTION 4.05.                                         Taxes.


 


The Issuer and
the Guarantors shall, and shall cause each of their Subsidiaries to, pay prior
to delinquency all material taxes, assessments, and governmental levies except
as contested in good faith and by appropriate proceedings.


 


SECTION 4.06.                                         Limitations
on Additional Indebtedness.


 


The Issuer
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, incur any Indebtedness; provided that
the Issuer or any Restricted Subsidiary may incur additional Indebtedness
(including Acquired Indebtedness) if no Default shall have occurred and be
continuing at the time of or as a consequence of the incurrence of the
Indebtedness and if, after giving effect thereto, the Consolidated Leverage
Ratio would be less than (a) 3.50 to 1.00 if such Indebtedness is incurred
before March 1, 2008 or (ii) 3.00 to 1.00 if such Indebtedness is
incurred on or after March 1, 2008 (the “Ratio Exception”).


 


Notwithstanding
the above, so long as no Default shall have occurred and be continuing at the
time of or as a consequence of the incurrence of the following Indebtedness,
each of the following shall be permitted (the “Permitted Indebtedness”):


 


(1)                             Indebtedness
of the Issuer and any Restricted Subsidiary under the Credit Facilities in an
aggregate amount at any time outstanding (whether incurred under the Ratio
Exception or as Permitted Indebtedness) not to exceed the greater of
(x) $500.0 million and (y) the amount of the Borrowing Base as of the
date of such incurrence;


 


(2)                             the
Notes and the Note Guarantees issued on the Issue Date;


 


(3)                             Indebtedness
of the Issuer and the Restricted Subsidiaries to the extent outstanding on the
Issue Date (other than Indebtedness referred to in clauses (1) and (2) above,
and after giving effect to the use of proceeds of the Notes);


 


(4)                             Indebtedness
of the Issuer and the Restricted Subsidiaries under Hedging Obligations; provided that (a) such Hedging Obligations relate to
payment obligations on Indebtedness otherwise permitted to be incurred by this Section 4.06,
(b) the notional principal amount of such Hedging Obligations at the time
incurred does not exceed the 


 


53

















 


principal amount of the Indebtedness to which such Hedging Obligations
relate and (c) such Hedging Obligations are entered into in the ordinary
course of business for bona fide hedging purposes and not for the purpose of
speculation;


 


(5)                             Indebtedness
of the Issuer owed to a Restricted Subsidiary and Indebtedness of any
Restricted Subsidiary owed to the Issuer or any other Restricted Subsidiary; provided, however, that (a) any
Indebtedness of the Issuer owed to a Restricted Subsidiary is unsecured and
subordinated to the Issuer’s obligations under this Indenture and the Notes and
(b) upon any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or such Indebtedness being owed to any Person other than the Issuer
or a Restricted Subsidiary, the Issuer or such Restricted Subsidiary, as
applicable, shall be deemed to have incurred Indebtedness not permitted by this
clause (5);


 


(6)                             Indebtedness
in respect of bid, performance or surety bonds issued for the account of the
Issuer or any Restricted Subsidiary in the ordinary course of business, including
guarantees or obligations of the Issuer or any Restricted Subsidiary with
respect to letters of credit supporting such bid, performance or surety
obligations (in each case other than for an obligation for money borrowed);


 


(7)                             Indebtedness
incurred by the Issuer or any Restricted Subsidiary with respect to letters of
credit issued in the ordinary course of business, including, without limitation,
in respect of workers’ compensation claims, self-insurance, real estate taxes,
earnest money deposits and utility installation and other infrastructure
developments, or other Indebtedness with respect to obligations regarding
workers’ compensation claims;


 


(8)                             Purchase
Money Indebtedness incurred by the Issuer or any Restricted Subsidiary, in an
aggregate amount not to exceed at any time outstanding the greater of (a) $15.0
million and (b) 1.5% of Total Assets;


 


(9)                             Non-Recourse
Indebtedness of the Issuer or any Restricted Subsidiary incurred for the
acquisition, development and/or improvement of real property and secured by
Liens only on such real property;


 


(10)                       Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of
business; provided, however,
that such Indebtedness is extinguished within five Business Days of incurrence;


 


(11)                       Indebtedness
arising in connection with endorsement of instruments for deposit in the
ordinary course of business;


 


(12)                       Indebtedness
owed to a seller of Developed Land under the terms of which the Issuer or such
Restricted Subsidiary, as obligor, is required to make a payment upon 


 


54

















 


the future sale of such Developed Land in an amount not to exceed 5% of
the gross sales price or, in the case of profit sharing agreements between such
seller and the Issuer or such Restricted Subsidiary, an amount that is
reasonable and customary in the industry and market;


 


(13)                       Indebtedness
of any Mortgage Subsidiary under warehouse lines of credit and purchase and
sale agreements and repurchase agreements, and Indebtedness secured by mortgage
loans and related assets of such Mortgage Subsidiary, in each case incurred in
the ordinary course of such business;
provided that the only legal recourse for collection of obligations
owing on such Indebtedness is against such Mortgage Subsidiary, any other
Mortgage Subsidiary and their respective assets;


 


(14)                       Indebtedness
evidenced by promissory notes subordinated to the Notes and the Note Guarantees
issued to current or former employees or directors of the Issuer or any
Subsidiary (or their respective spouses or estates) in lieu of cash payments
for Equity Interests of the Issuer being repurchased from such Person;


 


(15)                       Indebtedness
arising under a guarantee of Indebtedness of any joint venture (provided that
such guarantee shall be deemed to be an Investment in such joint venture and
such Investment shall constitute a Permitted Investment or otherwise be permitted
by Section 4.08;


 


(16)                       Indemnification,
adjustment of purchase price or similar obligations, including title insurance,
of the Issuer or any Restricted Subsidiary, in each case incurred in connection
with the acquisition or disposition of any assets of the Issuer or any
Restricted Subsidiary (other than guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such assets for the purpose of financing
such acquisition); provided, however, that such Indebtedness is not reflected on the
balance sheet of the Issuer or any Restricted Subsidiary (it being understood
that contingent obligations referred to in a footnote to financial statements
and not otherwise reflected on the balance sheet shall not be deemed to be
reflected on such balance sheet for purposes of this clause (16));


 


(17)                       Refinancing
Indebtedness with respect to Indebtedness incurred pursuant to the Ratio
Exception or clause (2) or (3) above or this clause (17); and


 


(18)                       Indebtedness
of the Issuer or any Restricted Subsidiary in an aggregate amount not to exceed
$25.0 million at any time outstanding.


 


For purposes
of determining compliance with this Section 4.06, in the event that an
item of Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness described in clauses (1) through (18) above or is
entitled to be incurred pursuant to the Ratio Exception, the Issuer shall, in
its sole discretion, classify (and may later reclassify) such item of
Indebtedness and may divide and classify such Indebtedness in more than
one of the 


 


55

















 


types of
Indebtedness described, except that Indebtedness outstanding under the Credit
Facilities on the Issue Date shall be deemed to have been incurred under clause
(1) above. Accrual of interest, accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends on
any Disqualified Equity Interests in the form of additional shares of the
same class of Disqualified Equity Interests will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Equity Interests for
purposes of this Section 4.06. Notwithstanding any other provision of this
Section 4.06, the maximum amount of Indebtedness that the Issuer or any Restricted
Subsidiary may incur pursuant to this Section 4.06 shall not be
deemed to be exceeded solely as a result of fluctuations in exchange rates or
currency values.


 


SECTION 4.07.                                         Limitations
on Layering Indebtedness.


 


The Issuer
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, incur any Indebtedness that is or purports to be by its terms (or
by the terms of any agreement governing such Indebtedness) senior in right of
payment to the Notes or the Note Guarantee of such Restricted Subsidiary and
subordinated in right of payment to any other Indebtedness of the Issuer or
such Restricted Subsidiary, as the case may be.


 


SECTION 4.08.                                         Limitations
on Restricted Payments.


 


The Issuer
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, make any Restricted Payment if at the time of such Restricted
Payment:


 


(1)                             a
Default shall have occurred and be continuing or shall occur as a consequence
thereof;


 


(2)                             the
Issuer cannot incur $1.00 of additional Indebtedness pursuant to the Ratio
Exception; or


 


(3)                             the
amount of such Restricted Payment, when added to the aggregate amount of all
other Restricted Payments made after the Issue Date (other than Restricted Payments
made pursuant to clause (2), (3) or (5) of the next paragraph),
exceeds the sum (the “Restricted Payments Basket”) of (without duplication):


 


(a)                             50%
of Consolidated Net Income for the period (taken as one accounting period)
commencing on the first day of the first full fiscal quarter commencing after
the Issue Date to and including the last day of the fiscal quarter ended
immediately prior to the date of such calculation for which consolidated financial
statements are available (or, if such Consolidated Net Income shall be a
deficit, minus 100% of such aggregate deficit), plus


 


56

















 


(b)                            100%
of the aggregate net cash proceeds, plus the Fair Market Value of any assets to
be used in a Permitted Business (or marketable securities) received by the
Issuer either (x) as contributions to the common equity of the Issuer
after the Issue Date or (y) from the issuance and sale of Qualified Equity
Interests after the Issue Date, other than to the extent any such proceeds are
used to redeem Notes in accordance with Section 6(b) of the Notes, plus


 


(c)                             the
aggregate amount by which Indebtedness of the Issuer or any Restricted
Subsidiary is reduced on the Issuer’s balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Issuer) subsequent to the Issue Date into
Qualified Equity Interests (less the amount of any cash, or the fair value of
assets, distributed by the Issuer or any Restricted Subsidiary upon such conversion
or exchange), plus


 


(d)                            100%
of the aggregate amount received in cash and the Fair Market Value of property
and marketable securities received by means of (A) the sale or other
disposition (other than to the Issuer or a Restricted Subsidiary) of any Investment
that was treated as a Restricted Payment made after the Issue Date, and
repurchases and redemptions of such Investments from the Issuer or its
Restricted Subsidiaries and repayments of loans or advances which constitute
Restricted Payments by the Issuer or its Restricted Subsidiaries or (B) the
sale (other than to the Issuer or a Restricted Subsidiary) of the Equity
Interests of an Unrestricted Subsidiary or a distribution from an Unrestricted
Subsidiary or a dividend from an Unrestricted Subsidiary, provided, however,
that the amount under this clause (d) shall not exceed the amount by which
such Investments reduced the Restricted Payments Basket, plus


 


(e)                             upon
a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, or
the merger or consolidation of an Unrestricted Subsidiary into the Issuer or a
Restricted Subsidiary, the lesser of (i) the Fair Market Value of the Investment
in such Subsidiary immediately following such Redesignation, merger or consolidation
and (ii) the aggregate amount of the Issuer’s Investments in such
Subsidiary to the extent such Investments reduced the amount available for subsequent
Restricted Payments under this clause (3) and were not previously repaid
or otherwise reduced.


 


The foregoing provisions shall
not prohibit:


 


(1)                             the
payment by the Issuer or any Restricted Subsidiary of any dividend within 60
days after the date of declaration thereof, if on the date of declaration the
payment would have complied with the provisions of this Indenture;


 


57

















 


(2)                             so
long as no Default shall have occurred and be continuing at the time of or as a
consequence of such redemption, the redemption of any Equity Interests of the Issuer
or any Restricted Subsidiary in exchange for, or out of the proceeds of the
issuance and sale within 60 days of, Qualified Equity Interests;


 


(3)                             so
long as no Default shall have occurred and be continuing at the time of or as a
consequence of such redemption, the redemption of Subordinated Indebtedness of
the Issuer or any Restricted Subsidiary (a) in exchange for, or out of the
proceeds of the issuance and sale within 30 days of, Qualified Equity Interests
or (b) in exchange for, or out of the proceeds of the incurrence within 30
days of, Refinancing Indebtedness permitted to be incurred under Section 4.06
and the other terms of this Indenture;


 


(4)                             so
long as no Default shall have occurred and be continuing at the time of or as a
consequence of such redemption, the redemption of Equity Interests of the
Issuer held by officers, directors or employees or former officers, directors
or employees (or their transferees, estates or beneficiaries under their
estates), upon their death, disability, retirement, severance or termination of
employment or service; provided that
the aggregate cash consideration paid for all such redemptions shall not exceed
$3.0 million during any calendar year (with unused amounts in any calendar year
being carried over to succeeding calendar years subject to a maximum of $6.0 million
in any calendar year);


 


(5)                             repurchases
of Equity Interests deemed to occur upon the exercise of stock options if the
Equity Interests represents a portion of the exercise price thereof and repurchases
of Equity Interests deemed to occur upon the withholding of a portion of the Equity
Interests issued, granted or awarded to an employee, director or consultant in
respect of the payment of taxes payable by such employee, director or
consultant upon such issuance, grant or award; or


 


(6)                             additional
Restricted Payments not to exceed $10.0 million in the aggregate since the
Issue Date;


 


provided
that no issuance and sale of Qualified Equity Interests pursuant to clause (2) or
(3) above shall increase the Restricted Payments Basket, except to the
extent the proceeds thereof exceed the amounts used to effect the transactions
described therein.


 


Notwithstanding
anything to the contrary contained in this Section 4.08, the Issuer shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
declare or pay any dividend or any other distribution on the Equity Interests
of the Issuer that would constitute a Restricted Payment at any time prior to a
Public Equity Offering after the Issue Date unless, at the time of such
Restricted Payment, (a) the Restricted Payment would otherwise be
permitted by this Section 4.08 and (b) the Consolidated Leverage
Ratio (calculated on a pro forma basis giving effect to such Restricted
Payment) would be less than 3.00 to 1.00.


 


58

















 


SECTION 4.09.                                         Limitations
on Asset Sales.


 


The Issuer
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, consummate any Asset Sale unless:


 


(1)                             the
Issuer or such Restricted Subsidiary receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the assets included in
such Asset Sale; and


 


(2)                             at
least 75% of the total consideration received in such Asset Sale or series of
related Asset Sales consists of cash or Cash Equivalents.


 


For purposes
of clause (2) of the preceding paragraph, the following shall be deemed to
be cash:


 


(a)                             the
amount (without duplication) of any Indebtedness (other than Subordinated
Indebtedness) of the Issuer or such Restricted Subsidiary that is expressly
assumed by the transferee in such Asset Sale and with respect to which the
Issuer or such Restricted Subsidiary, as the case may be, is
unconditionally released by the holder of such Indebtedness or is otherwise
unconditionally released from further liability, whether by operation of law or
otherwise;


 


(b)                            the
amount of any obligations received from such transferee that are within 90 days
converted by the Issuer or such Restricted Subsidiary to cash (to the extent of
the cash actually so received); and


 


(c)                             the
Fair Market Value of any assets (other than securities, unless such securities
represent Equity Interests in an entity engaged solely in a Permitted Business,
such entity becomes a Restricted Subsidiary and the Issuer or a Restricted
Subsidiary acquires voting and management control of such entity) received by
the Issuer or any Restricted Subsidiary to be used by it in a Permitted
Business.


 


If at any time
any non-cash consideration received by the Issuer or any Restricted Subsidiary,
as the case may be, in connection with any Asset Sale is repaid or
converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then the date of such
repayment, conversion or disposition shall be deemed to constitute the date of
an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied
in accordance with this Section 4.09.


 


If the Issuer
or any Restricted Subsidiary engages in an Asset Sale, the Issuer or such
Restricted Subsidiary shall, no later than one year following the consummation
thereof, apply all or any of the Net Available Proceeds therefrom to:


 


59

















 


(1)                             repay
any Senior Indebtedness or Guarantor Senior Indebtedness;


 


(2)                             repay
any Indebtedness which was secured by the assets sold in such Asset Sale;
and/or


 


(3)                             invest
all or any part of the Net Available Proceeds thereof in the purchase of
assets (other than securities, unless such securities represent Equity
Interests in an entity engaged solely in a Permitted Business, such entity
becomes a Restricted Subsidiary and the Issuer or a Restricted Subsidiary
acquires voting and management control of such entity) to be used by the Issuer
or any Restricted Subsidiary in a Permitted Business.


 


The amount of
Net Available Proceeds not applied or invested as provided in this paragraph
will constitute “Excess Proceeds.”


 


When the
aggregate amount of Excess Proceeds equals or exceeds $15.0 million, the Issuer
shall be required to make an Offer to Purchase from all Holders and, if
applicable, redeem (or make an offer to do so) any Pari Passu Indebtedness of
the Issuer the provisions of which require the Issuer to redeem such
Indebtedness with the proceeds from any Asset Sales (or offer to do so), in an
aggregate principal amount of Notes and such Pari Passu Indebtedness equal to
the amount of such Excess Proceeds as follows:


 


(1)                             the
Issuer shall (a) make an Offer to Purchase (a “Net Proceeds Offer”)
to all Holders, and (b) redeem (or make an offer to do so) any such other
Pari Passu Indebtedness, pro rata in proportion to the respective principal
amounts of the Notes and such other Indebtedness required to be redeemed, the
maximum principal amount of Notes and Pari Passu Indebtedness that may be
redeemed out of the amount (the “Payment Amount”) of such Excess
Proceeds;


 


(2)                             the
offer price for the Notes shall be payable in cash in an amount equal to 100%
of the principal amount of the Notes tendered pursuant to a Net Proceeds Offer,
plus accrued and unpaid interest thereon, if any, to the date such Net Proceeds
Offer is consummated (the “Offered Price”), and the redemption price for
such Pari Passu Indebtedness (the “Pari Passu Indebtedness Price”) shall
be as set forth in the related documentation governing such Indebtedness;


 


(3)                             if
the aggregate Offered Price of Notes validly tendered and not withdrawn by
Holders thereof exceeds the pro rata
portion of the Payment Amount allocable to the Notes, Notes to be purchased
shall be selected on a pro rata basis;
and


 


(4)                             upon
completion of such Net Proceeds Offer in accordance with the foregoing
provisions, the amount of Excess Proceeds with respect to which such Net Proceeds
Offer was made shall be deemed to be zero.


