Exhibit 10.1

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                                CREDIT AGREEMENT

                          Dated as of December 12, 2002

                                      among

                              MERITAGE CORPORATION,
                                as the Borrower,

                                  GUARANTY BANK
                 as Administrative Agent and Swing Line Lender,

                              FLEET NATIONAL BANK,
                              as Syndication Agent,

                                  BANK ONE, NA,
                             as Documentation Agent,

                                       and

                         The Other Lenders Party Hereto




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                                 GUARANTY BANK,
                                       as
                    Sole Lead Arranger and Sole Book Manager
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                                TABLE OF CONTENTS

ARTICLE I.     DEFINITIONS AND ACCOUNTING TERMS

     1.01      Defined Terms...................................................1
     1.02      Other Interpretive Provisions..................................28
     1.03      Accounting Terms...............................................29
     1.04      Rounding.......................................................29
     1.05      References to Agreements and Laws..............................30
     1.06      Times of Day...................................................30
     1.07      Letter of Credit Amounts.......................................30

ARTICLE II.    THE COMMITMENTS AND CREDIT EXTENSIONS

     2.01      Revolving Loans................................................30
     2.02      Borrowings, Conversions and Continuations of Revolving Loans...31
     2.03      Letters of Credit..............................................32
     2.04      Swing Line Loans...............................................39
     2.05      Prepayments....................................................42
     2.06      Termination or Reduction of Commitments........................43
     2.07      Repayment of Loans.............................................43
     2.08      Interest.......................................................43
     2.09      Fees...........................................................44
     2.10      Computation of Interest and Fees...............................44
     2.11      Evidence of Debt...............................................45
     2.12      Payments Generally.............................................45
     2.13      Sharing of Payments............................................47
     2.14      Extension of Scheduled Maturity Date...........................48

ARTICLE III.   TAXES, YIELD PROTECTION AND ILLEGALITY

     3.01      Taxes..........................................................49
     3.02      Illegality.....................................................50
     3.03      Inability to Determine Rates...................................51
     3.04      Increased Cost and Reduced Return; Capital Adequacy; Reserves
                 on Eurodollar Rate Loans.....................................51
     3.05      Funding Losses.................................................52
     3.06      Matters Applicable to all Requests for Compensation............52
     3.07      Survival.......................................................53

ARTICLE IV.    CONDITIONS PRECEDENT TO Credit Extensions

     4.01      Conditions of Initial Credit Extension.........................53
     4.02      Conditions to all Credit Extensions............................55

ARTICLE V.     REPRESENTATIONS AND WARRANTIES

     5.01      Existence, Qualification and Power; Compliance with Laws.......55
     5.02      Authorization; No Contravention................................56
     5.03      Governmental Authorization; Other Consents.....................56
     5.04      Binding Effect.................................................56
     5.05      Financial Statements; No Material Adverse Effect...............56

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     5.06      Litigation.....................................................57
     5.07      No Default.....................................................57
     5.08      Ownership of Property; Liens...................................57
     5.09      Environmental Compliance.......................................57
     5.10      Insurance......................................................57
     5.11      Taxes..........................................................57
     5.12      ERISA Compliance...............................................58
     5.13      Capitalization; Subsidiaries; Joint Ventures...................58
     5.14      Margin Regulations; Investment Company Act; Public Utility
                 Holding Company Act..........................................59
     5.15      Disclosure.....................................................59
     5.16      Compliance with Laws...........................................59
     5.17      Intellectual Property; Licenses, Etc...........................60
     5.18      Solvency.......................................................60
     5.19      Businesses.....................................................60
     5.20      Common Enterprise..............................................60

ARTICLE VI.    AFFIRMATIVE COVENANTS

     6.01      Financial Statements...........................................61
     6.02      Certificates; Other Information................................61
     6.03      Notices........................................................63
     6.04      Payment of Obligations.........................................63
     6.05      Preservation of Existence, Etc.................................63
     6.06      Maintenance of Properties......................................64
     6.07      Maintenance of Insurance.......................................64
     6.08      Compliance with Laws...........................................64
     6.09      Books and Records..............................................64
     6.10      Inspection Rights..............................................64
     6.11      Use of Proceeds................................................64
     6.12      Additional Guarantors..........................................65

ARTICLE VII.   NEGATIVE COVENANTS

     7.01      Liens..........................................................65
     7.02      Investments....................................................66
     7.03      Indebtedness...................................................67
     7.04      Fundamental Changes............................................67
     7.05      Dispositions...................................................68
     7.06      Restricted Payments............................................69
     7.07      Change in Nature of Business...................................69
     7.08      Transactions with Affiliates...................................69
     7.09      Burdensome Agreements..........................................70
     7.10      Use of Proceeds................................................70
     7.11      Financial Covenants............................................70
     7.12      Fiscal Year and Accounting Methods.............................71
     7.13      Amendment and Waivers of Senior Notes..........................71
     7.14      Sale and Leaseback.............................................72
     7.15      Off-Balance Sheet Liabilities..................................72

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ARTICLE VIII.  EVENTS OF DEFAULT AND REMEDIES

     8.01      Events of Default..............................................72
     8.02      Remedies Upon Event of Default.................................74
     8.03      Application of Funds...........................................74

ARTICLE IX.    ADMINISTRATIVE AGENT

     9.01      Appointment and Authorization of Administrative Agent..........76
     9.02      Delegation of Duties...........................................76
     9.03      Liability of Administrative Agent..............................76
     9.04      Reliance by Administrative Agent...............................77
     9.05      Notice of Default..............................................77
     9.06      Credit Decision; Disclosure of Information by
                 Administrative Agent.........................................78
     9.07      Indemnification of Administrative Agent........................78
     9.08      Administrative Agent in its Individual Capacity................79
     9.09      Successor Administrative Agent.................................79
     9.10      Administrative Agent May File Proofs of Claim..................80
     9.11      Guaranty Matters...............................................81
     9.12      Other Agents; Arrangers and Managers...........................81
     9.13      Related Obligations............................................81

ARTICLE X.     MISCELLANEOUS

     10.01     Amendments, Etc................................................82
     10.02     Notices and Other Communications; Facsimile Copies.............83
     10.03     No Waiver; Cumulative Remedies.................................84
     10.04     Attorney Costs, Expenses and Taxes.............................84
     10.05     Indemnification by the Borrower................................85
     10.06     Payments Set Aside.............................................86
     10.07     Successors and Assigns.........................................87
     10.08     Confidentiality................................................89
     10.09     Set-Off........................................................90
     10.10     Interest Rate Limitation.......................................91
     10.11     Counterparts...................................................91
     10.12     Integration....................................................91
     10.13     Survival of Representations and Warranties.....................91
     10.14     Severability...................................................91
     10.15     Tax Forms......................................................92
     10.16     Replacement of Lenders.........................................93
     10.17     Governing Law..................................................94
     10.18     Waiver of Right to Trial by Jury...............................94
     10.19     ENTIRE AGREEMENT...............................................94

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SCHEDULES

     1.01(b)   Existing Credit Facilities
     2.01      Commitments and Pro Rata Shares
     2.03(m)   Existing L/Cs
     5.05      Supplement to Interim Financial Statements
     5.05(e)   Off-Balance Sheet Liabilities
     5.06      Existing Litigation
     5.13      Subsidiaries and Other Equity Investments
     7.01      Existing Liens
     7.02      Existing Investments
     7.03      Existing Indebtedness
     7.08      Transactions With Affiliates
     10.02     Administrative Agent's Office, Certain Addresses for Notices

EXHIBITS

       FORM OF

     A         Revolving Loan Notice
     B         Swing Line Loan Notice
     C         Revolving Note
     D         Compliance Certificate
     E         Assignment and Assumption
     F         Guaranty
     G         Opinion Matters
     H         Borrowing Base Certificate
     I         Swing Line Note

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                                CREDIT AGREEMENT

     This CREDIT  AGREEMENT  ("AGREEMENT")  is entered  into as of December  12,
2002, among MERITAGE CORPORATION, a Maryland corporation (the "BORROWER"),  each
lender  from  time  to  time  party  hereto  (collectively,  the  "LENDERS"  and
individually, a "LENDER"), GUARANTY BANK, as Administrative Agent and Swing Line
Lender,  FLEET  NATIONAL  BANK,  as  Syndication  Agent,  and BANK  ONE,  NA, as
Documentation Agent.