 


60

















 


To the extent
that the sum of the aggregate Offered Price of Notes tendered pursuant to a Net
Proceeds Offer and the aggregate Pari Passu Indebtedness Price paid to the
holders of such Pari Passu Indebtedness is less than the Payment Amount
relating thereto (such shortfall constituting a “Net Proceeds Deficiency”),
the Issuer may use the Net Proceeds Deficiency, or a portion thereof, for
general corporate purposes, subject to the provisions of this Indenture.


 


In the event
of the transfer of substantially all (but not all) of the assets of the Issuer
and the Restricted Subsidiaries as an entirety to a Person in a transaction
covered by and effected in accordance with Section 5.01, the successor
corporation shall be deemed to have sold for cash at Fair Market Value the
assets of the Issuer and the Restricted Subsidiaries not so transferred for
purposes of this Section 4.09, and shall comply with the provisions of
this Section 4.09 with respect to such deemed sale as if it were an Asset
Sale (with such Fair Market Value being deemed to be Net Available Proceeds for
such purpose).


 


The Issuer
shall comply with applicable tender offer rules, including the requirements of Rule 14e-1
under the Exchange Act and any other applicable laws and regulations in connection
with the purchase of Notes pursuant to a Net Proceeds Offer. To the extent that
the provisions of any securities laws or regulations conflict with this Section 4.09,
the Issuer shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section 4.09
by virtue of this compliance.


 


SECTION 4.10.                                         Limitations
on Transactions with Affiliates.


 


The Issuer
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, in one transaction or a series of related transactions, sell,
lease, transfer or otherwise dispose of any of its assets to, or purchase any
assets from, or enter into any contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate involving aggregate
consideration in excess of $60,000 (an “Affiliate Transaction”), unless:


 


(1)                             such
Affiliate Transaction is on terms that are not materially less favorable to the
Issuer or the relevant Restricted Subsidiary than those that may have been
obtained in a comparable transaction at such time on an arm’s-length basis by
the Issuer or that Restricted Subsidiary from a Person that is not an Affiliate
of the Issuer or that Restricted Subsidiary; and


 


(2)                             the
Issuer delivers to the Trustee:


 


(a)                             with
respect to any Affiliate Transaction involving aggregate value in excess of
$10.0 million, an Officers’ Certificate certifying that such Affiliate
Transaction complies with clause (1) above and either (i) if there are one or more members of the Board of
Directors of the Issuer who qualify as Independent Directors, a Secretary’s
Certificate which sets forth and authenticates a resolution that has been
adopted by the Board of Directors of the Issuer and a majority of the 


 


61

















 


Independent
Directors of the Issuer approving such Affiliate Transaction or (ii) a
written opinion or appraisal of the types described in clause (b) below;
and


 


(b)                            with
respect to any Affiliate Transaction involving aggregate value of $25.0 million
or more, the certificates described in the preceding clause (a) and
(x) a written opinion as to the fairness of such Affiliate Transaction to
the Issuer or such Restricted Subsidiary from a financial point of view or
(y) a written appraisal supporting the value of such Affiliate
Transaction, in either case, issued by an Independent Financial Advisor.


 


The foregoing
restrictions shall not apply to:


 


(1)                             transactions
exclusively between or among (a) the Issuer and one or more Restricted
Subsidiaries or (b) Restricted Subsidiaries or entities that become
Restricted Subsidiaries as a result of such transaction; provided,
in each case, that no Affiliate of the Issuer (other than another Restricted
Subsidiary) owns Equity Interests of any such Restricted Subsidiary;


 


(2)                             reasonable
director, officer, employee and consultant compensation (including bonuses) and
other benefits (including retirement, health, stock and other benefit plans),
including compensation and benefits consistent with past practice, and indemnification
arrangements;


 


(3)                             loans
and advances permitted by clause (3) of the definition of “Permitted Investments”;


 


(4)                             any
agreement as in effect as of the Issue Date or any extension, amendment or
modification thereto (so long as any such extension, amendment or modification
satisfies the requirements set forth in clause (1) of the first paragraph
of this Section 4.10) or any transaction contemplated thereby;


 


(5)                             any
transaction with a Person that would otherwise constitute an Affiliate
Transaction solely because the Issuer or a Restricted Subsidiary owns an Equity
Interest in or otherwise controls such Person; provided,
however, that no Affiliate of the
Issuer or any of its Subsidiaries other than the Issuer or a Restricted
Subsidiary shall have a beneficial interest in such Person;


 


(6)                             Restricted
Payments of the type described in clause (1), (2) or (4) of the
definition of “Restricted Payment” and which are made in accordance with Section 4.08;
or


 


(7)                             issuances
or sales of Qualified Equity Interests by the Issuer to an Affiliate.


 


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SECTION 4.11.                                         Limitations
on Liens.


 


The Issuer
shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
create, incur, assume or permit or suffer to exist any Lien (other than
Permitted Liens) against any assets of the Issuer or any Restricted Subsidiary
(including Equity Interests of a Restricted Subsidiary), whether owned at the
Issue Date or thereafter acquired, or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom, which Lien
secures Indebtedness or trade payables, unless contemporaneously therewith:


 


(1)                             in
the case of any Lien securing an obligation that ranks pari passu
with the Notes or a Note Guarantee, effective provision is made to secure the
Notes or such Note Guarantee, as the case may be, at least equally and
ratably with or prior to such obligation with a Lien on the same collateral;
and


 


(2)                             in
the case of any Lien securing an obligation that is subordinated in right of
payment to the Notes or a Note Guarantee, effective provision is made to secure
the Notes or such Note Guarantee, as the case may be, with a Lien on the
same collateral that is prior to the Lien securing such subordinated
obligation,


 


in each case,
for so long as such obligation is secured by such Lien.


 


SECTION 4.12.                                         Conduct
of Business.


 


The Issuer
will not, and will not permit any Restricted Subsidiary to, engage in any
business other than a Permitted Business.


 


SECTION 4.13.                                         Additional
Note Guarantees.


 


If, after the
Issue Date, (a) the Issuer or any Restricted Subsidiary shall acquire or
create another Subsidiary (other than (1) a Subsidiary that has been
designated an Unrestricted Subsidiary or (2) an Excluded Subsidiary that
does not guarantee any Indebtedness of the Issuer or any other Restricted
Subsidiary), (b) any Unrestricted Subsidiary (other than an Excluded
Subsidiary that does not guarantee any Indebtedness of the Issuer or any other
Restricted Subsidiary) is redesignated a Restricted Subsidiary or (c) a
Restricted Subsidiary that is an Excluded Subsidiary guarantees any Indebtedness
of the Issuer or any other Restricted Subsidiary, then, in each such case, the
Issuer shall (unless it has already done so and a Note Guarantee of such Restricted
Subsidiary is then in effect) cause such Restricted Subsidiary to:


 


(1)                             execute
and deliver to the Trustee (a) a supplemental indenture in form and
substance satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Issuer’s obligations
under the Notes and this Indenture and (b) a notation of guarantee in
respect of its Note Guarantee; and


 


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(2)                             deliver
to the Trustee one or more Opinions of Counsel to the effect that such supplemental
indenture (a) has been duly authorized, executed and delivered by such
Restricted Subsidiary and (b) constitutes a valid and legally binding
obligation of such Restricted Subsidiary in accordance with its terms.


 


SECTION 4.14.                                         Limitations
on Dividend and Other Restrictions Affecting Restricted Subsidiaries.


 


The Issuer
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or consensual restriction on the ability of any
Restricted Subsidiary to:


 


(a)                             pay
dividends or make any other distributions on or in respect of its Equity Interests;


 


(b)                            make
loans or advances or pay any Indebtedness or other obligation owed to the
Issuer or any other Restricted Subsidiary; or


 


(c)                             transfer
any of its assets to the Issuer or any other Restricted Subsidiary;


 


except for:


 


(1)                             encumbrances
or restrictions existing under or by reason of applicable law or required by
any regulatory authority having jurisdiction over the Issuer or any Restricted
Subsidiary;


 


(2)                             encumbrances
or restrictions existing under this Indenture, the Notes and the Note Guarantees;


 


(3)                             non-assignment
provisions of any contract or any lease entered into in the ordinary course of
business;


 


(4)                             encumbrances
or restrictions existing under agreements existing on the date hereof
(including, without limitation, the Credit Facilities) as in effect on the date
hereof;


 


(5)                             restrictions
on the transfer of assets subject to any Lien permitted under this Indenture
imposed by the holder of such Lien;


 


(6)                             restrictions
on the transfer of assets imposed under any agreement to sell such assets
permitted under this Indenture to any Person pending the closing of such sale;


 


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(7)                             any
instrument governing Acquired Indebtedness or any other agreement of an
acquired Person, which encumbrance or restriction is not applicable to any
Person, or the assets of any Person, other than the Person or the assets so
acquired;


 


(8)                             encumbrances
or restrictions arising in connection with Refinancing Indebtedness; provided,
however, that any such encumbrances and restrictions are not materially more restrictive
in the aggregate than those contained in the agreements creating or evidencing
the Indebtedness being refinanced;


 


(9)                             customary
provisions in leases, partnership agreements, limited liability company
organizational governance documents, joint venture agreements and other similar
agreements entered into in the ordinary course of business that restrict (x)
the transfer of leasehold interests or ownership interests in such partnership,
limited liability company, joint venture or similar Person or (y) in the case
of a Restricted Subsidiary that is not a Wholly-Owned Restricted Subsidiary,
the transfer or distribution of assets of such Restricted Subsidiary;


 


(10)                       customary
encumbrances or restrictions imposed under any Indebtedness of a Mortgage
Subsidiary incurred pursuant to the category of Permitted Indebtedness described
in clause (13) of Section 4.06;


 


(11)                       restrictions
on cash or other deposits or net worth imposed by suppliers or landlords under
contracts entered into in the ordinary course of business;


 


(12)                       encumbrances
or restrictions under Non-Recourse Indebtedness incurred in compliance with Section 4.06
that impose restrictions of the nature described in clause (c) above on
the assets secured by such Non-Recourse Indebtedness or the proceeds from the
sale or distribution of such assets;


 


(13)                       customary
restrictions in other Indebtedness incurred in compliance with Section 4.06;
provided that such restrictions,
taken as a whole, are, in the good faith judgment of the Issuer’s board of
directors, no more materially restrictive with respect to such encumbrances and
restrictions than those contained in the existing agreements referenced in
clause (4) above; and


 


(14)                       any
encumbrances or restrictions imposed by any amendments or refinancings of the
contracts, instruments or obligations referred to in clauses (1) through
(13) above; provided that such amendments or
refinancings are, in the good faith judgment of the Issuer’s Board of Directors,
no more materially restrictive with respect to such encumbrances and restrictions
than those prior to such amendment or refinancing.


 


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SECTION 4.15.                                                         Limitations on Designation of Unrestricted
Subsidiaries.


 


The
Issuer may designate any Subsidiary of the Issuer as an “Unrestricted
Subsidiary” under this Indenture (a “Designation”) only if:


 


(1)                                  no Default shall have occurred and be continuing
at the time of or after giving effect to such Designation; and


 


(2)                                  the Issuer would be permitted to make, at the
time of such Designation, (a) a Permitted Investment or (b) an Investment
pursuant to the first paragraph of Section 4.08, in either case, in an amount
(the “Designation Amount”) equal to the Fair Market Value of the
Issuer’s proportionate interest in such Subsidiary on such date.


 


No
Subsidiary shall be Designated as an “Unrestricted Subsidiary” unless such
Subsidiary:


 


(1)                                  has no Indebtedness other than Permitted
Unrestricted Subsidiary Indebtedness;


 


(2)                                  is not party to any agreement, contract,
arrangement or understanding with the Issuer or any Restricted Subsidiary
unless the terms of the agreement, contract, arrangement or understanding are
not materially less favorable to the Issuer or the Restricted Subsidiary than
those that might be obtained at the time from Persons who are not Affiliates of
the Issuer or such Restricted Subsidiary;


 


(3)                                  is a Person with respect to which neither
the Issuer nor any Restricted Subsidiary has any direct or indirect obligation
(a) to subscribe for additional Equity Interests or (b) to maintain or preserve
the Person’s financial condition or to cause the Person to achieve any
specified levels of operating results; and


 


(4)                                  has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of the Issuer or any
Restricted Subsidiary, except for any guarantee given solely to support a
pledge by the Issuer or any Restricted Subsidiary of the Equity Interests of
such Unrestricted Subsidiary.


 


If,
at any time, any Unrestricted Subsidiary fails to meet the preceding
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary as of the date and, if the Indebtedness is
not permitted to be incurred under Section 4.06 or the Lien is not permitted
under Section 4.11, the Issuer shall be in default of the applicable covenant.


 


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The
Issuer may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a
“Redesignation”) only if:


 


(1)                                  no Default shall have occurred and be
continuing at the time of and after giving effect to such Redesignation; and


 


(2)                                  all Liens, Indebtedness and Investments of
such Unrestricted Subsidiary outstanding immediately following such Redesignation
would, if incurred or made at such time, have been permitted to be incurred or
made for all purposes of this Indenture.


 


All
Designations and Redesignations must be evidenced by resolutions of the Board
of Directors of the Issuer, delivered to the Trustee certifying compliance with
the foregoing provisions.


 


SECTION 4.16.                                                         [Intentionally Omitted]


 


SECTION 4.17.                                                         Maintenance of Properties; Insurance;
Compliance with Law.


 


(a)                                  The Issuer shall, and shall cause each of its
Restricted Subsidiaries to, at all times cause all properties used or useful in
the conduct of their business to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied with
all necessary equipment, and shall cause to be made all necessary repairs,
renewals, replacements, necessary betterments and necessary improvements
thereto.


 


(b)                                 The Issuer shall maintain, and shall cause to
be maintained for each of its Restricted Subsidiaries, insurance covering such
risks as are usually and customarily insured against by corporations similarly
situated in the markets where the Issuer and the Restricted Subsidiaries
conduct homebuilding operations, in such amounts as shall be customary for
corporations similarly situated and with such deductibles and by such methods
as shall be customary and reasonably consistent with past practice.


 


(c)                                  The Issuer shall, and shall cause each of its
Subsidiaries to, comply with all statutes, laws, ordinances or government rules
and regulations to which they are subject, non-compliance with which would
materially adversely affect the business, earnings, properties, assets or
financial condition of the Issuer and their Subsidiaries taken as a whole.


 


SECTION 4.18.                                                         Payments for Consent.


 


The
Issuer shall not, and shall not cause or permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such consideration is offered
to be paid or agreed to be paid to all Holders which so consent, waive or agree
to amend


 


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in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.


 


SECTION 4.19.                                                         Legal Existence.


 


Subject
to Article Five, the Issuer shall do or cause to be done all things necessary
to preserve and keep in full force and effect (i) its legal existence, and the
corporate, partnership or other existence of each Restricted Subsidiary, in
accordance with the respective organizational documents (as the same may be
amended from time to time) of each Restricted Subsidiary and the rights (charter
and statutory), licenses and franchises of the Issuer and its Restricted
Subsidiaries; provided that the
Issuer shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Restricted
Subsidiaries if the Board of Directors of the Issuer shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Issuer and its Restricted Subsidiaries, taken as a whole, and that the loss
thereof is not adverse in any material respect to the Holders.


 


SECTION 4.20.                                                         Change of Control Offer.


 


Upon
the occurrence of a Change of Control, the Issuer shall be obligated to make an
Offer to Purchase (the “Change of Control Offer”), and shall purchase,
on a Business Day (the “Change of Control Payment Date”) not more than
60 nor less than 30 days following the occurrence of the Change of Control, all
of the then outstanding Notes at a purchase price (the “Change of Control
Purchase Price”) equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the Change of Control Payment
Date. The Change of Control Offer shall remain open for at least 20 Business
Days and until the close of business on the Change of Control Payment Date.


 


Within
30 days following the date upon which a Change of Control occurs (the “Change
of Control Date”), the Issuer shall send, by first class mail, a notice to
each Holder, with a copy to the Trustee, which notice shall govern the terms of
the Change of Control Offer. The notice to the Holders shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Change of Control Offer.


 


Any
amounts remaining after the purchase of Notes pursuant to a Change of Control
Offer shall be returned by the Trustee to the Issuer.


 


The
Issuer’s obligation to make a Change of Control Offer will be satisfied if a
third party makes the Change of Control Offer in the manner and at the times
and otherwise in compliance with the requirements applicable to a Change of
Control Offer made by the Issuer and purchases all Notes properly tendered and
not withdrawn under the Change of Control Offer.


 


The
Issuer shall comply with applicable tender rules, including the requirements of
Rule 14e-1 under the Exchange Act and any other applicable laws and regulations
in connection


 


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with
the purchase of Notes pursuant to a Change of Control Offer. To the extent the
provisions of any securities laws or regulations conflict with the provisions
under this Section 4.20, the Issuer shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under this Section 4.20 by virtue thereof.


 


ARTICLE FIVE


 


SUCCESSOR CORPORATION


 


SECTION 5.01.                                                         Limitations on Mergers, Consolidations, Etc.


 


The
Issuer shall not, directly or indirectly, in a single transaction or a series
of related transactions, (a) consolidate or merge with or into another Person
(other than a merger that satisfies the requirements of clause (1) below with a
Wholly-Owned Restricted Subsidiary solely for the purpose of changing the
Issuer’s jurisdiction of incorporation to another State of the United States),
or sell, lease, transfer, convey or otherwise dispose of or assign all or
substantially all of the assets of the Issuer or the Issuer and the Restricted
Subsidiaries (taken as a whole) or (b) adopt a Plan of Liquidation unless, in
either case:


 


(1)                                  either:


 


(a)                                  the Issuer will be the surviving or
continuing Person; or


 


(b)                                 the Person formed by or surviving such
consolidation or merger or to which such sale, lease, conveyance or other
disposition shall be made (or, in the case of a Plan of Liquidation, any Person
to which assets are transferred) (collectively, the “Successor”) is a
corporation or limited liability company organized and existing under the laws
of any State of the United States of America or the District of Columbia, and
the Successor expressly assumes, by supplemental indenture in form and
substance satisfactory to the Trustee, all of the obligations of the Issuer
under the Notes, this Indenture and the Registration Rights Agreement; provided that at any time the Successor is
a limited liability company, such Successor shall organize a wholly-owned
subsidiary in the form of a corporation organized and existing under the laws
of any State of the United States of America or the District of Columbia, and
shall cause such corporation to expressly assume, as a party to the supplemental
indenture referenced above, as a co-obligor, each of such Successor’s
obligations under this Indenture, the Notes and the Registration Rights
Agreement;


 


(2)                                  immediately prior to and immediately after
giving effect to such transaction and the assumption of the obligations as set
forth in clause (1)(b) above and the incurrence


 


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of
any Indebtedness to be incurred in connection therewith, no Default shall have
occurred and be continuing; and


 


(3)                                  immediately after and giving effect to such
transaction and the assumption of the obligations set forth in clause
(1)(b) above and the incurrence of any Indebtedness to be incurred in
connection therewith, and the use of any net proceeds therefrom on a pro forma
basis, (a) the Consolidated Net Worth of the Issuer or the Successor, as
the case may be, would be at least equal to the Consolidated Net Worth of the
Issuer immediately prior to such transaction and (b) the Issuer or the
Successor, as the case may be, could incur $1.00 of additional Indebtedness
pursuant to the Ratio Exception.


 


For
purposes of this Section 5.01, any Indebtedness of the Successor which was not
Indebtedness of the Issuer immediately prior to the transaction shall be deemed
to have been incurred in connection with such transaction.


 


Except
as provided under Section 10.05, no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person) another
Person, whether or not affiliated with such Guarantor, unless:


 


(1)                                  either:


 


(a)                                  such Guarantor will be the surviving or
continuing Person; or


 


(b)                                 the Person formed by or surviving any such
consolidation or merger assumes, by supplemental indenture in form and
substance satisfactory to the Trustee, all of the obligations of such Guarantor
under the Note Guarantee of such Guarantor, this Indenture and the Registration
Rights Agreement; and


 


(2)                                  immediately after giving effect to such
transaction, no Default shall have occurred and be continuing.


 


For
purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the assets of one or more Restricted Subsidiaries, the
Equity Interests of which constitute all or substantially all of the assets of
the Issuer, will be deemed to be the transfer of all or substantially all of
the assets of the Issuer.


 


Upon
any consolidation, combination or merger of the Issuer or a Guarantor, or any
transfer of all or substantially all of the assets of the Issuer in accordance
with the foregoing, in which the Issuer or such Guarantor is not the continuing
obligor under the Notes or its Note Guarantee, the surviving entity formed by
such consolidation or into which the Issuer or such Guarantor is merged or to
which the conveyance, lease or transfer is made will succeed to, and be
substituted for, and may exercise every right and power of, the Issuer or such
Guarantor under


 


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this
Indenture, the Notes and the Note Guarantees with the same effect as if such
surviving entity had been named therein as the Issuer or such Guarantor and,
except in the case of a conveyance, transfer or lease, the Issuer or such
Guarantor, as the case may be, will be released from the obligation to pay the
principal of and interest on the Notes or in respect of its Note Guarantee, as
the case may be, and all of the Issuer’s or such Guarantor’s other obligations
and covenants under the Notes, this Indenture and its Note Guarantee, if
applicable.


 


Notwithstanding
the foregoing, any Restricted Subsidiary may consolidate, combine or merge into
the Issuer or with or into another Restricted Subsidiary (including as a result
of acquisitions or transfers of Equity Interests).


 


SECTION 5.02.                                                         Successor Person Substituted.


 


Upon
any consolidation or merger, or any transfer of all or substantially all of the
assets of the Issuer or any Restricted Subsidiary in accordance with Section
5.01, the successor entity formed by such consolidation or into which the
Issuer is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer or such
Restricted Subsidiary under this Indenture with the same effect as if such
successor entity had been named as the Issuer or such Restricted Subsidiary
herein, and thereafter the predecessor entity shall be relieved of all
obligations and covenants under this Indenture and the Notes.


 


ARTICLE SIX


 


DEFAULTS AND REMEDIES


 


SECTION 6.01.                                                         Events of Default.


 


Each
of the following is an “Event of Default”:


 


(1)                                  failure by the Issuer to pay interest on any
of the Notes when it becomes due and payable and the continuance of any such
failure for 30 days (whether or not such payment is prohibited by the
subordination provisions of this Indenture);


 


(2)                                  failure by the Issuer to pay the principal on
any of the Notes when it becomes due and payable, whether at stated maturity,
upon redemption, upon purchase, upon acceleration or otherwise (whether or not
such payment is prohibited by the subordination provisions of this Indenture);


 


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(3)                                  failure by the Issuer to comply with Section
5.01, or in respect of its obligations to make a Change of Control Offer
(whether or not any related payment is prohibited by the subordination
provisions of this Indenture);


 


(4)                                  failure by the Issuer to comply with any
other agreement or covenant in this Indenture and continuance of this failure
for 60 days after notice of the failure has been given to the Issuer by the
Trustee or by the Holders of at least 25% of the aggregate principal amount of
the Notes then outstanding;


 


(5)                                  default under any mortgage, indenture or
other instrument or agreement under which there may be issued or by which there
may be secured or evidenced Indebtedness (other than Non-Recourse Indebtedness
to the extent such default is not due to the default by the Issuer or any
Restricted Subsidiary under any other type of Indebtedness) of the Issuer or
any Restricted Subsidiary, whether such Indebtedness now exists or is incurred
after the Issue Date, which default:


 


(a)                                  is caused by a failure to pay when due
principal on such Indebtedness within the applicable express grace period,


 


(b)                                 results in the acceleration of such
Indebtedness prior to its express final maturity or


 


(c)                                  results in the commencement of judicial
proceedings to foreclose upon, or to exercise remedies under applicable law or
applicable security documents to take ownership of, the assets securing such
Indebtedness, and


 


in
each case, the principal amount of such Indebtedness, together with any other
Indebtedness with respect to which an event described in clause (a), (b) or (c)
has occurred and is continuing, aggregates $15.0 million or more;


 


(6)                                  one or more judgments or orders that exceed
$15.0 million in the aggregate (net of amounts covered by insurance or bonded)
for the payment of money have been entered by a court or courts of competent
jurisdiction against the Issuer or any Restricted Subsidiary and such judgment
or judgments have not been satisfied, stayed, annulled or rescinded within 60
days of such judgment being entered;


 


(7)                                  the Issuer or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:


 


(a)                                  commences a voluntary case,


 


(b)                                 consents to the entry of an order for
relief against it in an involuntary case,


 


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(c)                                  consents to the appointment of a
Custodian of it or for all or substantially all of its assets, or


 


(d)                                 makes a general assignment for the
benefit of its creditors;


 


(8)                                  a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:


 


(a)                                  is for relief against the Issuer or any
Significant Subsidiary as debtor in an involuntary case,


 


(b)                                 appoints a Custodian of the Issuer or any
Significant Subsidiary or a Custodian for all or substantially all of the
assets of the Issuer or any Significant Subsidiary, or


 


(c)                                  orders the liquidation of the Issuer or
any Significant Subsidiary,


 


and
the order or decree remains unstayed and in effect for 60 days; or


 


(9)                                  any Note Guarantee of any Significant
Subsidiary ceases to be in full force and effect (other than in accordance with
the terms of such Note Guarantee and this Indenture) or is declared null and
void and unenforceable or found to be invalid or any Guarantor denies its
liability under its Note Guarantee (other than by reason of release of a
Guarantor from its Note Guarantee in accordance with the terms of this
Indenture and the Note Guarantee).


 


Subject
to Sections 7.01 and 7.02, the Trustee shall not be charged with knowledge of
any Default, Event of Default, Change of Control or Asset Sale or the
requirement for payment of Liquidated Damages unless written notice thereof
shall have been given to a Responsible Officer at the Corporate Trust Office of
the Trustee by the Issuer or any other Person.


 


SECTION 6.02.                                                         Acceleration.


 


If
an Event of Default (other than an Event of Default specified in clause
(7) or (8) of Section 6.01 with respect to the Issuer), shall have
occurred and be continuing, the Trustee, by written notice to the Issuer, or
the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding by written notice to the Issuer and the Trustee, may declare all
amounts owing under the Notes to be due and payable immediately. Upon such
declaration of acceleration, the aggregate principal of and accrued and unpaid
interest on the outstanding Notes shall immediately become due and payable; provided, however,
that after such acceleration, but before a judgment or decree based on
acceleration, the Holders of a majority in aggregate principal amount of such
outstanding Notes may rescind and annul such acceleration if all Events of Default,
other than the nonpayment of accelerated principal and interest, have been
cured or


 


73

















 


waived
as provided in this Indenture. If an Event of Default specified in clause (7)
or (8) of Section 6.01 with respect to the Issuer occurs, all outstanding Notes
shall become due and payable without any further action or notice.


 


SECTION 6.03.                                                         Other Remedies.


 


If
an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, or premium, if any, and interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture and may take any
necessary action requested of it as Trustee to settle, compromise, adjust or
otherwise conclude any proceedings to which it is a party.


 


The
Trustee may maintain a proceeding even if it does not possess any of the Notes
or does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative. Any costs associated with
actions taken by the Trustee under this Section 6.03 shall be reimbursed
to the Trustee by the Issuer.


 


SECTION 6.04.                                                         Waiver of Past Defaults and Events of Default.


 


Subject
to Sections 6.02, 6.08 and 8.02, the Holders of a majority in aggregate
principal amount of the notes then outstanding have the right to waive any
existing Default or compliance with any provision of this Indenture or the
Notes. Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.


 


SECTION 6.05.                                                         Control by Majority.


 


The
Holders of a majority in aggregate principal amount of the Notes then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee by this Indenture. The Trustee, however, may refuse to
follow any direction that conflicts with law or this Indenture or that the
Trustee determines may be unduly prejudicial to the rights of another Holder
not taking part in such direction, and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken or if the
Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed may result in costs and expenses of the Trustee for
which it has no source of payment or recovery or involve it in personal
liability; provided that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.


 


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SECTION 6.06.                   Limitation on Suits.


 


No
Holder will have any right to institute any proceeding with respect to this
Indenture or for any remedy thereunder, unless the Trustee:


 


(1)                                  has failed to act for a period of 60 days
after receiving written notice of a continuing Event of Default by such Holder
and a request to act by Holders of at least 25% in aggregate principal amount
of Notes outstanding;


 


(2)                                  has been offered indemnity satisfactory to it
in its reasonable judgment; and


 


(3)                                  has not received from the Holders of a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request.


 


However,
such limitations do not apply to a suit instituted by a Holder of any Note for
enforcement of payment of the principal of or interest on such Note on or after
the due date therefor (after giving effect to the grace period specified in
clause (1) of Section 6.01).


 


SECTION 6.07.                   No Personal Liability of Directors, Officers,
Employees and

Stockholders.


 


No
director, officer, employee, incorporator or stockholder of the Issuer will
have any liability for any obligations of the Issuer under the Notes or this
Indenture or of any Guarantor under its Note Guarantee or this Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes and the Note Guarantees.


 


SECTION 6.08.                   Rights of Holders To Receive Payment.


 


Notwithstanding
any other provision of this Indenture, the right of any Holder of a Note to
receive payment of principal of, or premium, if any, and interest of the Note
(including Additional Interest) on or after the respective due dates expressed
in the Note, or to bring suit for the enforcement of any such payment on or
after such respective dates, is absolute and unconditional and shall not be
impaired or affected without the consent of the Holder.


 


SECTION 6.09.                   Collection Suit by Trustee.


 


If
an Event of Default in payment of principal, premium or interest specified in
Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Issuer
or any Guarantor (or any other obligor on the Notes) for the whole amount of
unpaid principal and accrued interest remaining unpaid,


 


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together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate set forth in the Notes.


 


SECTION 6.10.                                                         Trustee May File Proofs of Claim.


 


The
Trustee may file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee and the
Holders allowed in any judicial proceedings relative to the Issuer or any
Guarantor (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same
after deduction of its charges and expenses to the extent that any such charges
and expenses are not paid out of the estate in any such proceedings and any
custodian in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07.


 


Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan or
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceedings.


 


SECTION 6.11.                                                         Priorities.


 


If
the Trustee collects any money pursuant to this Article Six, it shall,
subject to Section 10.03 and Article Eleven, pay out the money in the following
order:


 


FIRST:  to the
Trustee for amounts due under Section 7.07;


 


SECOND:  to
Holders for amounts due and unpaid on the Notes for principal, premium, if any,
and interest (including Additional Interest, if any) as to each, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes; and


 


THIRD:  to the
Issuer or, to the extent the Trustee collects any amount from any Guarantor, to
such Guarantor.


 


The
Trustee may fix a record date and payment date for any payment to Holders
pursuant to this Section 6.11.


 


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SECTION 6.12.                                                         Undertaking for Costs.


 


In
any suit for the enforcement of any right or remedy under this Indenture or in
any suit against the Trustee for any action taken or omitted by it as Trustee,
a court in its discretion may require the filing by any party litigant in the
suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys’ fees,
against any party litigant in the suit, having due regard to the merits and
good faith of the claims or defenses made by the party litigant. This Section
6.12 does not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.08 or a suit by Holders of more than 10% in principal amount of the
Notes then outstanding.


 


SECTION 6.13.                                                         Restoration of Rights and Remedies.


 


If
the Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every case, subject to any determination in such
proceeding, the Issuer, the Guarantors, the Trustee and the Holders shall be
restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.


 


ARTICLE SEVEN


 


TRUSTEE


 


SECTION 7.01.                                                         Duties of Trustee.


 


(a)                                  If an Event of Default actually known to a
Responsible Officer of the Trustee has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the same circumstances in the conduct of his or her
own affairs.


 


(b)                                 Except during the continuance of an Event of
Default:


 


(1)                                  The Trustee need perform only those duties
that are specifically set forth in this Indenture and no others.


 


(2)                                  In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements


 


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of
this Indenture but, in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall be under a duty to examine the same to determine whether or
not they conform on their face to the requirements of this Indenture (but need
not confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).


 


(c)                                  The Trustee may not be relieved from
liability for its own negligent action, its own negligent failure to act, or
its own willful misconduct, except that:


 


(1)                                  This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.


 


(2)                                  The Trustee shall not be liable for any error
of judgment made in good faith, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.


 


(3)                                  The Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to the terms hereof.


 


(4)                                  No provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its rights, powers or duties if it shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity satisfactory to it against such risk or liability is not reasonably
assured to it.


 


(d)                                 Whether or not therein expressly so provided,
paragraphs (a), (b), (c) and (e) of this Section 7.01 shall govern every
provision of this Indenture that in any way relates to the Trustee.


 


(e)                                  The Trustee may refuse to perform any duty or
exercise any right or power unless it receives indemnity satisfactory to it in
its sole discretion against any loss, liability, expense or fee.


 


(f)                                    The Trustee shall not be liable for interest
on any money received by it except as the Trustee may agree in writing with the
Issuer or any Guarantor. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by the law.


 


(g)                                 Every provision of this Indenture relating to
the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section 7.01 and to the
provision of the TIA.


 


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SECTION 7.02.                                                         Rights of Trustee.


 


Subject
to Section 7.01:


 


(1)                                  The Trustee may rely on any document
reasonably believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.


 


(2)                                  Before the Trustee acts or refrains from
acting, it may require an Officers’ Certificate or an Opinion of Counsel, or
both, which shall conform to the provisions of Section 12.05. The Trustee shall
be protected and shall not be liable for any action it takes or omits to take
in good faith in reliance on such certificate or opinion.