     The  Borrower has  requested  that the Lenders  provide a revolving  credit
facility,  and the Lenders are willing to do so on the terms and  conditions set
forth herein.

     In consideration of the mutual covenants and agreements  herein  contained,
the parties hereto covenant and agree as follows:

                                   ARTICLE I.

                        DEFINITIONS AND ACCOUNTING TERMS

     1.01 DEFINED TERMS.  As used in this  Agreement,  the following terms shall
have the meanings set forth below:

     "ACQUIRED BUSINESS" has the meaning specified in SECTION 1.03(c).

     "ACQUISITION"  means the acquisition by any Person of (a) a majority of the
Equity Interests of another Person,  (b) all or substantially  all of the assets
of  another  Person or (c) all or  substantially  all of a line of  business  of
another  Person,  in  each  case  (i)  whether  or not  involving  a  merger  or
consolidation  with such other Person and (ii) whether in one  transaction  or a
series of related transactions.

     "ACQUISITION  CONSIDERATION"  means the consideration given by the Borrower
or any of its Subsidiaries for an Acquisition,  including but not limited to the
sum of (without  duplication)  (a) the fair market  value of any cash,  property
(including  Equity  Interests)  or  services  given,  plus (b) the amount of any
Indebtedness  assumed,  incurred  or  guaranteed  (to the extent  not  otherwise
included)  in  connection  with such  Acquisition  by the Borrower or any of its
Subsidiaries.

     "ADMINISTRATIVE   AGENT"   means   Guaranty   Bank  in  its   capacity   as
administrative  agent  under  any  of  the  Loan  Documents,  or  any  successor
administrative agent.

     "ADMINISTRATIVE  AGENT'S OFFICE" means the  Administrative  Agent's address
and,  as  appropriate,  account as set forth on  SCHEDULE  10.02,  or such other
address or account as the Administrative  Agent may from time to time notify the
Borrower and the Lenders.

     "ADMINISTRATIVE  REPLY FORM" means an  Administrative  Reply Form in a form
supplied by the Administrative Agent.

     "AFFILIATE" means with respect to any Person, another Person that directly,
or indirectly through one or more  intermediaries,  Controls or is Controlled by
or is under  common  Control  with the  Person  specified.  "Control"  means the
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the

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direction of the management or policies of a Person, whether through the ability
to  exercise  voting  power,  by  contract  or  otherwise.   "CONTROLLING"   and
"CONTROLLED" have meanings correlative thereto.  Without limiting the generality
of the foregoing, a Person shall be deemed to be Controlled by another Person if
such other Person possesses,  directly or indirectly,  power to vote 10% or more
of the Voting Stock of such Person.

     "AGENT-RELATED  PERSONS" means the Administrative  Agent, together with its
Affiliates  (including,  in the case of  Guaranty  Bank in its  capacity  as the
Administrative  Agent, the Arranger),  and the officers,  directors,  employees,
agents and attorneys-in-fact of such Persons and Affiliates.

     "AGGREGATE COMMITMENTS" means the Commitments of all the Lenders.

     "AGREEMENT" means this Credit Agreement.

     "APPLICABLE LAW" means (a) in respect of any Person, all provisions of Laws
applicable  to such  Person,  and all  orders  and  decrees  of all  courts  and
determinations  of  arbitrators  applicable to such Person and (b) in respect of
contracts made or performed in the State of Texas,  "APPLICABLE  LAW" shall also
mean the laws of the United States of America, including, without limitation the
foregoing,  12 USC  Sections 85 and 86, as amended to the date hereof and as the
same may be amended at any time and from time to time  hereafter,  and any other
statute of the United States of America now or at any time hereafter prescribing
the maximum rates of interest on loans and extensions of credit, and the laws of
the State of Texas.

     "APPLICABLE RATE" means the following percentages per annum:

<TABLE>
<CAPTION>
     PRICING                                   COMMITMENT  EURODOLLAR RATE; ALL  BASE
      LEVEL             LEVERAGE RATIO             FEE       LETTERS OF CREDIT   RATE
      -----             --------------             ---       -----------------   ----
<S>           <C>                                 <C>             <C>            <C>
        1     Greater than 2.00 to 1              0.500%          2.250%         0.500%

        2     Greater than 1.50 to 1 but less
              than or equal to 2.00 to 1          0.375%          2.000%         0.250%

        3     Greater than 1.25 to 1 but less
              than or equal to 1.50 to 1          0.300%          1.750%         0.000%

        4     Less than or equal to 1.25 to 1     0.275%          1.500%         0.000%
</TABLE>

Any increase or decrease in the  Applicable  Rate resulting from a change in the
Leverage Ratio shall become  effective as of the first Business Day  immediately
following  the date a Compliance  Certificate  is delivered  pursuant to SECTION
6.02(B);  PROVIDED,  HOWEVER,  that  (x)  if a  Compliance  Certificate  is  not
delivered when due in accordance with such Section,  or (y) there shall occur an
Event of Default,  then Pricing Level 1 shall apply as of the first Business Day
after the date on which such  Compliance  Certificate  was required to have been
delivered  or  such  Event  of  Default  shall  have  occurred,  as  applicable.
Thereafter,  as to clause (x) above only,  any decrease in the  Applicable  Rate
resulting from a change in the Leverage  Ratio shall become  effective as of the
first Business Day  immediately  following the date a Compliance  Certificate is
delivered.  In addition to the Leverage Ratio required above, in connection with
a decrease in the Applicable  Rate to Pricing Level 4, such decrease shall occur

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only if the  Borrower  shall have and  maintain a Debt Rating of at least BB- by
S&P and Ba3 by  Moody's.  Thereafter,  if  Pricing  Level 4 is in  effect  and a
publicly  announced  downgrade in either Debt Rating shall occur, the Applicable
Rate  shall  be  increased  to  Pricing  Level 3  effective  during  the  period
commencing on the date of the public announcement thereof and ending on the date
immediately   preceding   the   effective   date  of  the  next   such   change.
Notwithstanding the foregoing,  the Applicable Rate in effect from and after the
Closing Date to but not including the first Business Day  immediately  following
the date the first  Compliance  Certificate  is  delivered  pursuant  to SECTION
6.02(b) shall be Pricing Level 2.

     "ARRANGER"  means  Guaranty Bank, in its capacity as sole lead arranger and
sole book manager.

     "ASSIGNMENT   AND   ASSUMPTION"   means  an   Assignment   and   Assumption
substantially in the form of EXHIBIT E.

     "ATTORNEY COSTS" means and includes all fees, expenses and disbursements of
any law firm or other external counsel and, without  duplication,  the allocated
cost of internal legal services and all expenses and  disbursements  of internal
counsel.

     "ATTRIBUTABLE  INDEBTEDNESS"  means  on any  date,  (a) in  respect  of any
capital lease of any Person, the capitalized amount thereof that would appear on
a balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation,  the capitalized amount of
the remaining  lease  payments  under the relevant  lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP if
such lease were accounted for as a capital lease.

     "AUDITED FINANCIAL STATEMENTS" means the audited consolidated balance sheet
of the  Borrower  and its  Subsidiaries  for the fiscal year ended  December 31,
2001,  and  the  related  consolidated   statements  of  income  or  operations,
shareholders' equity and cash flows for such fiscal year of the Borrower and its
Subsidiaries, including the notes thereto.

     "AVAILABILITY  PERIOD" means the period from and including the Closing Date
to the earliest of (a) the Maturity  Date,  (b) the date of  termination  of the
Aggregate  Commitments pursuant to SECTION 2.06, and (c) the date of termination
of the  commitment of each Lender to make Loans and of the obligation of the L/C
Issuer to make L/C Credit Extensions pursuant to SECTION 8.02.

     "BASE  RATE"  means for any day a  fluctuating  rate per annum equal to the
higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest
in effect for such day as publicly  announced from time to time by Guaranty Bank
as its "prime  rate." The "prime rate" is a rate set by Guaranty Bank based upon
various factors  including  Guaranty  Bank's costs and desired  return,  general
economic  conditions  and other  factors,  and is used as a reference  point for
pricing some loans, which may be priced at, above, or below such announced rate.
Any change in such rate  announced  by  Guaranty  Bank shall take  effect at the
opening of  business on the day  specified  in the public  announcement  of such
change.