 


(3)                                  The Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or negligence of any
agent appointed by it with due care.


 


(4)                                  The Trustee shall not be liable for any
action it takes or omits to take in good faith which it reasonably believes to
be authorized or within its rights or powers; provided
that the Trustee’s conduct does not constitute negligence or willful
misconduct.


 


(5)                                  The Trustee may consult with counsel of its
selection, and the advice or opinion of such counsel as to matters of law shall
be full and complete authorization and protection from liability in respect of
any action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.


 


(6)                                  The Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Section 6.01(1) or 6.01(2) or (ii) any Event of Default
of which the Trustee shall have received written notification or otherwise
obtained actual knowledge.


 


(7)                                  The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity satisfactory to it against the cost, expenses
and liabilities which may be incurred therein or thereby.


 


(8)                                  The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate
(including any Officers’ Certificate), statement, instrument, opinion
(including any Opinion of Counsel), notice, request, direction, consent, order,
bond, debenture, note, other evidence of Indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled, upon reasonable notice to the Issuer, 


 


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to
examine the books, records, and premises of the Issuer, personally or by agent
or attorney at the sole cost of the investigation. Except with respect to
Sections 4.01, 4.02 (subject to paragraph 11 below) and 4.04, the Trustee shall
have no duty to inquire as to the performance of the Company’s covenants set
forth herein.


 


(9)                                  The Trustee shall not be required to give any
bond or surety in respect of the performance of its powers and duties
hereunder.


 


(10)                            The permissive rights of the Trustee to do
things enumerated in this Indenture shall not be construed as duties hereunder.


 


(11)                            The rights, privileges, protections, immunities
and benefits given to the Trustee, including, without limitation, its right to
be indemnified, are extended to, and shall be enforceable by, the Trustee in
each of its capacities hereunder, and to each agent, custodian and other Person
employed to act hereunder.


 


(12)                            Delivery of reports, information and
documents to the Trustee under Section 4.02 is for informational purposes only
and the Trustee’s receipt of the foregoing shall not constitute constructive
notice of any information contained therein, including the Issuer’s compliance
with any of its covenants hereunder (as which the Trustee is entitled to rely
exclusively on the Officers’ Certificate).


 


SECTION 7.03.                                                         Individual Rights of Trustee.


 


The
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may make loans to, accept deposits from, perform services for or
otherwise deal with the either of the Issuer or any Guarantor, or any
Affiliates thereof, with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. The Trustee, however, shall be subject
to Sections 7.10 and 7.11.


 


SECTION 7.04.                                                         Trustee’s Disclaimer.


 


The
Trustee shall not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Notes or any Guarantee, it shall
not be accountable for the Issuer’s or any Guarantor’s use of the proceeds from
the sale of Notes or any money paid to the Issuer or any Guarantor pursuant to
the terms of this Indenture and it shall not be responsible for any statement
in the Notes, Guarantee or this Indenture other than its certificate of
authentication.


 


SECTION 7.05.                                                         Notice of Defaults.


 


The
Trustee shall, within 30 days after the occurrence of any Default with respect
to the Notes, give the Holders notice of all uncured Defaults thereunder known
to it; provided,


 


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however, that, except in the case of an Event of Default in payment with
respect to the Notes or a Default in complying with Section 5.01, the
Trustee shall be protected in withholding such notice if and so long as a
committee of its Responsible Officers in good faith determines that the
withholding of such notice is not opposed to the interest of the Holders.


 


SECTION 7.06.                                                         Reports by Trustee to Holders.


 


If required by TIA § 313(a), within 60 days
after June 15 of any year, commencing June 15, 2006 the Trustee shall
mail to each Holder a brief report dated as of such June 15 that complies
with TIA § 313(a). The Trustee also shall comply with TIA § 313(b)(2).
The Trustee shall also transmit by mail all reports as required by TIA
§ 313(c) and TIA § 313(d).


 


Reports
pursuant to this Section 7.06 shall be transmitted by mail:


 


(1)                                  to all Holders of Notes, as the names and
addresses of such Holders appear on the Registrar’s books; and


 


(2)                                  to such Holders of Notes as have, within the
two years preceding such transmission, filed their names and addresses with the
Trustee for that purpose.


 


A
copy of each report at the time of its mailing to Holders shall be filed with
the SEC and each stock exchange on which the Notes are listed. The Issuer shall
promptly notify the Trustee when the Notes are listed on any stock exchange and
of any delisting thereof.


 


SECTION 7.07.                                                         Compensation and Indemnity.


 


The
Issuer and the Guarantors shall pay to the Trustee and Agents from time to time
reasonable compensation for its services hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust). The Issuer and the Guarantors shall reimburse the
Trustee and Agents upon request for all reasonable out-of-pocket disbursements,
expenses and advances incurred or made by it in connection with its duties
under this Indenture, including the reasonable compensation, disbursements and
expenses of the Trustee’s agents and counsel.


 


The
Issuer and the Guarantors shall indemnify each of the Trustee and any
predecessor Trustee for, and hold each of them harmless against, any and all
loss, damage, claim, liability or expense, including without limitation taxes
(other than taxes based on the income of the Trustee or such Agent) and
reasonable attorneys’ fees and expenses incurred by each of them in connection
with the acceptance or performance of its duties under this Indenture including
the reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder (including, without limitation, settlement costs). The
Trustee or Agent shall notify the Issuer and the Guarantors in writing promptly
of any claim asserted against the Trustee or Agent for which it may seek indemnity.



 


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However,
the failure by the Trustee or Agent to so notify the Issuer and the Guarantors
shall not relieve the Issuer and Guarantors of their obligations hereunder
except to the extent the Issuer and the Guarantors are prejudiced thereby.


 


Notwithstanding
the foregoing, the Issuer and the Guarantors need not reimburse the Trustee for
any expense or indemnify it against any loss or liability incurred by the
Trustee through its negligence, bad faith or willful misconduct. To secure the
payment obligations of the Issuer and the Guarantors in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee except such money or property held in trust to pay
principal of and interest on particular Notes. The obligations of the Issuer
and the Guarantors under this Section 7.07 to compensate and indemnify the
Trustee, Agents and each predecessor Trustee and to pay or reimburse the
Trustee, Agents and each predecessor Trustee for expenses, disbursements and
advances shall survive the resignation or removal of the Trustee and the
satisfaction, discharge or other termination of this Indenture, including any
termination or rejection hereof under any Bankruptcy Law.


 


When
the Trustee incurs expenses or renders services after an Event of Default
specified in Section 6.01(7) or (8) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.


 


For
purposes of this Section 7.07, the term “Trustee” shall include any trustee
appointed pursuant to this Article Seven.


 


SECTION 7.08.                                                         Replacement of Trustee.


 


The
Trustee may resign by so notifying the Issuer and the Guarantors in writing. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by notifying the Issuer and the removed Trustee in writing and may
appoint a successor Trustee with the Issuer’s written consent, which consent
shall not be unreasonably withheld. The Issuer may remove the Trustee at its
election if:


 


(1)                                  the Trustee fails to comply with Section
7.10;


 


(2)                                  the Trustee is adjudged a bankrupt or an
insolvent;


 


(3)                                  a receiver or other public officer takes
charge of the Trustee or its property; or


 


(4)                                  the Trustee otherwise becomes incapable of
acting.


 


If
the Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Issuer shall promptly appoint a successor Trustee.


 


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If
a successor Trustee does not take office within 60 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Issuer or the Holders
of a majority in principal amount of the outstanding Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.


 


If
the Trustee fails to comply with Section 7.10, any Holder may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.


 


A
successor Trustee shall deliver a written acceptance of its appointment to the
retiring Trustee and to the Issuer. Immediately following such delivery, the
retiring Trustee shall, subject to its rights under Section 7.07, transfer all
property held by it as Trustee to the successor Trustee, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuer obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.


 


SECTION 7.09.                                                         Successor Trustee by Consolidation, Merger,
etc.


 


If
the Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust assets to, another entity, subject to
Section 7.10, the successor entity without any further act shall be the
successor Trustee; provided such entity shall be otherwise qualified and
eligible under this Article Seven.


 


SECTION 7.10.                                                         Eligibility; Disqualification.


 


This
Indenture shall always have a Trustee who satisfies the requirements of TIA
§ 310(a)(1) and (2) in every respect. The Trustee (together with its
corporate parent) shall have a combined capital and surplus of at least
$50,000,000 as set forth in the most recent applicable published annual report
of condition. The Trustee shall comply with TIA § 310(b), including the
provision in § 310(b)(1).


 


SECTION 7.11.                                                         Preferential Collection of Claims Against
Issuer.


 


The
Trustee shall comply with TIA § 311(a), excluding any creditor
relationship listed in TIA § 311 (b). A Trustee who has resigned or been
removed shall be subject to TIA § 311(a) to the extent indicated therein.


 


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SECTION 7.12.                                                         Paying Agents.


 


The
Issuer shall cause each Paying Agent other than the Trustee to execute and
deliver to it and the Trustee an instrument in which such agent shall agree
with the Trustee, subject to the provisions of this Section 7.12:


 


(A)                              that it will hold all sums held by it as
agent for the payment of principal of, or premium, if any, or interest on, the
Notes (whether such sums have been paid to it by the Issuer or by any obligor
on the Notes) in trust for the benefit of Holders or the Trustee;


 


(B)                                that it will at any time during the
continuance of any Event of Default, upon written request from the Trustee,
deliver to the Trustee all sums so held in trust by it together with a full
accounting thereof; and


 


(C)                                that it will give the Trustee written notice
within three (3) Business Days of any failure of the Issuer (or by any obligor
on the Notes) in the payment of any installment of the principal of, premium,
if any, or interest on, the Notes when the same shall be due and payable.


 


ARTICLE EIGHT


 


AMENDMENTS, SUPPLEMENTS AND WAIVERS


 


SECTION 8.01.                                                         Without Consent of Holders.


 


The
Issuer and the Trustee may amend, waive or supplement this Indenture, the Note Guarantees
or the Notes without prior notice to or consent of any Holder:


 


(1)                                  to provide for the assumption of the Issuer’s
obligations to the Holders pursuant to Section 5.01;


 


(2)                                  to provide for uncertificated Notes in
addition to or in place of certificated Notes (provided that the uncertificated
Notes are issued in registered form for purposes of Section 163(f) of the Code,
or in a manner such that the uncertificated Securities are described in Section
163(f)(2)(B) of the code).


 


(3)                                  to cure any ambiguity, defect or
inconsistency;


 


(4)                                  to add Guarantees with respect to the Notes,
including any Subsidiary, or to secure the Notes.


 


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(5)                                  to release any Guarantor from any of its
obligations under its Notes Guarantee or this Indenture (to the extent permitted
by this Indenture);


 


(6)                                  to qualify or maintain the qualification of
this Indenture under the TIA;


 


(7)                                  to conform the text of this Indenture or the
Notes to any provision of the “Description of notes” set forth in the Offering
Memorandum;


 


(8)                                  to add to the covenants of the Issuer or a
Guarantor for the benefit of the Holders of the Notes or to surrender any right
or power herein conferred upon the Issuer or a Guarantor with respect to the
Notes.


 


(9)                                  to provide for the issuance of Additional
Notes in accordance with the provisions set forth in this Indenture; or


 


(10)                            to make any other change that does not
materially adversely affect the rights of any Holder hereunder.


 


The
Trustee is hereby authorized to join with the Issuer and the Guarantors in the
execution of any supplemental indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee shall not be obligated to enter
into any such supplemental indenture which adversely affects its own rights,
duties or immunities under this Indenture.


 


SECTION 8.02.                                                         With Consent of Holders.


 


This
Indenture or the Notes may be amended with the consent (which may include
consents obtained in connection with a tender offer or exchange offer for
Notes) of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding, and any existing Default under, or compliance with
any provision of, this Indenture may be waived (other than any continuing
Default in the payment of the principal or interest on the Notes) with the
consent (which may include consents obtained in connection with a tender offer
or exchange offer for Notes) of the Holders of a majority in aggregate
principal amount of the Notes then outstanding; provided that the Issuer and Trustee shall not:


 


(a)                                  without the consent of each Holder
affected, the Issuer and the Trustee may not:


 


(1)                                  change the maturity of any Note;


 


(2)                                  reduce the amount, extend the due date or
otherwise affect the terms of any scheduled payment of interest on or principal
of the Notes;


 


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(3)                                  reduce any premium payable upon optional
redemption of the Notes or change the date on which any Notes are subject to
redemption;


 


(4)                                  make any Note payable in money or
currency other than that stated in the Notes;


 


(5)                                  modify or change any provision of this
Indenture or the related definitions affecting the subordination of the Notes
or any Note Guarantee in a manner that adversely affects the Holders;


 


(6)                                  reduce the percentage of Holders
necessary to consent to an amendment or waiver to this Indenture or the Notes;


 


(7)                                  impair the rights of Holders to receive
payments of principal of or interest on the Notes;


 


(8)                                  release any Guarantor from any of its
obligations under its Note Guarantee or this Indenture, except as permitted by
this Indenture; or


 


(9)                                  make any change in this Section 8.02; or


 


(b)                                 without the consent of Holders of
two-thirds in aggregate principal amount of Notes then outstanding, amend or
otherwise modify the obligation of the Issuer under Section 4.20 or the related
definitions that could adversely affect the rights of any Holder.


 


No
amendment of, or supplement or waiver to, this Indenture shall adversely affect
the rights of any holder of Senior Indebtedness or Guarantor Senior
Indebtedness under the subordination provisions of this Indenture, without the
consent of such holder or, in accordance with the terms of such Senior
Indebtedness or Guarantor Senior Indebtedness, the consent of the agent or
representative of such holder or the requisite holders of such Senior
Indebtedness or Guarantor Senior Indebtedness.


 


After
an amendment, supplement or waiver under this Section 8.02 becomes effective,
the Issuer shall mail to the Holders a notice briefly describing the amendment,
supplement or waiver.


 


Upon
the written request of the Issuer, accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon the receipt
by the Trustee of evidence reasonably satisfactory to the Trustee of the
consent of the Holders as aforesaid and upon receipt by the Trustee of the
documents described in Section 8.06, the Trustee shall join with the Issuer and
the Guarantors in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee’s own rights, duties or immunities
under this Indenture,


 


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in
which case the Trustee may, but shall not be obligated to, enter into such
supplemental indenture.


 


It
shall not be necessary for the consent of the Holders under this Section to
approve the particular form of any proposed amendment, supplement or waiver,
but it shall be sufficient if such consent approves the substance thereof.


 


SECTION 8.03.                                                         Compliance with Trust Indenture Act.


 


Every
amendment or supplement to this Indenture or the Notes shall comply with the
TIA as then in effect.


 


SECTION 8.04.                                                         Revocation and Effect of Consents.


 


Until
an amendment, supplement, waiver or other action becomes effective, a consent
to it by a Holder of a Note is a continuing consent conclusive and binding upon
such Holder and every subsequent Holder of the same Note or portion thereof,
and of any Note issued upon the transfer thereof or in exchange therefor or in
place thereof, even if notation of the consent is not made on any such Note. Any
such Holder or subsequent Holder, however, may revoke the consent as to his
Note or portion of a Note, if the Trustee receives the written notice of
revocation before the date the amendment, supplement, waiver or other action
becomes effective.


 


The
Issuer may, but shall not be obligated to, fix a record date for the purpose of
determining the Holders entitled to consent to any amendment, supplement, or
waiver. If a record date is fixed, then, notwithstanding the preceding
paragraph, those Persons who were Holders at such record date (or their duly
designated proxies), and only such Persons, shall be entitled to consent to
such amendment, supplement, or waiver or to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 120 days after
such record date unless the consent of the requisite number of Holders has been
obtained.


 


After
an amendment, supplement, waiver or other action becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (9) of Section 8.02(a). In that case the amendment, supplement, waiver
or other action shall bind each Holder of a Note who has consented to it and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder’s Note.


 


SECTION 8.05.                                                         Notation on or Exchange of Notes.


 


If
an amendment, supplement, or waiver changes the terms of a Note, the Trustee
(in accordance with the specific written direction of the Issuer) shall request
the Holder of the Note (in accordance with the specific written direction of
the Issuer) to deliver it to the Trustee. In such case, the Trustee shall place
an appropriate notation on the Note about the changed terms


 


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and
return it to the Holder. Alternatively, if the Issuer or the Trustee so
determines, the Issuer in exchange for the Note shall issue, the Guarantors
shall endorse, and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.


 


SECTION 8.06.                                                         Trustee To Sign Amendments, etc.


 


The
Trustee shall sign any amendment, supplement or waiver authorized pursuant to
this Article Eight if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee. If
it does, the Trustee may, but need not, sign it. In signing or refusing to sign
such amendment, supplement or waiver the Trustee shall be entitled to receive and,
subject to Section 7.01, shall be fully protected in relying upon an Officers’
Certificate and an Opinion of Counsel stating, in addition to the matters
required by Section 12.04, that such amendment, supplement or waiver is
authorized or permitted by this Indenture and all conditions precedent required
hereunder to such amendment, supplement or waiver have been satisfied.


 


ARTICLE NINE


 


DISCHARGE OF INDENTURE; DEFEASANCE


 


SECTION 9.01.                                                         Discharge of Indenture.


 


The
Issuer may terminate its obligations and the obligations of the Guarantors
under the Notes, the Guarantees and this Indenture, except the obligations
referred to in the last paragraph of this Section 9.01, if


 


(1)                                  all the Notes that have been authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid and Notes for whose payment money has been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the Issuer
or discharged from this trust) have been delivered to the Trustee for
cancellation, or


 


(2)                                  (a) 
all Notes not delivered to the Trustee for cancellation otherwise have
become due and payable or have been called for redemption pursuant to paragraph
6 of the Notes, and the Issuer has irrevocably deposited or caused to be
deposited with the Trustee trust funds in trust in an amount of money
sufficient to pay and discharge the entire Indebtedness (including all
principal and accrued interest) on the Notes not theretofore delivered to the
Trustee for cancellation,


 


(b)                                 the Issuer has paid all sums payable by it
under this Indenture,


 


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(c)                                  the Issuer has delivered irrevocable
instructions to the Trustee to apply the deposited money toward the payment of
the Notes at maturity or on the date of redemption, as the case may be, and


 


(d)                                 the Trustee, for the benefit of the Holders,
has a valid, perfected, exclusive security interest in this trust.


 


In
addition, the Issuer must deliver an Officers’ Certificate and an Opinion of Counsel
(as to legal matters) stating that all conditions precedent to satisfaction and
discharge have been complied with.


 


After
such delivery, the Trustee shall acknowledge in writing the discharge of the
Issuer’s and the Guarantors’ obligations under the Notes, the Guarantees and
this Indenture except for those surviving obligations specified below.


 


Notwithstanding
the satisfaction and discharge of this Indenture, the obligations of the Issuer
in Sections 7.07, 9.05 and 9.06 shall survive.


 


SECTION 9.02.                                                         Legal Defeasance.


 


The
Issuer may at its option, by Board Resolution of the Board of Directors of the
Issuer, be discharged from its obligations with respect to the Notes and the
Guarantors discharged from their obligations under the Guarantees on the date
the conditions set forth in Section 9.04 are satisfied (hereinafter, “Legal
Defeasance”). For this purpose, such Legal Defeasance means that the Issuer
shall be deemed to have paid and discharged the entire indebtedness represented
by the Notes and to have satisfied all its other obligations under such Notes
and this Indenture insofar as such Notes are concerned (and the Trustee, at the
expense of the Issuer, shall, subject to Section 9.06, execute instruments in
form and substance reasonably satisfactory to the Trustee and Issuer
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: 
(A) the rights of Holders of outstanding Notes to receive solely
from the trust funds described in Section 9.04 and as more fully set forth in
such Section, payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, (B) the Issuer’s
obligations with respect to such Notes under Sections 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.11 and 4.19, (C) the rights, powers, trusts, duties,
and immunities of the Trustee hereunder (including claims of, or payments to,
the Trustee under or pursuant to Section 7.07) and (D) this Article Nine. Subject
to compliance with this Article Nine, the Issuer may exercise its option
under this Section 9.02 with respect to the Notes notwithstanding the prior
exercise of its option under Section 9.03 with respect to the Notes.


 


SECTION 9.03.                                                         Covenant Defeasance.


 


At
the option of the Issuer, pursuant to a Board Resolution of the Board of
Directors of the Issuer, (x) the Issuer and the Guarantors shall be
released from their respective obligations


 


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under
Sections 4.02 (except for obligations mandated by the TIA), 4.05 through
4.17, inclusive, and 4.20 and clause (3) of the first paragraph of
Section 5.01 and (y) Section 6.01 (5) and (6) shall no longer apply
with respect to the outstanding Notes on and after the date the conditions set
forth in Section 9.04 are satisfied (hereinafter, “Covenant Defeasance”).
For this purpose, such Covenant Defeasance means that the Issuer and the
Guarantors may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such specified Section or
portion thereof, whether directly or indirectly by reason of any reference
elsewhere herein to any such specified Section or portion thereof or by reason
of any reference in any such specified Section or portion thereof to any other
provision herein or in any other document, but the remainder of this Indenture
and the Notes shall be unaffected thereby.


 


SECTION 9.04.                                                         Conditions to Legal Defeasance or Covenant
Defeasance.


 


The
following shall be the conditions to application of Section 9.02 or Section
9.03 to the outstanding Notes:


 


(1)                                  the Issuer must irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders, U.S. legal tender, U.S.
Government Obligations or a combination thereof, in such amounts as will be
sufficient (without reinvestment) in the opinion of a nationally recognized
firm of independent public accountants selected by the Issuer, to pay the
principal of and interest on the Notes on the stated date for payment or on the
redemption date of the principal or installment of principal of or interest on
the Notes,


 


(2)                                  in the case of Legal Defeasance, the Issuer
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that:


 


(a)                                  the Issuer has received from, or there
has been published by the Internal Revenue Service, a ruling, or


 


(b)                                 since the date hereof, there has been a
change in the applicable U.S. federal income tax law,


 


in
either case to the effect that, and based thereon this Opinion of Counsel shall
confirm that, the Holders will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of the Legal Defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had not
occurred,


 


(3)                                  in the case of Covenant Defeasance, the
Issuer shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders will
not recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to U.S.


 


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federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if the Covenant Defeasance had not occurred,


 


(4)                                  no
Default shall have occurred and be continuing on the date of such deposit
(other than a Default resulting from the borrowing of funds to be applied to
such deposit and the grant of any Lien securing such borrowing),


 


(5)                                  the Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under
this Indenture or any other material agreement or instrument to which the
Issuer or any of its Subsidiaries is a party or by which the Issuer or any of
its Subsidiaries is bound,


 


(6)                                  the Issuer shall have delivered to the
Trustee an Officers’ Certificate stating that the deposit was not made by it
with the intent of preferring the Holders over any other of its creditors or
with the intent of defeating, hindering, delaying or defrauding any other of
its creditors or others, and


 


(7)                                  the Issuer shall have delivered to the
Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that
the conditions provided for in, in the case of the Officers’ Certificate,
clauses (1) through (6) and, in the case of the Opinion of Counsel, clauses (2)
and/or (3) and (5) of this paragraph have been complied with.


 


If
the funds deposited with the Trustee to effect Covenant Defeasance are
insufficient to pay the principal of and interest on the Notes when due, then
the Issuer’s obligations and the obligations of Guarantors under this Indenture
will be revived and no such defeasance will be deemed to have occurred.


 


SECTION 9.05.                   Deposited Money and U.S. Government
Obligations To Be Held

in Trust; Other Miscellaneous Provisions.


 


All
money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee pursuant to Section 9.04 in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent, to the Holders of such
Notes, of all sums due and to become due thereon in respect of principal,
premium, if any, and accrued interest, but such money need not be segregated
from other funds except to the extent required by law.


 


The
Issuer and the Guarantors shall (on a joint and several basis) pay and
indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to Section
9.04 or the principal, premium, if any, and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of the outstanding Notes.


 


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Anything
in this Article Nine to the contrary notwithstanding, the Trustee shall
deliver or pay to the Issuer from time to time any money or U.S. Government
Obligations held by it as provided in Section 9.04 which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.


 


SECTION 9.06.                                                         Reinstatement.


 


If
the Trustee or Paying Agent is unable to apply any money or U.S. Government
Obligations in accordance with Section 9.01, 9.02 or 9.03 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Issuer’s and each Guarantor’s obligations under this
Indenture, the Notes and the Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to this Article Nine until such
time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 9.01; provided that if the Issuer or the
Guarantors have made any payment of principal of, premium, if any, or accrued
interest on any Notes because of the reinstatement of their obligations, the
Issuer or the Guarantors, as the case may be, shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.


 


SECTION 9.07.                                                         Moneys Held by Paying Agent.


 


In
connection with the satisfaction and discharge of this Indenture, all moneys
then held by any Paying Agent under the provisions of this Indenture shall,
upon written demand of the Issuer, be paid to the Trustee, or if sufficient
moneys have been deposited pursuant to Section 9.04, to the Issuer (or, if such
moneys had been deposited by the Guarantors, to such Guarantors), and thereupon
such Paying Agent shall be released from all further liability with respect to
such moneys.


 


SECTION 9.08.                                                         Moneys Held by Trustee.


 


Subject
to applicable law, any moneys deposited with the Trustee or any Paying Agent or
then held by the Issuer or the Guarantors in trust for the payment of the
principal of, or premium, if any, or interest on any Note that are not applied
but remain unclaimed by the Holder of such Note for two years after the date
upon which the principal of, or premium, if any, or interest on such Note shall
have respectively become due and payable shall be repaid to the Issuer (or, if
appropriate, the Guarantors), or if such moneys are then held by the Issuer or
the Guarantors in trust, such moneys shall be released from such trust; and the
Holder of such Note entitled to receive such payment shall thereafter, as an
unsecured general creditor, look only to the Issuer and the Guarantors for the
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided that the Trustee or any such


 


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Paying
Agent, before being required to make any such repayment, may, at the expense of
the Issuer and the Guarantors, either mail to each Holder affected, at the
address shown in the register of the Notes maintained by the Registrar pursuant
to Section 2.03, or cause to be published once a week for two successive
weeks, in a newspaper published in the English language, customarily published
each Business Day and of general circulation in the City of New York, New York,
a notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such mailing or
publication, any unclaimed balance of such moneys then remaining will be repaid
to the Issuer. After payment to the Issuer or the Guarantors or the release of
any money held in trust by the Issuer or any Guarantors, as the case may be,
Holders entitled to the money must look only to the Issuer and the Guarantors
for payment as general creditors unless applicable abandoned property law
designates another Person.


 


ARTICLE TEN


 


GUARANTEE OF NOTES


 


SECTION 10.01.                                                   Guarantee.


 


Subject
to the provisions of this Article Ten, each Guarantor, by execution of
this Indenture, jointly and severally, unconditionally guarantees to each
Holder (i) the due and punctual payment of the principal of and interest
on each Note, when and as the same shall become due and payable, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on the overdue principal of and interest on the Notes, to the extent
lawful, and the due and punctual payment of all other Obligations and due and
punctual performance of all obligations of the Issuer to the Holders or the
Trustee all in accordance with the terms of such Note, this Indenture and the
Registration Rights Agreement, and (ii) in the case of any extension of
time of payment or renewal of any Notes or any of such other Obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, at stated maturity, by acceleration or
otherwise. Each Guarantor, by execution of this Indenture, agrees that its
obligations hereunder shall be absolute and unconditional, irrespective of, and
shall be unaffected by, any invalidity, irregularity or unenforceability of any
such Note or this Indenture, any failure to enforce the provisions of any such
Note, this Indenture or the Registration Rights Agreement, any waiver,
modification or indulgence granted to the Issuer with respect thereto by the
Holder of such Note, or any other circumstances which may otherwise constitute
a legal or equitable discharge of a surety or such Guarantor.


 


Each
Guarantor hereby waives diligence, presentment, demand for payment, filing of
claims with a court in the event of merger or bankruptcy of the Issuer, any
right to require a proceeding first against the Issuer, protest or notice with
respect to any such Note or the Indebtedness evidenced thereby and all demands
whatsoever, and covenants that this Guarantee will not be discharged as to any
such Note except by payment in full of the principal thereof and


 


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interest
thereon. Each Guarantor hereby agrees that, as between such Guarantor, on the
one hand, and the Holders and the Trustee, on the other hand, (i) the
maturity of the Obligations guaranteed hereby may be accelerated as provided in
Article Six for the purposes of this Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (ii) in the event of any declaration of
acceleration of such Obligations as provided in Article Six, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by each Guarantor for the purpose of this Guarantee.


 


SECTION 10.02.                                                   Execution and Delivery of Guarantee.


 


To
further evidence the Guarantee set forth in Section 10.01, each Guarantor
hereby agrees that a notation of such Guarantee, substantially in the form
included in Exhibit G hereto, shall be endorsed on each Note
authenticated and delivered by the Trustee and such Guarantee shall be executed
by either manual or facsimile signature of an Officer or an Officer of a
general partner, as the case may be, of each Guarantor. The validity and
enforceability of any Guarantee shall not be affected by the fact that it is
not affixed to any particular Note.


 


Each
of the Guarantors hereby agrees that its Guarantee set forth in Section 10.01
shall remain in full force and effect notwithstanding any failure to endorse on
each Note a notation of such Guarantee.


 


If
an officer of a Guarantor whose signature is on this Indenture or a Guarantee
no longer holds that office at the time the Trustee authenticates the Note on
which such Guarantee is endorsed or at any time thereafter, such Guarantor’s
Guarantee of such Note shall be valid nevertheless.


 


The
delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of any Guarantee set forth in this
Indenture on behalf of the Guarantor.


 


SECTION 10.03.                                                   Subordination of Note Guarantees.


 


The
obligations of each Guarantor under its Note Guarantee pursuant to this Article
Ten shall be junior and subordinated to the prior payment in full of the
Guarantor Senior Indebtedness of such Guarantor in cash, Cash Equivalents or
other cash equivalents reasonably accept-able to the holders of such Guarantor
Senior Indebtedness of such Guarantor on the same basis as the Notes are junior
and subordinated to Senior Indebtedness of the Issuer. For the purposes of the
foregoing sentence, the Trustee and the Holders shall have the right to receive
and/or retain payments by any of the Guarantors only at such times as they may
receive and/or retain payments in respect of the Notes pursuant to this
Indenture, including Article Eleven.


 


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SECTION 10.04.                                                   Limitation of Guarantee.


 


The
obligations of each Guarantor are limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Guarantor
and after giving effect to any collections from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
this Indenture, result in the obligations of such Guarantor under its Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal
or state law. Each Guarantor that makes a payment or distribution under a
Guarantee shall be entitled to a contribution from each other Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Guarantor.


 


SECTION 10.05.                                                   Release of Guarantor.


 


A
Guarantor shall be released from all of its obligations under its Guarantee if:


 


(i)            all
of the assets of such Guarantor have been sold or otherwise disposed of in a
transaction in compliance with the terms of this Indenture (including Sections
4.09, 4.20 and 5.01);


 


(ii)           all
of the Equity Interests held by the Issuer and the Restricted Subsidiaries of
such Guarantor have been sold or otherwise disposed of in a transaction in
compliance with the terms of this Indenture (including Sections 4.20 and 5.01);


 


(iii)          the
Guarantor is designated an Unrestricted Subsidiary in compliance with the terms
of this Indenture (including Section 4.15);


 


and
in each such case, the Issuer has delivered to the Trustee an Officers’
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with and that such release is authorized and permitted hereunder.


 


The
Trustee shall execute any documents reasonably requested by the Issuer or a
Guarantor in order to evidence the release of such Guarantor from its
obligations under its Guarantee endorsed on the Notes and under this Article
Ten.


 


SECTION 10.06.                                                   Waiver of Subrogation.


 


Each
Guarantor hereby irrevocably waives any claim or other rights which it may now
or hereafter acquire against the Issuer that arise from the existence, payment,
performance or enforcement of such Guarantor’s obligations under its Guarantee
and this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in
any claim or remedy of any Holder of Notes against the Issuer,


 


95

















 


whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including, without limitation, the right to take or receive from
the Issuer, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or Note on account of such claim or other rights. If
any amount shall be paid to any Guarantor in violation of the preceding
sentence and the Notes shall not have been paid in full, such amount shall have
been deemed to have been paid to such Guarantor for the benefit of, and held in
trust for the benefit of, the Holders, and shall forthwith be paid to the
Trustee for the benefit of such Holders to be credited and applied upon the
Notes, whether matured or unmatured, in accordance with the terms of this
Indenture. Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and
that the waiver set forth in this Section 10.06 is knowingly made in
contemplation of such benefits.


 


ARTICLE ELEVEN


 


SUBORDINATION OF NOTES


 


SECTION 11.01.                                                   Agreement to Subordinate.


 


The
Issuer agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Notes is subordinated in right of payment, to the
extent and in the manner provided in this Article Eleven, to the prior payment
in full in cash or Cash Equivalents of all Senior Indebtedness (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of and enforceable
by the holders of Senior Indebtedness, including Senior Indebtedness incurred
after the date of this Indenture.


 


A
distribution may consist of cash, securities or other property, by set-off or
otherwise.


 


SECTION 11.02.                                                   Liquidation; Dissolution; Bankruptcy.


 


(a)           The holders of Senior Indebtedness
shall be entitled to receive payment in full in cash or Cash Equivalents of all
Obligations due in respect of Senior Indebtedness before the Holders of Notes
will be entitled to receive any payment or distribution of any kind or
character with respect to any Obligations on or relating to the Notes (other
than in Permitted Junior Securities) in the event of any distribution to
creditors of the Issuer:


 


(1)           in
a total or partial liquidation, dissolution or winding up of the Issuer;


 


(2)           in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Issuer or its assets;


 


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(3)           in
an assignment for the benefit or creditors; or


 


(4)           in
any marshalling of the Issuer’s assets and liabilities; and


 


(b)           If a payment or distribution is made
to the holders of the Notes that, due to the subordination provisions, should
not have been made to them, such holders are required to hold it in trust for
the holders of the Senior Indebtedness and pay the payment or distribution over
to the holders of the Senior Indebtedness, as their interests may appear.


 


SECTION 11.03.                                                   Default on Designated Senior Indebtedness.