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     "BASE RATE LOAN" means a Loan that bears interest based on the Base Rate.

     "BORROWER" has the meaning specified in the introductory paragraph hereto.

     "BORROWING" means a Revolving  Borrowing or a Swing Line Borrowing,  as the
context may require.

     "BORROWING  BASE" means with  respect to an  Inventory  Valuation  Date for
which it is to be determined,  an amount equal to the sum (without  duplication)
of the  following  assets of each Loan Party  (but only to the extent  that such
assets set forth in subparagraph (a) below are not subject to any Liens and such
assets set forth in  subparagraphs  (b) through (h) below are not subject to any
Liens other than Permitted Liens):

          (a) 100% of Cash and Receivables (which shall not include cash used to
     collateralize L/C Obligations);

          (b) 90% of the Net Book Value of Presold Units;

          (c) 80% of the Net Book Value of Eligible Model Units;

          (d) 80% of the Net Book Value of Unsold Units Under Construction;

          (e) 80% of the Net Book Value of  Completed  Unsold Units Less Than 18
     Months Since Completion;

          (f) 70% of the Net Book Value of Finished Lots;

          (g) 60% of the Net Book Value Land/Lots Under Development; and

          (h) 50% of the Net Book Value of Unimproved Entitled Land;

     PROVIDED, HOWEVER, that (i) at no time shall more than 50% of the Borrowing
Base be  comprised  of the  items set forth in  subparagraphs  (f),  (g) and (h)
above, (ii) at no time shall more than 25% of the Borrowing Base be comprised of
the  items  set  forth in  subparagraphs  (g) and (h) above and (iii) at no time
shall the aggregate amount of condominiums exceed 15% of the aggregate number of
Units comprising the items set forth in  subparagraphs  (b), (c), (d) and (e) in
the aggregate.

     "BORROWING BASE ASSETS" means Cash,  Receivables,  Presold Units,  Eligible
Model Units, Unsold Units Under  Construction,  Completed Unsold Units Less Than
18 Months Since  Completion,  Finished Lots,  Land/Lots  Under  Development  and
Unimproved  Entitled  Land of the  Borrower and the  Guarantors  included in the
calculation of the Borrowing Base.

     "BORROWING BASE CERTIFICATE" means the Certificate in the form of EXHIBIT H
hereto, or in such other form acceptable to the Administrative  Agent,  executed
by a Responsible Officer of the Borrower.

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     "BORROWING  BASE  DEBT"  means  as  of  any  date  of  determination,   all
Consolidated  Indebtedness as of such date of  determination,  including without
limitation the Obligations  and the Senior Notes,  but excluding (a) any portion
of any  Subordinated  Debt of any Loan Party which is due and payable  more than
one year from such date of determination  and (b) Indebtedness  secured by Liens
on assets that are not part of any of the Borrowing Base Assets, but only to the
extent  that the  Indebtedness  (i)  secured  by any Lien on such asset does not
exceed the Net Book Value of such asset as  determined by GAAP and (ii) does not
exceed in aggregate amount the amount set forth in SECTION 7.03(f).

     "BUSINESS DAY" means any day other than a Saturday,  Sunday or other day on
which commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where the Administrative  Agent's Office is located and, if
such day  relates  to any  Eurodollar  Rate  Loan,  means  any such day on which
dealings in Dollar  deposits are  conducted  by and between  banks in the London
interbank eurodollar market.

     "CAPITAL  LEASE"  means as of any  date,  any  lease of  property,  real or
personal,  the  obligations  of the lessee in respect of which are  required  in
accordance with GAAP to be capitalized on the balance sheet of the lessee.

     "CASH" means unrestricted cash.

     "CASH AND CASH  EQUIVALENTS"  means (a) Cash;  (b)  marketable  obligations
issued or unconditionally  guaranteed by the U.S. Government or issued by any of
its agencies  and backed by the full faith and credit of the U.S.,  in each case
maturing within one year from the date of acquisition (and investments in mutual
funds investing primarily in those obligations); (c) short-term investment grade
domestic and eurodollar  certificates of deposit or time deposits that are fully
insured by the Federal Deposit Insurance Corporation or are issued by commercial
banks having combined capital,  surplus,  and undivided profits of not less than
$500,000,000 (as shown on its most recently  published  statement of condition);
(d) commercial paper and similar  obligations rated "P-1" by Moody's or "A-1" by
S&P; (e) readily marketable  tax-free municipal bonds of a domestic issuer rated
"AAA" by Moody's, or "AAA" by S&P, and maturing within one year from the date of
issuance (and  investments in mutual funds investing  primarily in those bonds);
and (f) demand deposit accounts maintained in the ordinary course of business.

     "CASH COLLATERALIZE" has the meaning specified in SECTION 2.03(g).

     "CHANGE OF CONTROL" means with respect to any Person, an event or series of
events by which:

          (a) any "person" or "group" (as such terms are used in Sections  13(d)
     and  14(d) of the  Securities  Exchange  Act of  1934,  but  excluding  the
     Permitted  Holders,  any  employee  benefit  plan  of  such  person  or its
     subsidiaries,  and any person or entity  acting in its capacity as trustee,
     agent or other  fiduciary or  administrator  of any such plan)  becomes the
     "beneficial  owner"  (as  defined  in  Rules  13d-3  and  13d-5  under  the
     Securities  Exchange  Act of 1934,  except  that a person or group shall be
     deemed to have "beneficial ownership" of all securities that such person or
     group has the right to acquire  (such right,  an "OPTION  RIGHT"),  whether
     such right is  exercisable  immediately or only after the passage of time),

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<PAGE>
     directly or  indirectly,  of 25% or more of the equity  securities  of such
     Person entitled to vote for members of the board of directors or equivalent
     governing  body of such  Person on a  fully-diluted  basis (and taking into
     account  all such  securities  that  such  person or group has the right to
     acquire pursuant to any option right); or

          (b) during  any period of 24  consecutive  months,  a majority  of the
     members of the board of directors  or other  equivalent  governing  body of
     such Person  cease to be composed of  individuals  (i) who were  members of
     that board or  equivalent  governing  body on the first day of such period,
     (ii) whose  election or nomination  to that board or  equivalent  governing
     body  was  approved  by  individuals   referred  to  in  clause  (i)  above
     constituting at the time of such election or nomination at least a majority
     of that board or  equivalent  governing  body or (iii)  whose  election  or
     nomination to that board or other equivalent governing body was approved by
     individuals  referred to in clauses (i) and (ii) above  constituting at the
     time of such  election or  nomination  at least a majority of that board or
     equivalent governing body.

     "CLOSING DATE" means the first date all the conditions precedent in SECTION
4.01 are satisfied or waived in accordance with SECTION 4.01 (or, in the case of
SECTION  4.01(b),  waived by the  Person  entitled  to  receive  the  applicable
payment).

     "CODE" means the Internal Revenue Code of 1986.

     "COMMITMENT"  means as to each Lender, its obligation to (a) make Revolving
Loans to the Borrower  pursuant to SECTION 2.01, (b) purchase  participations in
L/C  Obligations,  and (c) purchase  participations  in Swing Line Loans,  in an
aggregate  principal amount at any one time outstanding not to exceed the amount
set forth  opposite such Lender's name on SCHEDULE  2.01, in any  Assignment and
Assumption  pursuant  to which such  Lender  becomes a party  hereto,  or in any
amendment  hereto,  as  applicable,  as such amount may be adjusted from time to
time in accordance with this Agreement.

     "COMPLETED  UNSOLD UNITS LESS THAN 18 MONTHS SINCE  COMPLETION" means as of
any date, all Units  (excluding  Model Units),  for which  construction has been
"completed"  less than 18 months  before  such date,  but for which  there is in
existence no Contract For Sale. Construction will be considered "completed" when
the temporary  certificate of occupancy or the certificate of occupancy has been
issued, whichever occurs first.

     "COMPLIANCE  CERTIFICATE" means a certificate  substantially in the form of
EXHIBIT  D,  with  such  changes,  or in such  other  form,  as agreed to by the
Administrative Agent, executed by a Responsible Officer of the Borrower.

     "CONSENTING LENDERS" has the meaning specified in SECTION 2.14(b).