 


(a)           The Issuer may not make any payment
or distribution to the Trustee or any Holder in respect of Obligations with
respect to the Notes and may not acquire from the Trustee or any Holder any
Notes for cash or property (other than (A) Permitted Junior Securities and (B)
payments and other distributions made from any defeasance trust created
pursuant to Section 9.01) until all principal and other Obligations with
respect to the Senior Indebtedness have been paid in full if:


 


(1)           a
default (whether at stated maturity, upon acceleration or otherwise) in the
payment of any principal or other Obligations with respect to Senior
Indebtedness occurs and is continuing beyond any applicable grace period in the
agreement, indenture or other document governing such Senior Indebtedness; or


 


(2)           any
other default, other than a payment default, on Designated Senior Indebtedness
occurs and is continuing that then permits holders of the Designated Senior
Indebtedness to accelerate its maturity and the Trustee receives a notice of
the default (a “Payment Blockage Notice”) from the Representative of
such Designated Senior Indebtedness. If the Trustee receives any such Payment
Blockage Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until at least 360 days shall have elapsed
since the delivery of the immediately prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice unless such default shall have been cured
or waived for a period of not less than 90 consecutive days. Any subsequent
action or any breach of any covenants for a period ending after the date of
delivery of the initial Payment Blockage Notice that in either case would give
rise to a default pursuant to any provisions under which a default previously
existed or was continuing will constitute a new default for this purpose.


 


(b)           The Issuer may and shall resume
payments on and distributions in respect of the Notes and may acquire them upon
the earlier of:


 


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(1)           in
the case of a payment default (whether at stated maturity, upon acceleration or
otherwise), the date upon which all payment defaults are cured or waived, and


 


(2)           in
the case of a default referred to in clause (ii) of Section 11.03(a) hereof,
the earliest of (1) the date on which all such non-payment defaults are cured
or waived, (2) 179 days after the applicable Payment Blockage Notice is
received or (3) the date on which the Trustee receives notice from the
Representative for such Designated Senior Indebtedness rescinding the Payment
Blockage Notice, unless the maturity of any Designated Senior Indebtedness has
been accelerated.


 


In
the event that the Designated Senior Indebtedness is accelerated because of a
default other than a payment default thereunder in accordance with the terms of
such Designated Senior Indebtedness, and such acceleration has not been
rescinded, then the failure to make the payment required arising from such
acceleration shall constitute a payment default.


 


SECTION 11.04.                                                   Acceleration of Securities.


 


If
payment of the Notes is accelerated because of an Event of Default, the Issuer
shall promptly notify the Representative of the Designated Senior Indebtedness
of the acceleration.


 


SECTION 11.05.                                                   When Distribution Must Be Paid Over.


 


In
the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes (except Permitted Junior Securities or
payments and other distributions made from the defeasance trust described under
Article Nine) when the payment is prohibited by Section 11.03, such payment
shall be held by the Trustee or such Holder, in trust for the benefit of, and
shall be paid forthwith over and delivered, upon written request, to, the
holders of Senior Indebtedness as their interests may appear or their
Representative under this Indenture or other agreement (if any) pursuant to
which Senior Indebtedness may have been issued, as their respective interests
may appear, for application to the payment of all Obligations with respect to
Senior Indebtedness remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.


 


With
respect to the holders of Senior Indebtedness, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically
set forth in this Article Eleven, and no implied covenants or obligations with
respect to the holders of Senior Indebtedness shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Indebtedness, and shall not be liable to any such
holders if the Trustee shall pay over or distribute to or on behalf of Holders
or the Issuer or any other Person money or assets to which any holders of
Senior Indebtedness shall be entitled by


 


98

















 


virtue
of this Article Eleven, except if such payment is made as a result of the
willful misconduct or gross negligence of the Trustee.


 


SECTION 11.06.                                                   Notice by the Issuer.


 


The
Issuer shall promptly notify the Trustee and the Paying Agent of any facts
known to the Issuer that would cause a payment of any Obligations with respect
to the Notes to violate this Article Eleven, but failure to give such notice
shall not affect the subordination of the Notes to the Senior Indebtedness as
provided in this Article Eleven.


 


SECTION 11.07.                                                   Subrogation.


 


After
all Senior Indebtedness is paid in full and until the Notes are paid in full,
Holders of Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the
Notes) to the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness to the extent that distributions otherwise
payable to the Holders of Notes have been applied to the payment of Senior
Indebtedness. A distribution made under this Article Eleven to holders of
Senior Indebtedness that otherwise would have been made to Holders of Notes is
not, as between the Issuer and Holders, a payment by the Issuer on the Notes.


 


SECTION 11.08.                                                   Relative Rights.


 


This
Article Eleven defines the relative rights of Holders of Notes and holders of
Senior Indebtedness. Nothing in this Indenture shall:


 


(a)           impair, as between the Issuer and
Holders of Notes, the obligation of the Issuer, which is absolute and
unconditional, to pay principal of and interest on the Notes in accordance with
their terms;


 


(b)           affect the relative rights of Holders
of Notes and creditors of the Issuer other than their rights in relation to
holders of Senior Indebtedness;


 


(c)           prevent the Trustee or any Holder of
Notes from exercising its available remedies upon a Default or Event of
Default, subject to the rights of holders and owners of Senior Indebtedness to
receive distributions and payments otherwise payable to Holders of Notes; or


 


(d)           subordinate in favor of holders of
Senior Indebtedness or otherwise impair the rights of the Trustee under
Section 7.07 hereof.


 


If
the Issuer fails because of this Article Eleven to pay principal of or interest
on a Note on the due date, the failure is still a Default or Event of Default.


 


99

















 


SECTION 11.09.                                                   Subordination May Not Be Impaired by the
Issuer.


 


No
right of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Issuer or any Holder or by the failure of the Issuer or any Holder
to comply with this Indenture.


 


SECTION 11.10.                                                   Distribution or Notice to Representative.


 


Whenever
a distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
Representative.


 


Upon
any payment or distribution of assets of the Issuer referred to in this Article
Eleven, the Trustee and the Holders of Notes shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders of Notes
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Issuer, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Eleven.


 


SECTION 11.11.                                                   Rights of Trustee and Paying Agent.


 


Notwithstanding
the provisions of this Article Eleven or any other provision of this Indenture,
the Trustee shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment or distribution by the Trustee,
and the Trustee and the Paying Agent may continue to make payments on the
Notes, unless the Trustee shall have received at its Corporate Trust Office at
least five Business Days prior to the date of such payment written notice of
facts that would cause the payment of any Obligations with respect to the Notes
to violate this Article Eleven. Only the Issuer or a Representative may give
the notice. Nothing in this Article Eleven shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.


 


The
Trustee in its individual or any other capacity may hold Senior Indebtedness
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.


 


The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness and shall not be liable to any such holders if the Trustee shall
in good faith mistakenly pay over or distribute to Holders of Notes or to the
Issuer or to any other person cash, property or securities to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article Eleven or
otherwise. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants or obligations
as are specifically


 


100

















 


set
forth in this Indenture and no implied covenants or obligations with respect to
holders of Senior Indebtedness shall be read into this Indenture against the
Trustee.


 


SECTION 11.12.                                                   Authorization to Effect Subordination.


 


Each
Holder of Notes, by the Holder’s acceptance thereof, authorizes and directs the
Trustee on such Holder’s behalf to take such action as may be necessary or
appropriate to effectuate the subordination as provided in this Article Eleven,
and appoints the Trustee to act as such Holder’s attorney-in-fact for any and
all such purposes. If the Trustee does not file a proper proof of claim or
proof of debt in the form required in any proceeding referred to in Section
6.10 at least 30 days before the expiration of the time to file such claim, the
Representatives are hereby authorized to file an appropriate claim for and on
behalf of the Holders of the Notes.


 


ARTICLE TWELVE


 


MISCELLANEOUS


 


SECTION 12.01.                                                   Trust Indenture Act Controls.


 


If
any provision of this Indenture limits, qualifies or conflicts with another
provision which is required to be included in this Indenture by the TIA, the
required provision shall control. If any provision of this Indenture modifies
any TIA provision that may be so modified, such TIA provision shall be deemed
to apply to this Indenture as so modified. If any provision of this Indenture
excludes any TIA provision that may be so excluded, such TIA provision shall be
excluded from this Indenture.


 


The
provisions of TIA §§ 310 through 317 that impose duties on any Person
(including the provisions automatically deemed included unless expressly
excluded by this Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.


 


SECTION 12.02.                                                   Notices.


 


Except
for notice or communications to Holders, any notice or communication shall be
given in writing and delivered in person, sent by facsimile, delivered by
commercial courier service or mailed by first-class mail, postage prepaid,
addressed as follows:


 


If to the Issuer or any Guarantor:


 


KIMBALL
HILL, INC.


5999
New Wilke Road


Suite 504


 


101

















 


Rolling
Meadows, IL  60008


 


Attention:  Chief Financial Officer


 


Fax
Number:  (847) 439-0875


 


with, in the case of any notice furnished pursuant
to Article Six, a copy to:


 


KIRKLAND
& ELLIS LLP

200 East Randolph Drive

Chicago, IL  60601


 


Attention:
Michael Timmers, Esq.


 


Fax
Number:  (312) 861-2200


 


If
to the Trustee:


 


U.S.
BANK NATIONAL ASSOCIATION

60 Livingston Avenue

EP-MN-WS3C

St. Paul, MN  55107


 


Attention:  Corporate Trust Services


 


Fax
Number:  (651) 495-8097


 


Such
notices or communications shall be effective when received and shall be
sufficiently given if so given within the time prescribed in this Indenture.


 


The
Issuer, the Guarantors or the Trustee by written notice to the others may
designate additional or different addresses for subsequent notices or
communications.


 


Any
notice or communication mailed to a Holder shall be mailed to him by
first-class mail, postage prepaid, at his address shown on the register kept by
the Registrar.


 


Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders. If a notice or
communication to a Holder is mailed in the manner provided above, it shall be
deemed duly given, whether or not the addressee receives it.


 


In
case by reason of the suspension of regular mail service, or by reason of any
other cause, it shall be impossible to mail any notice as required by this
Indenture, then such


 


102

















 


method
of notification as shall be made with the approval of the Trustee shall
constitute a sufficient mailing of such notice.


 


SECTION 12.03.                                                   Communications by Holders with Other Holders.


 


Holders
may communicate pursuant to TIA § 312(b) with other Holders with respect
to their rights under this Indenture or the Notes. The Issuer, the Guarantors,
the Trustee, the Registrar and anyone else shall have the protection of TIA
§ 312(c).


 


SECTION 12.04.                                                   Certificate and Opinion as to Conditions
Precedent.


 


Upon
any request or application by the Issuer or any Guarantor to the Trustee to
take any action or refrain from taking any action under this Indenture, the
Issuer or such Guarantor shall furnish to the Trustee:


 


(1)           an
Officers’ Certificate in form and substance reasonably satisfactory to the
Trustee (which shall include the statements set forth in Section 12.05) stating
that, in the opinion of the signers, all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with;
and


 


(2)           an
Opinion of Counsel in form and substance reasonably satisfactory to the Trustee
(which shall include the statements set forth in Section 12.05) stating that,
in the opinion of such counsel, all such conditions precedent have been
complied with.


 


SECTION 12.05.                                                   Statements Required in Certificate and
Opinion.


 


Each
certificate and opinion with respect to compliance by or on behalf of the
Issuer or any Guarantor with a condition or covenant provided for in this
Indenture shall include:


 


(1)           a
statement that the Person making such certificate or opinion has read such
covenant or condition;


 


(2)           a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;


 


(3)           a
statement that, in the opinion of such Person, it or he has made such
examination or investigation as is necessary to enable it or him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and


 


(4)           a
statement as to whether or not, in the opinion of such Person, such covenant or
condition has been complied with.


 


103

















 


SECTION 12.06.                                                   Rules by Trustee and Agents.


 


The
Trustee may make reasonable rules for action by or meetings of Holders. The
Registrar and Paying Agent may make reasonable rules for their functions.


 


SECTION 12.07.                                                   Business Days; Legal Holidays.


 


A
“Business Day” is a day that is not a Legal Holiday. A “Legal Holiday”
is a Saturday, a Sunday or other day on which (i) commercial banks in the
City of New York are authorized or required by law to close or (ii) the
New York Stock Exchange is not open for trading. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for
the intervening period.


 


SECTION 12.08.                                                   Governing Law.


 


This Indenture and the Notes shall be governed by and
construed in accordance with the laws of the State of New York, as applied to
contracts made and performed within the State of New York.


 


SECTION 12.09.                                                   No Adverse Interpretation of Other Agreements.


 


This
Indenture may not be used to interpret another indenture, loan, security or
debt agreement of the Issuer or any Subsidiary thereof. No such indenture,
loan, security or debt agreement may be used to interpret this Indenture.


 


SECTION 12.10.                                                   No Recourse Against Others.


 


No
recourse for the payment of the principal of or premium, if any, or interest,
including Additional Interest, on any of the Notes, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Issuer or any Guarantor in this
Indenture or in any supplemental indenture, or in any of the Notes, or because
of the creation of any Indebtedness represented thereby, shall be had against
any stockholder, officer, director or employee, as such, past, present or
future, of the Issuer or of any successor corporation or against the property
or assets of any such stockholder, officer, employee or director, either
directly or through the Issuer or any Guarantor, or any successor corporation
thereof, whether by virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the Notes are solely obligations of the
Issuer and the Guarantors, and that no such personal liability whatever shall
attach to, or is or shall be incurred by, any stockholder, officer, employee or
director of the Issuer or any Guarantor, or any successor corporation thereof,
because of the creation of the indebtedness hereby authorized, or under or by reason
of the obligations, covenants or agreements contained in this Indenture or the
Notes or implied therefrom, and that any and all


 


104

















 


such
personal liability of, and any and all claims against every stockholder,
officer, employee and director, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issuance of the Notes. It is understood that this limitation on recourse is
made expressly for the benefit of any such shareholder, employee, officer or
director and may be enforced by any of them.


 


SECTION 12.11.                                                   Successors.


 


All
agreements of the Issuer and the Guarantors in this Indenture and the Notes
shall bind their respective successors. All agreements of the Trustee, any
additional trustee and any Paying Agents in this Indenture shall bind its
successor.


 


SECTION 12.12.                                                   Multiple Counterparts.


 


The
parties may sign multiple counterparts of this Indenture. Each signed
counterpart shall be deemed an original, but all of them together represent one
and the same agreement.


 


SECTION 12.13.                                                   Table of Contents, Headings, etc.


 


The
table of contents, cross-reference sheet and headings of the Articles and
Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.


 


SECTION 12.14.                                                   Separability.


 


Each
provision of this Indenture shall be considered separable and if for any reason
any provision which is not essential to the effectuation of the basic purpose
of this Indenture or the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.


 


105

















 


IN
WITNESS WHEREOF, the parties have caused this Indenture to be duly executed all
as of the date and year first written above.


 


	
   

  	
  KIMBALL HILL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David K. Hill

  
	
   

  	
   

  	
  Title:

  	
  Chairman, Chief Executive Officer

  and Director

  
					



 


S-1

















 


Guarantors:


 


CACTUS
HILLS, LLC


KIMBALL HILL HOMES AUSTIN INVESTMENTS,

L.L.C.


KIMBALL HILL HOMES AUSTIN OPERATIONS,

L.L.C.


KIMBALL HILL HOMES DALLAS INVESTMENTS,

L.L.C.


KIMBALL HILL HOMES DALLAS OPERATIONS,

L.L.C.


KIMBALL HILL HOMES HOUSTON INVESTMENTS,

L.L.C.


KIMBALL HILL HOMES HOUSTON OPERATIONS,

L.L.C.


KIMBALL HILL TEXAS INVESTMENT COMPANY,

L.L.C.


 


	
   

  	
  By:

  	
  /s/
  David K. Hill

  	
   

  
	
   

  	
  Name:

  	
  David
  K. Hill

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EAST
  LAKE PARK, INC.

  
	
   

  	
  KIMBALL
  HILL FAR EAST DETROIT, LLC

  
	
   

  	
  KIMBALL
  HILL STATEWAY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President and Treasurer

  
						



 


S-2

















 


KH
FINANCIAL HOLDING COMPANY


KHH
TEXAS TRADING COMPANY L.P.


KIMBALL
HILL HOMES AUSTIN, L.P.


KIMBALL
HILL HOMES CALIFORNIA, INC.


KIMBALL
HILL HOMES DALLAS, L.P.


KIMBALL
HILL HOMES FLORIDA, INC.


KIMBALL
HILL HOMES HOUSTON, L.P.


KIMBALL
HILL HOMES ILLINOIS, LLC


KIMBALL
HILL HOMES NEVADA, INC.


KIMBALL
HILL HOMES OHIO, INC.


KIMBALL
HILL HOMES OREGON, INC.


KIMBALL
HILL HOMES REALTY FLORIDA, INC.


KIMBALL
HILL HOMES SAN ANTONIO, L.P.


KIMBALL
HILL HOMES TEXAS, INC.


KIMBALL
HILL HOMES WASHINGTON, INC.


KIMBALL
HILL HOMES WISCONSIN, INC.


NATIONAL CREDIT AND GUARANTY

CORPORATION


RIVER
OAKS REALTY, L.P.


 


 


	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  18TH
  AND PEORIA, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Suburban Centers, L.L.C., its manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill, Inc., its manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Senior
  Vice President, Finance

  



 


S-3

















 


KIMBALL
HILL SUBURBAN CENTERS, L.L.C.


KIMBALL
HILL URBAN CENTERS, L.L.C.


THE
GLENS AT WESTLAKE, L.L.C.


 


	
   

  	
  By:

  	
  Kimball
  Hill, Inc., its manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Senior
  Vice President, Finance

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIMBALL HILL URBAN CENTERS CHICAGO ONE,

  L.L.C.

  
	
   

  	
  KIMBALL HILL URBAN CENTERS CHICAGO TWO,

  L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Urban Centers, L.L.C., its
  manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill, Inc., its manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Senior
  Vice President, Finance

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BRIDLE
  RIDGE LIMITED PARTNERSHIP

  
	
   

  	
  PARKVIEW
  LIMITED PARTNERSHIP

  
	
   

  	
  RIVER
  POINTE LIMITED PARTNERSHIP

  
	
   

  	
  SONATA AT MORADA RANCH LIMITED

  PARTNERSHIP

  
	
   

  	
  WINDMILL
  PARK LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes California, Inc., its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
									



 


S-4

















 


KIMBALL
HILL BELLEVUE RANCH, LLC


KIMBALL
HILL REFLECTIONS, LLC


KIMBALL
HILL SHELDON LAKES, LLC


KIMBALL
HILL VILLAGES, LLC


 


	
   

  	
  By:

  	
  Kimball
  Hill Homes California, Inc., its manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:
  

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL CHADWICK FARMS LIMITED

  PARTNERSHIP

  
	
   

  	
  KIMBALL
  WEST FRISCO LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes Dallas, L.P., its general

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL CALUSA PALMS LIMITED

  PARTNERSHIP

  
	
   

  	
  KIMBALL HILL MARBELLA ESTATES LIMITED

  PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes Florida, Inc., its general

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
					



 


S-5

















 


	
   

  	
  INDIAN
  TRAILS LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes Houston, L.P., its general

  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIMBALL
  HILL TX PROPERTIES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes Houston, L.P., its manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASTOR
  PLACE LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  BOLINGBROOK
  LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  EDGEWATER
  LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  HUNTINGTON
  CHASE LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  LEGEND
  LAKES LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  THE
  GLEN TOWNHOMES LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  THE
  HAMILTON PLACE PARTNERSHIP

  	
   

  
	
   

  	
  WATERFORD
  LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  WHISPERING
  MEADOW LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  WHITE
  OAK LIMITED PARTNERSHIP

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes Illinois, LLC, its general

  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
						



 


S-6

















 


	
   

  	
  KH
  INGHAM PARK SOUTH, LLC

  
	
   

  	
  KH
  SRAV II, LLC

  
	
   

  	
   

  
	
   

  	
  By:
  Kimball Hill Homes Illinois, LLC, its manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIMBALL HILL CENTENNIAL HEIGHTS LIMITED

  PARTNERSHIP

  
	
   

  	
  KIMBALL HILL HEATHERS/CAPAROLA LIMITED

  PARTNERSHIP

  
	
   

  	
  KIMBALL MOUNTAIN FIRST LIMITED

  PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes Nevada, Inc., its general

  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIMBALL
  COVE LIMITED PARTNERSHIP

  
	
   

  	
  KIMBALL HILL LYNDEN PARK II LIMITED

  PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes Texas, Inc., its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
					



 


S-7

















 


	
   

  	
  RIVER
  OAKS HOMES, L.L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes Texas, Inc., its manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GABLES
  AT HIDDENBROOK LIMITED PARTNER

  SHIP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes Washington, Inc., its general

  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARK
  SHORE, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball
  Hill Homes Wisconsin, Inc., its manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal
  H. Barber

  
	
   

  	
  Title:

  	
  Vice
  President

  



 


S-8

















 


	
   

  	
  U.S. BANK NATIONAL ASSOCIATION, as

  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard
  Prokosch

  	
   

  
	
   

  	
   

  	
  Name:  Richard Prokosch

  
	
   

  	
   

  	
  Title:    Vice
  President

  



 


S-9

















 


EXHIBIT A


 


CUSIP             


 


KIMBALL HILL, INC.


 


No.                                                                                                                                                               $


 


101⁄2% SENIOR SUBORDINATED NOTE
DUE 2012


 


KIMBALL HILL,
INC., an Illinois corporation (the “Company”), for value received, promises to
pay to CEDE & CO. or registered assigns the principal sum of
$             dollars
on December 15, 2012.


 


Interest
Payment Dates:  June 15 and December 15.


 


Record
Dates:  June 1 and December 1.


 


Reference is
made to the further provisions of this Note contained herein, which will for
all purposes have the same effect as if set forth at this place.


 


A-1

















 


IN WITNESS
WHEREOF, the Company has caused this Note to be signed manually or by facsimile
by its duly authorized officers.


 


	
   

  	
  KIMBALL HILL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


Dated:


 


Certificate of
Authentication


 


This is one of
the 101⁄2% Senior Subordinated Notes due 2012 referred to in the within-mentioned
Indenture.


 


	
   

  	
  U.S. BANK NATIONAL ASSOCIATION, as 

  
	
   

  	
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  



 


Dated:


 


A-2

















 


[FORM OF REVERSE OF NOTE]


 


KIMBALL HILL, INC.


 


101⁄2% SENIOR SUBORDINATED NOTE
DUE 2012


 


1.             Interest.  KIMBALL HILL, INC., an Illinois corporation
(the “Company”), promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the face
hereof at a rate of 101⁄2% per annum. 
Interest hereon will accrue from and including the most recent date to
which interest has been paid or, if no interest has been paid, from and
including [insert applicable issue date] to but
excluding the date on which interest is paid. 
Interest shall be payable in arrears on each June 15 and December 15
commencing on [insert applicable issue date].  Interest will be computed on the basis of a
360-day year of twelve 30-day months. 
The Company shall pay interest on overdue principal and on overdue
interest (to the full extent permitted by law) at a rate of 101⁄2% per annum.


 


2.             Method
of Payment.  The Company will pay
interest hereon (except defaulted interest) to the Persons who are registered
Holders at the close of business on June 1 or December 1 next
preceding the interest payment date (whether or not a Business Day).  Holders must surrender Notes to a Paying
Agent to collect principal payments.  The
Company will pay principal and interest in money of the United States of America
that at the time of payment is legal tender for payment of public and private
debts.  Interest may be paid by check
mailed to the Holder entitled thereto at the address indicated on the register
maintained by the Registrar for the Notes, provided, however, that payments on a certificated Note will be made
by wire transfer to a U.S. dollar account maintained by the payee with a bank
in the United States if such Holder elects payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating
such account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its discretion).


 


3.             Paying
Agent and Registrar.  Initially, U.S.
Bank National Association, a national banking association (the “Trustee”), will
act as a Paying Agent and Registrar. The Company may appoint and change any
Paying Agent or Registrar or co-registrar without notice.  The Company or any of its Affiliates may act as
Paying Agent or Registrar.


 


4.             Indenture.  The Company issued the Notes under an
Indenture dated as of December 19, 2005 (the “Indenture”) among the
Company, the Guarantors (as defined in the Indenture) and the Trustee.  This is one of an issue of Notes of the
Company issued, or to be issued, under the Indenture.  The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code §§ 77aaa-77bbbb), as amended from time
to time.  The Notes are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of them.  Capitalized and certain
other terms used herein and not otherwise defined have the meanings set forth
in the Indenture.


 


A-3

















 


5.             Subordination.  The payment of the Notes will, to the extent
set forth in the Indenture, be subordinated in right of payment to the prior
payment in full in cash or cash equivalents of all Senior Indebtedness.


 


6.             Optional
Redemption.  (a)  The Company,
at its option, may redeem the Notes, in whole or in part, at any time on or
after December 15, 2009 upon not less than 30 nor more than 60 days’
notice, at the redemption prices (expressed as percentages of principal
amount), set forth below, together, in each case, with accrued and unpaid
interest thereon, if any, to the Redemption Date, if redeemed during the twelve
month period beginning on December 15 of each year listed below:


 


	
  Year

  	
   

  	
  Redemption Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2009

  	
   

  	
  105.250

  	
  %

  
	
  2010

  	
   

  	
  102.625

  	
  %

  
	
  2011 and thereafter

  	
   

  	
  100.000

  	
  %

  



 


(b)           Notwithstanding
the foregoing, at any time prior to December 15, 2008, the Issuer may
redeem up to 35% of the aggregate principal amount of the Notes with the net
cash proceeds of one or more Qualified Equity Offerings at a redemption price
equal to 110.50% of the principal amount of the Notes to be redeemed, plus
accrued and unpaid interest thereon, if any, to the Redemption Date; provided
that (1) at least 65% of the aggregate principal amount of Notes issued
under the Indenture remains outstanding immediately after the occurrence of
such redemption and (2) the redemption occurs within 90 days of the date
of the closing of any such Qualified Equity Offering.


 


(c)           In
the event of a redemption of fewer than all of the Notes, the Trustee shall
select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, while such Notes are listed, or
if such Notes are not then listed on a national securities exchange, on a pro
rata basis, by lot or in such other manner as the Trustee shall deem
fair and equitable.  The Notes will be
redeemable in whole or in part upon not less than 30 nor more than 60 days’
prior written notice, mailed by first class mail to a Holder’s last address as
it shall appear on the register maintained by the Registrar of the Notes.  On and after any redemption date, interest
will cease to accrue on the Notes or portions thereof called for redemption
unless the Company shall fail to redeem any such Note.


 


7.             Notice
of Redemption.  Notice of redemption
will be mailed at least 30 days but not more than 60 days before the Redemption
Date to each Holder of Notes to be redeemed at his registered address.  On and after the Redemption Date, unless the
Company defaults in making the redemption payment, interest ceases to accrue on
Notes or portions thereof called for redemption.


 


8.             Offers
To Purchase.  The Indenture provides
that upon the occurrence of a Change of Control or an Asset Sale and subject to
further limitations contained therein, the Company shall make an offer to
purchase outstanding Notes in accordance with the procedures set forth in the
Indenture.


 


A-4

















 


9.             Registration
Rights.  Pursuant to a Registration
Rights Agreement among the Company, the Guarantors and the Initial Purchasers,
the Company will be obligated to consummate an exchange offer pursuant to which
the Holder of this Note shall have the right to exchange this Note for notes of
a separate series issued under the Indenture (or a trust indenture
substantially identical to the Indenture in accordance with the terms of the
Registration Rights Agreement) which have been registered under the Securities
Act, in like principal amount and having substantially identical terms as the
Notes.  The Holders shall be entitled to
receive certain additional interest payments in the event such exchange offer
is not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.


 


10.           Denominations,
Transfer, Exchange.  The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000.  A Holder may
transfer or exchange Notes in accordance with the Indenture.  The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay to it any taxes and fees required by law or permitted by the Indenture.  The Registrar need not register the transfer
of or exchange any Notes or portion of a Note selected for redemption, or
register the transfer of or exchange any Notes for a period of 15 days before a
mailing of notice of redemption.


 


11.           Persons
Deemed Owners.  The registered Holder
of this Note may be treated as the owner of this Note for all purposes.


 


12.           Unclaimed
Money.  If money for the payment of
principal or interest remains unclaimed for two years, the Trustee will pay the
money back to the Company at its written request.  After that, Holders entitled to the money
must look to the Company for payment as general creditors unless an “abandoned
property” law designates another Person.


 


13.           Amendment,
Supplement, Waiver, Etc.  The
Company, the Guarantors and the Trustee (if a party thereto) may, without the
consent of the Holders of any outstanding Notes, amend, waive or supplement the
Indenture or the Notes for certain specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, maintaining the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended, and making any change that does not materially and adversely affect
the rights of any Holder.  Other
amendments and modifications of the Indenture or the Notes may be made by the
Company, the Guarantors and the Trustee with the consent of the Holders of not
less than a majority of the aggregate principal amount of the outstanding
Notes, subject to certain exceptions requiring the consent of the Holders of
the particular Notes to be affected.


 


14.           Successor
Corporation.  When a successor
corporation assumes all the obligations of its predecessor under the Notes and
the Indenture and the transaction complies with the terms of Article Five
of the Indenture, the predecessor corporation will, except as provided in Article Five,
be released from those obligations.


 


15.           Defaults
and Remedies.  Events of Default are
set forth in the Indenture.  Subject to
certain limitations in the Indenture, if an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with
respect to the Company) occurs and is continuing, 


 


A-5

















 


the Trustee or
the Holders of not less than 25% in aggregate principal amount of the
outstanding Notes may, by written notice to the Trustee and the Company, and
the Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the outstanding Notes shall, declare all principal of and
accrued interest on all Notes to be immediately due and payable and such
amounts shall become immediately due and payable.  If an Event of Default specified in Section 6.01(7) or
(8) occurs with respect to the Company, the principal amount of and
interest on, all Notes shall ipso  facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder.  Holders may not enforce
the Indenture or the Notes except as provided in the Indenture.  The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes.  Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. 
The Trustee may withhold from Holders notice of any continuing default
(except a default in payment of principal, premium, if any, or interest on the
Notes or a default in the observance or performance of any of the obligations
of the Company under Article Five of the Indenture) if it determines that
withholding notice is in their best interests.


 


16.           Trustee
Dealings with Company.  The Trustee,
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company or its Affiliates, and may otherwise
deal with the Company or its Affiliates, as if it were not Trustee.


 


17.           Discharge.  The Company’s obligations pursuant to the
Indenture will be discharged, except for obligations pursuant to certain
sections thereof, subject to the terms of the Indenture, upon the payment of
all the Notes or upon the irrevocable deposit with the Trustee of United States
dollars or U.S. Government Obligations sufficient to pay when due principal of
and interest on the Notes to maturity or redemption, as the case may be.


 


18.           Guarantees.  The Note will be entitled to the benefits of
certain Guarantees made for the benefit of the Holders.  Reference is hereby made to the Indenture for
a statement of the respective rights, limitations of rights, duties and
obligations thereunder of the Guarantors, the Trustee and the Holders.


 


19.           Authentication.  This Note shall not be valid until the
Trustee signs the certificate of authentication on the other side of this Note.


 


20.           Governing
Law.  This Note shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York.  The Trustee, the Company, the Guarantor and
the Holders agree to submit to the jurisdiction of the courts of the State of
New York in any action or proceeding arising out of or relating to the
Indenture or the Notes.


 


21.           Abbreviations.  Customary abbreviations may be used in the
name of a Holder or an assignee, such as: 
TEN COM (=  tenants in common),
TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).


 


A-6

















 


The Company
will furnish to any Holder upon written request and without charge a copy of
the Indenture.  Requests may be made to:


 


KIMBALL HILL, INC.

5999 New Wilke Road

Suite 504

Rolling Meadows, IL  60008



Attention:  Chief Financial Officer


 


A-7

















 


ASSIGNMENT


 


I or we assign and transfer this Note to:


 


(Insert assignee’s social
security or tax I.D. number)


 


                                                                                                                                                                                                                        

                                                                                                                                                                                                                        

                                                                                                                                                                                                                        


(Print or type name, address
and zip code of assignee)


 


and irrevocably appoint:


 


                                                                                                                                                                                                                        

                                                                                                                                                                                                                        


 


Agent to transfer this Note on the books of the Company.  The Agent may substitute another to act for
him.


 


 


	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
   

  	
  (Sign exactly as your name

  
	
   

  	
   

  	
  appears on the other side of

  
	
   

  	
   

  	
  this Note)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  	
   

  
							



 


SIGNATURE GUARANTEE


 


Signatures
must be guaranteed by an “eligible guarantor institution” meeting the requirements
of the Registrar, which requirements include membership or participation in the
Security Transfer Agent Medallion Program (“STAMP”) or such other “signature
guarantee program” as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.


 


A-8

















 


OPTION OF HOLDER TO ELECT
PURCHASE


 


If you want to
elect to have all or any part of this Note purchased by the Company pursuant to
Section 4.09 or Section 4.20 of the Indenture, check the appropriate
box:


 


	
  o

  	
  Section 4.09

  	
  o

  	
  Section 4.20

  



 


If you want to
have only part of the Note purchased by the Company pursuant to Section 4.09
or Section 4.20 of the Indenture, state the amount you elect to have purchased:


 


$                                                    

(multiple of $1,000)


 


	
  Date:

  	
   

  	
   

  	
   

  
	
   

  
	
  Your Signature:

  	
   

  	
   

  
	
   

  	
  (Sign exactly as your name appears on the
  face of this Note)

  
	
   

  
	
   

  	
   

  
	
  Signature Guaranteed

  
						



 


SIGNATURE GUARANTEE


 


Signatures
must be guaranteed by an “eligible guarantor institution” meeting the requirements
of the Registrar, which requirements include membership or participation in the
Security Transfer Agent Medallion Program (“STAMP”) or such other “signature
guarantee program” as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.


 


A-9

















 


EXHIBIT B


 


[FORM OF LEGEND FOR 144A
NOTES AND OTHER NOTES

THAT ARE RESTRICTED NOTES]


 


THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY,
BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY
INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION
TERMINATION DATE”) THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO
THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A
PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR”
WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY
TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.