     "CONSOLIDATED  EBITDA" means for any period, the Consolidated Net Income of
the Loan Parties  PLUS,  to the extent  deducted  from  revenues in  determining
Consolidated Net Income,  (a)  Consolidated  Interest  Expense,  (b) expense for
income taxes paid or accrued, (c) depreciation,  (d) amortization, (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 the future) and (f)
the amount of  dividends  accrued  or payable by the Loan  Parties in respect of
Disqualified   Equity  Interests  or  any  Preferred  Stock  of  any  Restricted

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<PAGE>
Subsidiary  (excluding any amount payable to any Loan Party), which amount shall
be "grossed up" to include any applicable  taxes on income that would be used to
pay  such  dividends,  PROVIDED,  HOWEVER,  that  interest,  dividends  or other
payments or accruals of a consolidated Subsidiary that is not wholly owned shall
be  included  only  to the  extent  of the  interest  of  such  Person  in  such
Subsidiary.

     "CONSOLIDATED INDEBTEDNESS" means as of any date of determination,  for the
Loan Parties on a  consolidated  basis,  Indebtedness  of the Loan Parties as of
such date, but excluding Indebtedness of one Loan Party to another Loan Party.

     "CONSOLIDATED  INTEREST EXPENSE" means for any period, for the Loan Parties
on a  consolidated  basis,  the interest  expense and interest and other charges
amortized  to cost of home sales and cost of land sales for the Loan Parties for
such period.

     "CONSOLIDATED INTEREST INCURRED" means for any period, the aggregate amount
(without duplication and determined in each case in accordance with GAAP) of (a)
interest  (excluding  interest on  Indebtedness  of a Loan Party to another Loan
Party)  incurred,  whether  such  interest was  expensed or  capitalized,  paid,
accrued,  or scheduled  to be paid or accrued by any of the Loan Parties  during
such period,  including  (i)  original  issue  discount  and  non-cash  interest
payments  or  accruals,  (ii)  the  interest  portion  of all  deferred  payment
obligations,  and (iii) all  commissions,  discounts  and other fees and charges
owed with respect to bankers'  acceptances  and letter of credit  financings and
Swap Contracts,  in each case to the extent attributable to such period PLUS (b)
the amount of  dividends  accrued  or payable by the Loan  Parties in respect of
Disqualified   Equity  Interests  or  any  Preferred  Stock  of  any  Restricted
Subsidiary  (excluding any amount payable to any Loan Party), which amount shall
be "grossed up" to include  applicable taxes on income that would be used to pay
such in dividends, PROVIDED, HOWEVER, that interest, dividends or other payments
or  accruals  of a  consolidated  Subsidiary  that is not wholly  owned shall be
included  only to the extent of the interest of such Person in such  Subsidiary.
For purposes of this definition,  (x) interest on Capital Leases shall be deemed
to accrue at an interest  rate  reasonably  determined by the Borrower to be the
rate of interest implicit in such Capital Leases in accordance with GAAP and (y)
without  duplication,  interest  expense  attributable  to any  Indebtedness  of
another  Person  represented by any Guarantee of a Loan Party shall be deemed to
be the interest expense attributable to the Indebtedness guaranteed.

     "CONSOLIDATED  NET INCOME" means with respect to any Person for any period,
the net income (or loss) of such Person and its  Subsidiaries  for such  period,
determined on a consolidated basis in accordance with GAAP;  PROVIDED,  that (a)
net income (or loss) of any other Person which is not a Subsidiary of the Person
or is accounted for by such specified  Person by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid to the specified  Person or a Subsidiary of such Person,  (b) all gains and
losses which are either extraordinary (as determined in accordance with GAAP) or
are either  unusual or  nonrecurring  (including any gain from the sale or other
disposition  of assets  outside  the  ordinary  course of  business  or from the
issuance or sale of any Equity  Interests),  shall be excluded,  and (c) the net
income, if positive,  of any of such Person's  consolidated  Subsidiaries to the
extent that the declaration or payment of dividends or similar  distributions is
not at the time  permitted by operation of the terms of its charter or bylaws or
any other agreement,  instrument,  judgment,  decree,  order,  statute,  rule or
governmental  regulation  applicable to such  consolidated  Subsidiary  shall be

                                       7
<PAGE>
excluded,  PROVIDED,  HOWEVER,  in the case of exclusions from  Consolidated Net
Income set forth in CLAUSES (b) and (c) above,  such  amounts  shall be excluded
only to the extent included in computing such net income (or loss) in accordance
with GAAP and without duplication.

     "CONSOLIDATED  TANGIBLE NET WORTH"  means as of any date of  determination,
for Loan  Parties  on a  consolidated  basis,  Shareholders'  Equity of the Loan
Parties on that date  MINUS the  Intangible  Assets of the Loan  Parties on that
date.

     "CONTRACT  FOR SALE" means a bona fide written sale and purchase  agreement
between a Loan Party and a third Person purchaser who (a) is not an Affiliate of
any Loan Party,  and (b) has made an earnest money deposit or down payment of at
least  $1,000;  PROVIDED,  HOWEVER,  that such  agreement  shall not contain any
contingency  clause other than the  contingency  that the  purchaser  shall have
obtained mortgage financing.

     "CONTRACTUAL  OBLIGATION"  means as to any  Person,  any  provision  of any
security  issued  by  such  Person  or of any  agreement,  instrument  or  other
undertaking  to  which  such  Person  is a party  or by  which  it or any of its
property is bound.

     "CONTROL" has the meaning specified in the definition of "AFFILIATE."

     "CREDIT EXTENSION" means each of the following:  (a) a Borrowing and (b) an
L/C Credit Extension.

     "DEBT  RATINGS"  means,  as of any date,  the lowest  rating  that has been
recently  announced  by  either  S&P or  Moody's,  as the case  may be,  for any
non-credit-enhanced, senior unsecured long-term debt of the Borrower.

     "DEBTOR  RELIEF LAWS" means the Bankruptcy  Code of the United States,  and
all other liquidation,  conservatorship,  bankruptcy, assignment for the benefit
of   creditors,    moratorium,    rearrangement,    receivership,    insolvency,
reorganization,  or similar  debtor  relief  Laws of the United  States or other
applicable jurisdictions from time to time in effect and affecting the rights of
creditors generally.

     "DEFAULT" means any event or condition that constitutes an Event of Default
or that, with the giving of any notice,  the passage of time, or both,  would be
an Event of Default.

     "DEFAULT  RATE" means an interest  rate equal to (a) the Base Rate PLUS (b)
the  Applicable  Rate,  if any,  applicable  to Base Rate  Loans PLUS (c) 2% per
annum;  PROVIDED,  HOWEVER,  that with  respect to a Eurodollar  Rate Loan,  the
Default Rate shall be an interest rate equal to the interest rate (including any
Applicable  Rate)  otherwise  applicable to such Loan plus 2% per annum, in each
case to the fullest extent permitted by applicable Laws.

     "DEFAULTING  LENDER"  means  any  Lender  that (a) has  failed  to fund any
portion  of  the  Revolving   Loans,   participations   in  L/C  Obligations  or
participations  in Swing Line Loans required to be funded by it hereunder within
one  Business  Day of the date  required to be funded by it  hereunder,  (b) has
otherwise failed to pay over to the Administrative Agent or any other Lender any
other amount required to be paid by it hereunder  within one Business Day of the

                                       8
<PAGE>
date when due,  unless  the  subject of a good  faith  dispute,  or (c) has been
deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

     "DISPOSITION"  or "DISPOSE"  means the sale,  transfer,  license,  lease or
other disposition (including any sale and leaseback transaction) of any property
by any Person, including any sale, assignment,  transfer or other disposal, with
or  without  recourse,  of any notes or  accounts  receivable  or any rights and
claims associated therewith.

     "DISQUALIFIED EQUITY INTERESTS" means (a) except as set forth in clause (b)
below, with respect to any Person,  Equity Interests of such Person that, by its
terms or by the terms of any security into which it is convertible,  exercisable
or  exchangeable,  is, or upon the  happening of an event or the passage of time
would be, required to be redeemed or repurchased (including at the option of the
holder thereof) by such Person or any of its Subsidiaries,  in whole or in part,
on or  prior  to the  Scheduled  Maturity  Date,  and (b)  with  respect  to any
Subsidiary  of such Person  (including  with  respect to any  Subsidiary  of the
Borrower),  any Equity Interests other than any common stock with no preference,
privileges, or redemption or repayment provisions.