 


B-1

















 


[FORM OF ASSIGNMENT FOR
144A NOTES AND OTHER NOTES

THAT ARE  RESTRICTED NOTES]


 


I or we assign and transfer this Note to:


 


(Insert assignee’s social
security or tax I.D. number)


 


                                                                                                                                                                                                                        

                                                                                                                                                                                                                        

                                                                                                                                                                                                                        


(Print or type name, address
and zip code of assignee)


 


and irrevocably appoint:


 


                                                                                                                                                                                                                        

                                                                                                                                                                                                                        


 


Agent to transfer this Note on the books of the Company.  The Agent may substitute another to act for
him.


 


[Check One]


 


	
  o (a)

  	
   

  	
  this Note is being transferred in
  compliance with the exemption from registration under the Securities Act
  provided by Rule 144A thereunder.

  
	
   

  	
   

  	
   

  
	
  or

  
	
   

  	
   

  	
   

  
	
  o (b)

  	
   

  	
  this Note is being transferred other than
  in accordance with (a) above and documents are being furnished which
  comply with the conditions of transfer set forth in this Note and the Indenture.

  



 


If none of the
foregoing boxes is checked, the Trustee or Registrar shall not be obligated to
register this Note in the name of any person other than the Holder hereof
unless and until the conditions to any such transfer of registration set forth
herein and in Sections 2.16 and 2.17 of the Indenture shall have been
satisfied.


 


	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Sign exactly as your name appears on the

  face of this Note)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  
							



 


SIGNATURE GUARANTEE


 


Signatures
must be guaranteed by an “eligible guarantor institution” meeting the requirements
of the Registrar, which requirements include membership or participation in the
Security Transfer Agent Medallion Program (“STAMP”) or such other “signature
guarantee program” as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.


 


B-2

















 


TO BE COMPLETED BY PURCHASER IF
(a) ABOVE IS CHECKED


 


The
undersigned represents and warrants that it is purchasing this Note for its own
account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act and is aware that
the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as the undersigned
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the undersigned’s
foregoing representations in order to claim the exemption from registration provided
by Rule 144A.


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  NOTICE: To be executed by an executive officer

  



 


B-3

















 


EXHIBIT C


 


[FORM OF LEGEND FOR
REGULATION S NOTE]


 


THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY,
BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY
INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION
DATE”) THAT IS 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON
IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR”
WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY
TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.


 


C-1

















 


[FORM OF ASSIGNMENT FOR
REGULATION S NOTE]


 


I or we assign and transfer this Note to:


 


(Insert assignee’s social
security or tax I.D. number)


 


                                                                                                                                                                                                                        

                                                                                                                                                                                                                        

                                                                                                                                                                                                                        


(Print or type name, address
and zip code of assignee)


 


and irrevocably appoint:


 


                                                                                                                                                                                                                        

                                                                                                                                                                                                                        


 


Agent to transfer this Note on the books of the Company.  The Agent may substitute another to act for
him.


 


[Check One]


 


	
  o (a)

  	
   

  	
  this Note is being transferred in
  compliance with the exemption from registration under the Securities Act
  provided by Rule 144A thereunder.

  
	
   

  	
   

  	
   

  
	
  or

  
	
   

  	
   

  	
   

  
	
  o (b)

  	
   

  	
  this Note is being transferred other than
  in accordance with (a) above and documents are being furnished which
  comply with the conditions of transfer set forth in this Note and the Indenture.

  



 


If none of the foregoing boxes is checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 2.16 and 2.17 of the Indenture
shall have been satisfied.


 


	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Sign exactly as your name appears on the

  face of this Note)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  
							



 


SIGNATURE GUARANTEE


 


Signatures
must be guaranteed by an “eligible guarantor institution” meeting the requirements
of the Registrar, which requirements include membership or participation in the
Security Transfer Agent Medallion Program (“STAMP”) or such other “signature
guarantee program” as may be 


 


C-2

















 


determined by
the Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.


 


C-3

















 


TO BE COMPLETED BY PURCHASER IF
(a) ABOVE IS CHECKED


 


The
undersigned represents and warrants that it is purchasing this Note for its own
account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act and is aware that
the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as the undersigned
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the undersigned’s
foregoing representations in order to claim the exemption from registration provided
by Rule 144A.


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  NOTICE: To be executed by an executive officer

  



 


C-4

















 


EXHIBIT D


 


[FORM OF LEGEND FOR GLOBAL
NOTE]


 


Any Global
Note authenticated and delivered hereunder shall bear a legend (which would be
in addition to any other legends required in the case of a Restricted Note) in
substantially the following form:


 


This Note is a
Global Note within the meaning of the indenture hereinafter referred to and is
registered in the name of a depository or a nominee of a depository.  This Note is not exchangeable for Notes
registered in the name of a person other than the depository or its nominee
except in the limited circumstances described in the indenture, and no transfer
of this Note (other than a transfer of this Note as a whole by the depository
to a nominee of the depository or by a nominee of the depository to the
depository or another nominee of the depository) may be registered except in
the limited circumstances described in the Indenture.


 


Unless this
certificate is presented by an authorized representative of the Depository
Trust Company (a New York corporation) (“DTC”) to the issuer or its agent for
registration of transfer, exchange, or payment, and any certificate issued is
registered in the name of CEDE & CO. or in such other name as it
requested by an authorized representative of DTC (and any payment is made to
CEDE & CO. or such other entity as is requested by an authorized
representative of DTC), any transfer, pledge or other use hereof for value or
otherwise by or to any Person is wrongful inasmuch as the registered owner
hereof, CEDE & CO., has an interest herein.


 


D-1

















 


EXHIBIT E


 


Form of Certificate To Be


Delivered in Connection with


Transfers to
Non-QIB Accredited Investors


 


U.S. Bank
National Association

Kimball Hill, Inc.

c/o U.S. Bank National Association

60 Livingston Avenue

EP-MN-WS3C

St. Paul, MN  55107


 


Attention:  Corporate Trust
Services


 


Ladies and Gentlemen:


 


In connection
with our proposed purchase of 101⁄2% Senior Subordinated Notes due 2012 (the “Notes”)
of Kimball Hill, Inc., an Illinois corporation (the “Company”), we confirm
that:


 


1.             We
understand that any subsequent transfer of the Notes is subject to certain
restrictions and conditions set forth in the Indenture dated as of December 19,
2005 relating to the Notes and we agree to be bound by, and not to resell,
pledge or otherwise transfer the Notes except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the “Securities
Act”).


 


2.             We
understand that the Notes have not been registered under the Securities Act or
any other applicable securities laws, have not been and will not be qualified
for sale under the securities laws of any non-U.S. jurisdiction and that the
Notes may not be offered, sold, pledged or otherwise transferred except as
permitted in the following sentence.  We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell any Notes, we will do so only (i) to
the Company or any subsidiary thereof, (ii) in accordance with Rule 144A
under the Securities Act to a “qualified institutional buyer” (as defined in Rule 144A),
(iii) to an institutional “accredited investor” (as defined below) that,
prior to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Notes, (iv) outside
the United States to persons other than U.S. persons in offshore transactions
meeting the requirements of Rule 904 of Regulation S under the Securities
Act, (v) pursuant to the exemption form registration provided by Rule 144
under the Securities Act (if applicable) or (vi) pursuant to an effective
registration statement, and we further agree to provide to any person
purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.


 


E-1

















 


3.             We
understand that, on any proposed resale of any Notes, we will be required to
furnish to you and the Company such certifications, legal opinions and other information
as you and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. 
We further understand that the Notes purchased by us will bear a legend
to the foregoing effect.


 


4.             We
are an institutional “accredited investor” (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) and have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Notes, and we and any accounts for
which we are acting each are able to bear the economic risk of our or their
investment, as the case may be.


 


5.             We
are acquiring the Notes purchased by us for our account or for one or more accounts
(each of which is an institutional “accredited investor”) as to each of which
we exercise sole investment discretion.


 


6.             We
are not acquiring the Notes with a view toward the distribution thereof in a
transaction that would violate the Securities Act or the securities laws of any
state of the United States or any other applicable jurisdiction.


 


You are
entitled to rely upon this letter and are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the matters covered
hereby.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of Transferee]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  Date: 

  	
   

  	
   

  	
   

  
						



 


E-2

















 


EXHIBIT F


 


Form of Certificate To Be
Delivered


in Connection with Transfers


Pursuant to
Regulation S


 


U.S. Bank
National Association

Kimball Hill, Inc.

c/o U.S. Bank National Association

60 Livingston Avenue

EP-MN-WS3C

St. Paul, MN  55107


 


Attention:  Corporate Trust
Services


 


	
  Re:

  	
  Kimball Hill, Inc., an Illinois
  corporation (the “Company”)

  
	
   

  	
  101⁄2% Senior Subordinated Notes due 2012
  (the “Notes”)

  



 


Dear Sirs:


 


In connection
with our proposed sale of $                        
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, we
represent that:


 


(1)           the
offer of the Notes was not made to a U.S. person or to a person in the United
States;


 


(2)           either
(a) at the time the buy offer was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably believed
that the transferee was outside the United States, or (b) the transaction
was executed in, on or through the facilities of a designated off-shore
securities market and neither we nor any person acting on our behalf knows that
the transaction has been pre-arranged with a buyer in the United States;


 


(3)           no
directed selling efforts have been made in the United States in contravention
of the requirements of Rule 904(a) of Regulation S;


 


(4)           the
transaction is not part of a plan or scheme to evade the registration requirements
of the Securities Act; and


 


(5)           we
have advised the transferee of the transfer restrictions applicable to the
Notes.


 


You are
entitled to rely upon this letter and are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any administrative or
legal proceedings or 


 


F-1

















 


official
inquiry with respect to the matters covered hereby.  Terms used in this certificate have the
meanings set forth in Regulation S.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of Transferee]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  



 


F-2

















 


EXHIBIT G


 


NOTATION OF GUARANTEE


 


Each of the
undersigned (the “Guarantors”) hereby jointly and severally unconditionally
guarantees, to the extent set forth in the Indenture dated as of December 19,
2005 by and among Kimball Hill, Inc., as issuer, the Guarantors, as
guarantors, and U.S. Bank National Association, as Trustee (as amended,
restated or supplemented from time to time, the “Indenture”), and subject to
the provisions of the Indenture, (a) the due and punctual payment of the
principal of, and premium, if any, and interest on the Notes, when and as the
same shall become due and payable, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on overdue principal of,
and premium and, to the extent permitted by law, interest, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee, all in accordance with the terms set forth in Article Ten of
the Indenture, and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.


 


The
obligations of the Guarantors to the Holders and to the Trustee pursuant to
this Guarantee and the Indenture are expressly set forth in Article Ten of
the Indenture, and reference is hereby made to the Indenture for the precise
terms and limitations of this Guarantee. 
Each Holder of the Note to which this Guarantee is endorsed, by
accepting such Note, agrees to and shall be bound by such provisions.


 


[Signatures on Following Pages]


 


G-1

















 


IN WITNESS
WHEREOF, each of the Guarantors has caused this Guarantee to be signed by a
duly authorized officer.


 


	
   

  	
  CACTUS HILLS, LLC

  	
   

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN INVESTMENTS,

  	
   

  
	
   

  	
  L.L.C.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN OPERATIONS,

  	
   

  
	
   

  	
  L.L.C.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES DALLAS INVESTMENTS,

  	
   

  
	
   

  	
  L.L.C.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES DALLAS OPERATIONS,

  	
   

  
	
   

  	
  L.L.C.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES HOUSTON INVESTMENTS,

  	
   

  
	
   

  	
  L.L.C.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES HOUSTON OPERATIONS,

  	
   

  
	
   

  	
  L.L.C.

  	
   

  
	
   

  	
  KIMBALL HILL TEXAS INVESTMENT COMPANY,

  	
   

  
	
   

  	
  L.L.C.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  David K. Hill

  	
   

  
	
   

  	
  Title:

  	
  Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EAST LAKE PARK, INC.

  	
   

  
	
   

  	
  KIMBALL HILL FAR EAST DETROIT, LLC

  	
   

  
	
   

  	
  KIMBALL HILL STATEWAY, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  	
   

  
	
   

  	
  Title:

  	
  Vice President and Treasurer

  	
   

  
								



 


G-2

















 


	
   

  	
  KH FINANCIAL HOLDING COMPANY

  	
   

  
	
   

  	
  KHH TEXAS TRADING COMPANY L.P.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN, L.P.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES CALIFORNIA, INC.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES DALLAS, L.P.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES FLORIDA, INC.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES HOUSTON, L.P.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES ILLINOIS, LLC

  	
   

  
	
   

  	
  KIMBALL HILL HOMES NEVADA, INC.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES OHIO, INC.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES OREGON, INC.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES REALTY FLORIDA, INC.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES SAN ANTONIO, L.P.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES TEXAS, INC.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES WASHINGTON, INC.

  	
   

  
	
   

  	
  KIMBALL HILL HOMES WISCONSIN, INC.

  	
   

  
	
   

  	
  NATIONAL CREDIT AND GUARANTY

  	
   

  
	
   

  	
  CORPORATION

  	
   

  
	
   

  	
  RIVER OAKS REALTY, L.P.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  18TH AND PEORIA, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Suburban Centers, L.L.C., its manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill, Inc., its manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Senior Vice President, Finance

  
									



 


G-3

















 


	
   

  	
  KIMBALL HILL SUBURBAN CENTERS, L.L.C.

  	
   

  
	
   

  	
  KIMBALL HILL URBAN CENTERS, L.L.C.

  	
   

  
	
   

  	
  THE GLENS AT WESTLAKE, L.L.C.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill, Inc., its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Senior Vice President, Finance

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL URBAN CENTERS CHICAGO ONE,

  	
   

  
	
   

  	
  L.L.C.

  	
   

  
	
   

  	
  KIMBALL HILL URBAN CENTERS CHICAGO TWO,

  	
   

  
	
   

  	
  L.L.C.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Urban Centers, L.L.C.,
  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill, Inc., its manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Senior Vice President, Finance

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BRIDLE RIDGE LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  PARKVIEW LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  RIVER POINTE LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  SONATA AT MORADA RANCH LIMITED

  	
   

  
	
   

  	
  PARTNERSHIP

  	
   

  
	
   

  	
  WINDMILL PARK LIMITED PARTNERSHIP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes California, Inc., its general 

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
														



 


G-4

















 


	
   

  	
  KIMBALL HILL BELLEVUE RANCH, LLC

  	
   

  
	
   

  	
  KIMBALL HILL REFLECTIONS, LLC

  	
   

  
	
   

  	
  KIMBALL HILL SHELDON LAKES, LLC

  	
   

  
	
   

  	
  KIMBALL HILL VILLAGES, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes California, Inc., its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL CHADWICK FARMS LIMITED

  	
   

  
	
   

  	
  PARTNERSHIP

  	
   

  
	
   

  	
  KIMBALL WEST FRISCO LIMITED PARTNERSHIP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Dallas, L.P., its general 

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL CALUSA PALMS LIMITED

  	
   

  
	
   

  	
  PARTNERSHIP

  	
   

  
	
   

  	
  KIMBALL HILL MARBELLA ESTATES LIMITED

  	
   

  
	
   

  	
  PARTNERSHIP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes Florida, Inc., its general 

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
												



 


G-5

















 


	
   

  	
  INDIAN TRAILS LIMITED PARTNERSHIP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Houston, L.P., its general 

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL TX PROPERTIES, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Houston, L.P., its manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ASTOR PLACE LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  BOLINGBROOK LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  EDGEWATER LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  HUNTINGTON CHASE LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  LEGEND LAKES LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  THE GLEN TOWNHOMES LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  THE HAMILTON PLACE PARTNERSHIP

  	
   

  
	
   

  	
  WATERFORD LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  WHISPERING MEADOW LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  WHITE OAK LIMITED PARTNERSHIP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Illinois, LLC, its general 

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
										



 


G-6

















 


	
   

  	
  KH INGHAM PARK SOUTH, LLC

  	
   

  
	
   

  	
  KH SRAV II, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: Kimball Hill Homes Illinois, LLC, its manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL CENTENNIAL HEIGHTS LIMITED

  	
   

  
	
   

  	
  PARTNERSHIP

  	
   

  
	
   

  	
  KIMBALL HILL HEATHERS/CAPAROLA LIMITED

  	
   

  
	
   

  	
  PARTNERSHIP

  	
   

  
	
   

  	
  KIMBALL MOUNTAIN FIRST LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Nevada, Inc., its general 

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL COVE LIMITED PARTNERSHIP

  	
   

  
	
   

  	
  KIMBALL HILL LYNDEN PARK II LIMITED

  	
   

  
	
   

  	
  PARTNERSHIP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Texas, Inc., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
										



 


G-7

















 


	
   

  	
  RIVER OAKS HOMES, L.L.P.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: Kimball Hill Homes Texas, Inc., its manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GABLES AT HIDDENBROOK LIMITED PARTNERSHIP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Washington, Inc., its general 

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PARK SHORE, L.L.C.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Wisconsin, Inc., its manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
										



 


G-8