     "DOCUMENTATION  AGENT" means Bank One, NA, in its capacity as documentation
agent under any of the Loan Documents.

     "DOLLAR" and "$" mean lawful money of the United States.

     "ELIGIBLE ASSIGNEE" has the meaning specified in SECTION 10.07(g).

     "ELIGIBLE  MODEL UNITS" means Model Units that have not been  completed for
more than 36 months  after the last  production  Unit in the Project  (for which
such Model Unit is used as a Model) has been closed.

     "ENTITLED LAND" means Land that has all requisite vested residential zoning
for the construction of Units.

     "ENVIRONMENTAL  LAWS" means any and all Federal,  state, local, and foreign
statutes,  laws, regulations,  ordinances,  rules,  judgments,  orders, decrees,
permits, concessions,  grants, franchises,  licenses, agreements or governmental
restrictions  relating to pollution and the protection of the environment or the
release  of any  materials  into the  environment,  including  those  related to
hazardous  substances or wastes, air emissions and discharges to waste or public
systems.

     "ENVIRONMENTAL  LIABILITY"  means any  liability,  contingent  or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower, any other Loan Party or any of their
respective  Subsidiaries directly or indirectly resulting from or based upon (a)
violation  of  any  Environmental  Law,  (b)  the  generation,   use,  handling,
transportation,  storage,  treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous  Materials,  (d) the release or threatened  release of
any Hazardous  Materials into the environment or (e) any contract,  agreement or
other consensual  arrangement  pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

                                       9
<PAGE>
     "EQUITY  INTERESTS"  means as to any Person,  the equity  interests in such
Person, including, without limitation, the shares of each class of capital stock
in any Person that is a corporation,  each class of partnership  interest in any
Person  that is a  partnership,  and each class of  membership  interest  in any
Person  that is a limited  liability  company,  and any  warrants  or options to
purchase or otherwise acquire any such equity interests.

     "ERISA" means the Employee Retirement Income Security Act of 1974.

     "ERISA AFFILIATE" means any trade or business (whether or not incorporated)
under common  control with the Borrower  within the meaning of Section 414(b) or
(c) of the  Code  (and  Sections  414(m)  and (o) of the Code  for  purposes  of
provisions relating to Section 412 of the Code).

     "ERISA EVENT" means (a) a Reportable  Event with respect to a Pension Plan;
(b) a  withdrawal  by the  Borrower or any ERISA  Affiliate  from a Pension Plan
subject  to  Section  4063  of  ERISA  during  a plan  year  in  which  it was a
substantial  employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of  operations  that is treated as such a withdrawal  under  Section  4062(e) of
ERISA;  (c) a  complete  or  partial  withdrawal  by the  Borrower  or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in  reorganization;  (d) the  filing of a notice of  intent  to  terminate,  the
treatment of a Plan  amendment as a termination  under Sections 4041 or 4041A of
ERISA,  or the  commencement  of  proceedings by the PBGC to terminate a Pension
Plan or Multiemployer  Plan; (e) an event or condition which constitutes grounds
under  Section 4042 of ERISA for the  termination  of, or the  appointment  of a
trustee to  administer,  any  Pension  Plan or  Multiemployer  Plan;  or (f) the
imposition  of any  liability  under  Title  IV of  ERISA,  other  than for PBGC
premiums due but not delinquent  under Section 4007 of ERISA,  upon the Borrower
or any ERISA Affiliate.

     "EURODOLLAR  RATE"  means  for any  Interest  Period  with  respect  to any
Eurodollar Rate Loan:

          (a)  the  rate  per  annum  equal  to  the  rate   determined  by  the
     Administrative Agent to be the offered rate that appears on the page of the
     Telerate screen (or any successor thereto) that displays an average British
     Bankers  Association  Interest Settlement Rate for deposits in Dollars (for
     delivery on the first day of such Interest  Period) with a term  equivalent
     to such Interest Period,  determined as of approximately 11:00 a.m. (London
     time) two Business Days prior to the first day of such Interest Period, or

          (b) if the rate referenced in the preceding clause (a) does not appear
     on such page or service or such page or service shall not be available, the
     rate per annum equal to the rate determined by the Administrative  Agent to
     be the offered rate on such other page or other  service  that  displays an
     average British Bankers  Association  Interest Settlement Rate for deposits
     in Dollars (for delivery on the first day of such  Interest  Period) with a
     term  equivalent to such Interest  Period,  determined as of  approximately
     11:00 a.m.  (London  time) two Business Days prior to the first day of such
     Interest Period, or

                                       10
<PAGE>
          (c) if the rates  referenced in the preceding  clauses (a) and (b) are
     not available, the rate per annum determined by the Administrative Agent as
     the rate of interest at which deposits in Dollars for delivery on the first
     day of such Interest Period in same day funds in the approximate  amount of
     the  Eurodollar  Rate Loan being made,  continued  or converted by Guaranty
     Bank and with a term equivalent to such Interest Period would be offered by
     Guaranty Bank to major banks in the London interbank  eurodollar  market at
     their request at  approximately  4:00 p.m.  (London time) two Business Days
     prior to the first day of such Interest Period.

     "EURODOLLAR RATE LOAN" means a Revolving Loan that bears interest at a rate
based on the Eurodollar Rate.

     "EVENT OF DEFAULT" has the meaning specified in SECTION 8.01.

     "EXISTING CREDIT  FACILITIES"  means these certain credit facilities of the
Borrower and its Subsidiaries set forth on SCHEDULE 1.01(b) which are to be paid
in full  on the  Closing  Date  without  further  loan  or  funding  commitments
thereunder.

     "EXISTING L/C'S" has the meaning specified in SECTION 2.03(m).

     "FEDERAL  FUNDS  RATE"  means for any day,  the rate per annum equal to the
weighted  average of the rates on  overnight  Federal  funds  transactions  with
members of the Federal  Reserve System arranged by Federal funds brokers on such
day,  as  published  by the  Federal  Reserve  Bank  on the  Business  Day  next
succeeding  such day;  PROVIDED  that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such  transactions  on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next  succeeding  Business  Day,
the Federal Funds Rate for such day shall be the average rate  (rounded  upward,
if  necessary,  to a whole  multiple of 1/100 of 1%) charged to Guaranty Bank on
such day on such transactions as determined by the Administrative Agent.

     "FEE LETTER" means the letter  agreement,  dated September 18, 2002,  among
the  Borrower,  the  Administrative  Agent and the  Arranger,  and any other fee
letter  entered  into from  time to time  among the  Administrative  Agent,  the
Borrower and the Arranger, or any of them.

     "FINISHED  LOTS" means parcels of Entitled Land which are duly recorded and
platted  for the  construction  of Units with vested  zoning for such use,  with
respect to which  substantially all utilities and major  infrastructure has been
completed  and stubbed to site,  and all  requisite  governmental  consents  and
approvals  required for a building  permit to be issued have been,  or could be,
obtained and  construction  commenced  without the  satisfaction  of any further
conditions;  PROVIDED,  HOWEVER, that the term "FINISHED LOTS" shall not include
any real property upon which the construction of a Unit has commenced.

     "FOREIGN LENDER" has the meaning specified in SECTION 10.15(a)(i).

     "FRB" means the Board of  Governors  of the Federal  Reserve  System of the
United States.

                                       11
<PAGE>
     "GAAP" means generally accepted accounting  principles in the United States
set forth in the opinions and pronouncements of the Accounting  Principles Board
and the American  Institute of Certified  Public  Accountants and statements and
pronouncements  of the  Financial  Accounting  Standards  Board  or  such  other
principles  as  may be  approved  by a  significant  segment  of the  accounting
profession in the United States,  that are applicable to the circumstances as of
the date of determination, consistently applied.

     "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political   subdivision   thereof,  any  agency,   authority,   instrumentality,
regulatory body, court,  administrative  tribunal,  central bank or other entity
exercising   executive,    legislative,    judicial,   taxing,   regulatory   or
administrative powers or functions of or pertaining to government.

     "GUARANTEE"  means as to any  Person,  any (a)  obligation,  contingent  or
otherwise,  of such  Person  guaranteeing  or  having  the  economic  effect  of
guaranteeing  any  Indebtedness  or other  obligation  payable or performable by
another  Person  (the  "primary  obligor")  in any manner,  whether  directly or
indirectly, and including any obligation of such Person, direct or indirect, (i)
to purchase or pay (or advance or supply  funds for the  purchase or payment of)
such  Indebtedness  or other  obligation,  (ii) to purchase  or lease  property,
securities  or services  for the  purpose of assuring  the obligee in respect of
such  Indebtedness  or other  obligation of the payment or  performance  of such
Indebtedness or other  obligation,  (iii) to maintain  working  capital,  equity
capital or any other  financial  statement  condition  or  liquidity or level of
income or cash flow of the primary  obligor so as to enable the primary  obligor
to pay such  Indebtedness  or other  obligation,  or (iv)  entered  into for the
purpose  of  assuring  in any  other  manner  the  obligee  in  respect  of such
Indebtedness  or other  obligation of the payment or  performance  thereof or to
protect such obligee  against loss in respect  thereof (in whole or in part), or
(b) any Lien on any assets of such Person  securing  any  Indebtedness  or other
obligation  of any  other  Person,  whether  or not such  Indebtedness  or other
obligation  is assumed by such  Person.  The  amount of any  Guarantee  shall be
deemed to be an amount equal to the stated or determinable amount of the related
primary  obligation,  or portion thereof,  in respect of which such Guarantee is
made or, if not  stated or  determinable,  the  maximum  reasonably  anticipated
liability in respect  thereof as determined by the  guaranteeing  Person in good
faith. The term "GUARANTEE" as a verb has a corresponding meaning.

     "GUARANTIED PARTIES" has the meaning given to such term in the Guaranty.

     "GUARANTORS"  means each Restricted  Subsidiary of the Borrower existing on
the Closing  Date and each  Restricted  Subsidiary  that  becomes an  additional
Guarantor pursuant to SECTION 6.12.

     "GUARANTY"  means  each  Guaranty  made by the  Guarantors  in favor of the
Administrative  Agent on behalf of the Guarantied Parties,  substantially in the
form of EXHIBIT F.

     "GUARANTY BANK" means Guaranty Bank and its successors.

     "HAZARDOUS  MATERIALS"  means all  explosive or  radioactive  substances or
wastes  and all  hazardous  or toxic  substances,  wastes  or other  pollutants,
including petroleum or petroleum  distillates,  asbestos or  asbestos-containing
materials,  polychlorinated  biphenyls,  radon gas, infectious or medical wastes

                                       12
<PAGE>
and all other  substances  or wastes of any  nature  regulated  pursuant  to any
Environmental Law.

     "HIGHEST  LAWFUL RATE" means at the particular time in question the maximum
rate of interest  which,  under  Applicable Law, any Lender is then permitted to
charge  on the  Obligations.  If the  maximum  rate  of  interest  which,  under
Applicable  Law,  any Lender is  permitted  to charge on the  Obligations  shall
change after the date  hereof,  the Highest  Lawful Rate shall be  automatically
increased  or  decreased,  as the  case  may  be,  from  time  to time as of the
effective  time of each change in the Highest  Lawful Rate without notice to the
Borrower.  For purposes of determining the Highest Lawful Rate under  Applicable
Law,  the  indicated  rate  ceiling  shall be the lesser of (a)(i)  the  "WEEKLY
CEILING",  as that expression is defined in Section 303.003 of the Texas Finance
Code, as amended,  or (ii) if available in accordance with the terms thereof and
at the Administrative  Agent's option after notice to the Borrower and otherwise
in  accordance  with the terms of Section  303.103 of the Texas Finance Code, as
amended,  the "ANNUALIZED  CEILING" and (b)(i) if the amount  outstanding  under
this Agreement is less than $250,000,  twenty-four percent (24%), or (ii) if the
amount under this Agreement is equal to or greater than  $250,000,  twenty-eight
percent (28%) per annum.

     "HONOR DATE" has the meaning specified in SECTION 2.03(c)(i).

     "ICC" has the meaning specified in SECTION 2.03(h).

     "INDEBTEDNESS"  means  as to  any  Person  at a  particular  time,  without
duplication,  all of the following,  whether or not included as  indebtedness or
liabilities in accordance with GAAP:

          (a)  all  obligations  of  such  Person  for  borrowed  money  and all
     obligations  of such Person  evidenced by bonds,  debentures,  notes,  loan
     agreements or other similar instruments;

          (b) all direct or contingent  obligations of such Person arising under
     letters of credit (including standby and commercial), bankers' acceptances,
     bank guaranties, surety bonds and similar instruments;

          (c) net obligations of such Person under any Swap Contract;

          (d) all obligations of such Person to pay the deferred  purchase price
     of property or services  (except the following  items shall not be included
     as Indebtedness:  (i) trade accounts payable that are not more than 30 days
     past the date the invoice was approved and entered into the computer system
     by such Person and also  including  any trade  payables that are in dispute
     and (ii) accrued expenses incurred by such Person in the ordinary course of
     business);

          (e) indebtedness  (excluding  prepaid  interest  thereon) secured by a
     Lien on  property  owned  or  being  purchased  by such  Person  (including
     indebtedness  arising  under  conditional  sales or other  title  retention
     agreements),  whether or not such  indebtedness  shall have been assumed by
     such Person or is limited in recourse;

          (f) obligations under Capital Leases;

                                       13
<PAGE>
          (g) Synthetic Lease Obligations and Off-Balance Sheet Liabilities;

          (h) obligations in respect to Redeemable Stock of such Person;

          (i) any Receivables Facility Attributed Indebtedness;

          (j) any "withdrawal  liability" of such Person as such term is defined
     under Part I of Subtitle E of Title IV of ERISA; and

          (k) all  Guarantees  by such Person in respect of any of the foregoing
     of another Person.

     For all purposes  hereof,  the Indebtedness of any Person shall include the
Indebtedness  of any  partnership  or joint  venture in which  such  Person is a
general  partner or a joint  venturer  to the extent  that such Person is liable
therefor  as  a  result  of  such  Person's   ownership  interest  in  or  other
relationship  with such  entity,  unless such  Indebtedness  is  expressly  made
non-recourse  to such Person.  The amount of any net  obligation  under any Swap
Contract on any date shall be deemed to be the Swap Termination Value thereof as
of such date. The amount of any Capital Lease or Synthetic  Lease  Obligation as
of any date shall be deemed to be the  amount of  Attributable  Indebtedness  in
respect thereof as of such date.

     Notwithstanding  the  foregoing,  (1) earn-outs or similar  profit  sharing
arrangements provided for in Acquisition  agreements which are determined on the
basis of future operating  earnings or similar  performance  criteria (which are
not determinable at the time of acquisition) of the acquired assets or entities,
(2) deferred  income taxes and surety  bonds  arising in the ordinary  course of
business,  (3)  any  liabilities  arising  under  rolling  options  and  similar
contracts for the  acquisition of real property  incurred in the ordinary course
of business,  and (4) any liabilities  arising under model home leases shall not
be  considered  Indebtedness  to the extent  such items are not  required  to be
capitalized in accordance with GAAP.

     "INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION 10.05.

     "INDEMNITEES" has the meaning set forth in SECTION 10.05.

     "INTANGIBLE  ASSETS"  means  assets that are  considered  to be  intangible
assets  under GAAP,  including  customer  lists,  goodwill,  computer  software,
copyrights, trade names, trademarks, patents, franchises,  licenses, unamortized
deferred charges and unamortized debt discount.

     "INTEREST COVERAGE RATIO" means as of any date of determination,  the ratio
of (a) Consolidated  EBITDA for the period of four fiscal quarters ended on such
date to (b) Consolidated Interest Incurred for such four fiscal quarters.

     "INTEREST  PAYMENT  DATE"  means (a) as to any Loan  other than a Base Rate
Loan,  the last day of each  Interest  Period  applicable  to such  Loan and the
Maturity Date; PROVIDED,  HOWEVER,  that if any Interest Period for a Eurodollar
Rate Loan exceeds three months,  the first Business Day of each January,  April,
July and October shall also be Interest  Payment  Dates;  and (b) as to any Base
Rate Loan (including a Swing Line Loan), the first Business Day of each January,
April, July and October and the Maturity Date.

                                       14
<PAGE>
     "INTEREST  PERIOD"  means  as to each  Eurodollar  Rate  Loan,  the  period
commencing on the date such Eurodollar Rate Loan is disbursed or converted to or
continued as a Eurodollar  Rate Loan and ending on the date one,  two,  three or
six months thereafter, as selected by the Borrower in its Revolving Loan Notice;
PROVIDED that:

          (i) any Interest  Period that would otherwise end on a day that is not
     a Business Day shall be extended to the next succeeding Business Day unless
     such  Business  Day falls in  another  calendar  month,  in which case such
     Interest Period shall end on the next preceding Business Day;

          (ii) any  Interest  Period that begins on the last  Business  Day of a
     calendar month (or on a day for which there is no numerically corresponding
     day in the calendar month at the end of such Interest  Period) shall end on
     the last  Business  Day of the calendar  month at the end of such  Interest
     Period; and

          (iii) no Interest Period shall extend beyond the Maturity Date.

     "INVENTORY  VALUATION  DATE" means the last day of the most recent calendar
month  with  respect to which the  Borrower  is  required  to have  delivered  a
Borrowing Base Certificate pursuant to SECTION 6.02(c).

     "INVESTMENT" means as to any Person, any direct or indirect  acquisition or
investment  by such  Person,  whether  by  means  of (a) the  purchase  or other
acquisition of capital stock or other securities of another Person,  (b) a loan,
advance or capital  contribution  to,  Guarantee  or  assumption  of debt of, or
purchase  or other  acquisition  of any other  debt or equity  participation  or
interest in, another Person, including any partnership or joint venture interest
in  such  other  Person,  or (c)  the  purchase  or  other  acquisition  (in one
transaction  or a series  of  transactions)  of assets of  another  Person  that
constitute a business unit. For purposes of covenant  compliance,  the amount of
any Investment  shall be the amount actually  invested,  without  adjustment for
subsequent increases or decreases in the value of such Investment.

     "IP RIGHTS" has the meaning set forth in SECTION 5.17.

     "IRS" means the United States Internal Revenue Service.

     "LAND"  means land owned by any Loan  Party,  which land is held for future
development or sale.

     "LAND/LOTS  UNDER  DEVELOPMENT"  means  Entitled  Land on which  grading or
construction of on-site  infrastructure  improvements has begun,  and, for which
all  necessary  zoning  approvals  have been  obtained and are in full force and
effect,  and which does not  qualify  as a Presold  Unit,  an Unsold  Unit Under
Construction or a Finished Lot.

     "LAWS" means collectively,  all international,  foreign, Federal, state and
local statutes, treaties, rules, guidelines, regulations,  ordinances, codes and
administrative   or  judicial   precedents   or   authorities,   including   the
interpretation or administration  thereof by any Governmental  Authority charged
with  the  enforcement,   interpretation  or  administration  thereof,  and  all
applicable   administrative  orders,   directed  duties,   requests,   licenses,

                                       15
<PAGE>
authorizations and permits of, and agreements with, any Governmental  Authority,
in each case whether or not having the force of law.

     "L/C ADVANCE" means with respect to each Lender,  such Lender's  funding of
its participation in any L/C Borrowing in accordance with its Pro Rata Share.

     "L/C BORROWING" means an extension of credit resulting from a drawing under
any  Letter of Credit  which  has not been  reimbursed  on the date when made or
refinanced as a Revolving Borrowing.

     "L/C  CREDIT  EXTENSION"  means with  respect to any Letter of Credit,  the
issuance  thereof or  extension  of the expiry date  thereof,  or the renewal or
increase of the amount thereof.

     "L/C ISSUER"  means  Guaranty  Bank in its capacity as issuer of Letters of
Credit  hereunder,  or  such  other  Lender  or  Lenders  as the  Borrower,  the
Administrative  Agent and such other  Lender or Lenders  may agree upon that may
also issue Letters of Credit hereunder.

     "L/C  OBLIGATIONS"  means as at any date of  determination,  the  aggregate
undrawn  amount of all  outstanding  Letters of Credit PLUS the aggregate of all
Unreimbursed Amounts, including all L/C Borrowings.

     "LENDER" has the meaning  specified in the  introductory  paragraph  hereto
and, as the context requires, includes the L/C Issuer and the Swing Line Lender.

     "LENDING  OFFICE"  means as to any  Lender,  the  office or offices of such
Lender  described as such in such  Lender's  Administrative  Reply Form, or such
other  office or offices as a Lender may from time to time  notify the  Borrower
and the Administrative Agent.

     "LETTER OF CREDIT" means any letter of credit issued hereunder. A Letter of
Credit may be a commercial letter of credit or a standby letter of credit.

     "LETTER OF CREDIT  APPLICATION"  means an application and agreement for the
issuance or amendment of a Letter of Credit in the form from time to time in use
by the L/C Issuer.

     "LETTER OF CREDIT  EXPIRATION  DATE" means the day that is seven days prior
to the Maturity  Date then in effect (or, if such day is not a Business Day, the
next preceding Business Day).

     "LETTER  OF CREDIT  SUBLIMIT"  means an amount  equal to  $40,000,000.  The
Letter of Credit  Sublimit  is part of, and not in  addition  to, the  Aggregate
Commitments.

     "LEVERAGE  RATIO" means as of any date of  determination,  the ratio of (a)
Consolidated  Indebtedness  on such date (which,  for the purpose of calculating
the Leverage  Ratio only,  shall  include  accrued  expenses of the Loan Parties
incurred in the ordinary  course of business) to (b)  Consolidated  Tangible Net
Worth on such date.

     "LIEN"  means any  mortgage,  pledge,  hypothecation,  assignment,  deposit
arrangement,  encumbrance,  lien  (statutory or other),  charge,  or preference,
priority or other security  interest or preferential  arrangement of any kind or
nature  whatsoever  (including  any  conditional  sale or other title  retention

                                       16
<PAGE>
agreement, and any financing lease having substantially the same economic effect
as any of the foregoing).

     "LOAN"  means an  extension  of credit by a Lender  to the  Borrower  under
ARTICLE II in the form of a Revolving Loan or a Swing Line Loan.

     "LOAN  DOCUMENTS"  means this Agreement,  the Notes,  the Fee Letter,  each
Guaranty, each Request for Credit Extension,  each Compliance  Certificate,  and
any other  agreement  executed,  delivered or  performable  by any Loan Party in
connection herewith or as security for the Obligations (excluding,  however, any
Swap Contract with a Lender or an Affiliate of a Lender).

     "LOAN PARTIES" means collectively, the Borrower and each Guarantor.

     "MATERIAL ADVERSE EFFECT" means any of the following events: (a) a material
adverse effect upon, the operations,  business, properties,  liabilities (actual
or contingent),  condition (financial or otherwise) or prospects of the Borrower
or the Loan Parties taken as a whole;  (b) a material  impairment of the ability
of any Loan Party to perform its obligations under any Loan Document to which it
is a party; (c) a material adverse effect upon the legality,  validity,  binding
effect or enforceability against any Loan Party of any Loan Document to which it
is a party;  or (d) the occurrence of any event or  circumstance  the effects of
which will result in, or could reasonably be expected to result in, a Default.

     "MATURITY DATE" means the earlier of (a) the Scheduled Maturity Date or (b)
such earlier date that (i) the  Obligations  become due and payable  pursuant to
this Agreement (whether by acceleration, prepayment in full, scheduled reduction
or  otherwise)  or (ii)  there  shall  exist an Event of Default  under  SECTION
8.1(f).

     "MODEL UNITS" means all Units which are  initially  used as models or sales
offices to market a  particular  Project  and that are not  intended  to be sold
until all or substantially all other Units in such particular Project are sold.

     "MOODY'S" means Moody's  Investors  Service,  Inc., or any successor rating
agency.

     "MULTIEMPLOYER  PLAN" means any employee benefit plan of the type described
in Section  4001(a)(3)  of ERISA,  to which the Borrower or any ERISA  Affiliate
makes or is obligated to make  contributions,  or during the preceding five plan
years, has made or been obligated to make contributions.

     "NET  AVAILABLE  PROCEEDS"  means,  with  respect to any  Disposition,  the
proceeds thereof in the form of Cash and Cash Equivalents, net of:

     (i) brokerage  commissions and other fees and expenses  (including fees and
expenses of legal counsel, accountants and investment banks) of such Disposition
paid to parties other than the Borrower or Affiliates of the Borrower;

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

                                       17
<PAGE>
     (iii) amounts required to be paid by any Person (other than the Borrower or
any Restricted Subsidiary) owning a beneficial interest in the assets subject to
the Disposition or having a Lien thereon;

     (iv)  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 Disposition; and

     (v)  appropriate  amounts to be provided by the Borrower or any  Restricted
Subsidiary,  as the case may be, as a reserve  required in accordance  with GAAP
against any  liabilities  associated  with such  Disposition and retained by the
Borrower  or  any  Restricted  Subsidiary,  as  the  case  may  be,  after  such
Disposition,  including pensions and other  post-employment  benefit liabilities
under any indemnification  obligations associated with such Disposition,  all as
reflected  in  an  certificate  of  a  Responsible   Officer  delivered  to  the
Administrative  Agent;  provided,  however,  that any  amounts  remaining  after
adjustments,  revaluations or liquidations of such reserves shall constitute Net
Available Proceeds.

     "NET BOOK VALUE" means, with respect to an asset owned by a Loan Party, the
gross investment of such Loan Party in the asset,  less all reserves  (including
loss reserves and reserves for  depreciation)  attributable  to that asset,  all
determined in accordance with GAAP.

     "NON-CONSENTING LENDER" has the meaning specified in SECTION 2.14(a).

     "NON-RECOURSE  INDEBTEDNESS"  with respect to any Person means Indebtedness
of such Person (i) for which 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 ninety (90) days after the acquisition of such property and for
which no other  assets of such  Person may be  realized  upon in  collection  of
principal or interest on such Indebtedness, or (ii) that refinances Indebtedness
described in clause (i) and for which the recourse is limited to the same extent
described in clause (i).

     "NOTES" means the Revolving Loan Notes and the Swing Line Note.

     "OBLIGATIONS"  means all debts,  liabilities  and  obligations  of any Loan
Party arising under any Loan Document or any Swap Contract entered into with any
Lender or any  Affiliate of any Lender,  whether  direct or indirect  (including
those acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter  arising,  and shall also  include all fees,  expenses and
other  amounts  owing to any  Lender  pursuant  to cash  management,  depository
accounts  (including  chargebacks) or similar  agreements.  Without limiting the
generality of the foregoing,  "OBLIGATIONS"  includes all amounts which would be
owed by any Loan Party or any other Person (other than  Administrative  Agent or
Lenders) to Administrative Agent, Lenders or any Affiliate of a Lender under any
Loan Document, but for the fact that they are unenforceable or not allowable due
to the existence of a bankruptcy, reorganization or similar proceeding involving
any Loan Party or any other  Person  (including  all such  amounts  which  would
become due or would be secured but for the filing of any petition in bankruptcy,
or the commencement of any insolvency,  reorganization or like proceeding of any
other Loan Party or any other Person under any Debtor Relief Law).

                                       18
<PAGE>
     "OFF-BALANCE  SHEET LIABILITIES" means with respect to any Person as of any
date  of  determination  thereof,  without  duplication  and to the  extent  not
included as a liability on the consolidated balance sheet of such Person and its
Subsidiaries   in  accordance   with  GAAP:   (a)  with  respect  to  any  asset
securitization transaction (including any accounts receivable purchase facility)
(i) the  unrecovered  investment  of  purchasers  or  transferees  of  assets so
transferred,  and (ii) any other payment, recourse,  repurchase,  hold harmless,
indemnity or similar  obligation  of such Person or any of its  Subsidiaries  in
respect of assets  transferred or payments made in respect  thereof,  other than
limited recourse provisions that are customary for transactions of such type and
that  neither  (x) have the effect of  limiting  the loss or credit risk of such
purchasers or transferees with respect to payment or performance by the obligors
of the  assets  so  transferred  nor  (y)  impair  the  characterization  of the
transaction as a true sale under applicable Laws (including Debtor Relief Laws);
(b) the monetary obligations under any financing lease or so-called "synthetic,"
tax retention or off-balance sheet lease transaction which, upon the application
of any Debtor  Relief Law to such  Person or any of its  Subsidiaries,  would be
characterized as indebtedness;  (c) any other monetary  obligation  arising with
respect to any other  transaction  which (i) upon the  application of any Debtor
Relief Law to such Person or any of its Subsidiaries,  would be characterized as
indebtedness  or (ii) is the  functional  equivalent  of or takes  the  place of
borrowing but which does not constitute a liability on the consolidated  balance
sheet of such Person and its Subsidiaries  (for purposes of this clause (c), any
transaction  structured to provide tax  deductibility as interest expense of any
dividend,  coupon or other periodic  payment will be deemed to be the functional
equivalent of a borrowing);  PROVIDED,  HOWEVER,  that (A)  liabilities  arising
under rolling options and similar contracts for the acquisition of real property
incurred in the ordinary  course of business and (B)  liabilities  arising under
model home leases in the ordinary  course of business  shall not be deemed to be
"Off-Balance Sheet Liabilities".

     "ORGANIZATION  DOCUMENTS"  means (a) with respect to any  corporation,  the
certificate  or  articles  of  incorporation  and the bylaws (or  equivalent  or
comparable  constitutive  documents with respect to any non-U.S.  jurisdiction);
(b) with respect to any limited liability  company,  the certificate or articles
of formation or organization  and operating  agreement;  and (c) with respect to
any  partnership,  joint venture,  trust or other form of business  entity,  the
partnership,  joint  venture  or other  applicable  agreement  of  formation  or
organization  and any  agreement,  instrument,  filing  or notice  with  respect
thereto  filed  in  connection  with  its  formation  or  organization  with the
applicable  Governmental  Authority  in the  jurisdiction  of its  formation  or
organization  and, if  applicable,  any  certificate or articles of formation or
organization of such entity.

     "OUTSTANDING  AMOUNT"  means (i) with respect to Revolving  Loans and Swing
Line Loans on any date, the aggregate outstanding principal amount thereof after
giving effect to any borrowings and prepayments or repayments of Revolving Loans
and Swing Line Loans, as the case may be,  occurring on such date; and (ii) with
respect to any L/C  Obligations on any date, the amount of such L/C  Obligations
on such date after giving effect to any L/C Credit  Extension  occurring on such
date and any other changes in the aggregate  amount of the L/C Obligations as of
such date,  including as a result of any  reimbursements  of outstanding  unpaid
drawings  under any Letters of Credit or any  reductions  in the maximum  amount
available for drawing under Letters of Credit taking effect on such date.

                                       19
<PAGE>
     "PARTICIPANT" has the meaning specified in SECTION 10.07(d).

     "PBGC" means the Pension Benefit Guaranty Corporation.

     "PENSION PLAN" means any "employee  pension  benefit plan" (as such term is
defined in Section  3(2) of ERISA),  other than a  Multiemployer  Plan,  that is
subject to Title IV of ERISA and is sponsored or  maintained  by the Borrower or
any ERISA Affiliate or to which the Borrower or any ERISA Affiliate  contributes
or has an obligation  to  contribute,  or in the case of a multiple  employer or
other plan described in Section 4064(a) of ERISA, has made  contributions at any
time during the immediately preceding five plan years.

     "PERMITTED  HOLDERS"  means  Steven J.  Hilton  and John R.  Landon,  their
respective wives and children,  any corporation,  limited  liability  company or
partnership  in which  either of them has voting  control  and is the direct and
beneficial  owner of a majority  of the Equity  Interests  and any trust for the
benefit of either of them or their wives or children.

     "PERMITTED LIENS" means as to any Loan Party, any of the following:

          (a) Liens for taxes,  assessments or governmental charges or levies on
     such  Loan  Party's  property  if the  same  (i)  shall  not at the time be
     delinquent or  thereafter  can be paid without  penalty,  or (ii) are being
     contested  in good  faith  and by  appropriate  proceedings  and for  which
     adequate reserves shall have been established on such Loan Party's books in
     accordance with GAAP;

          (b)  Liens  imposed  by  Law,   such  as  carriers',   warehousemen's,
     mechanics' and  materialmen's  Liens and other similar Liens arising in the
     ordinary course of business with respect to amounts that either (i) are not
     yet delinquent,  or (ii) are delinquent but are being contested in a timely
     manner in good  faith by  appropriate  proceedings  and for which  adequate
     reserves  shall  have  been  established  on such  Loan  Party's  books  in
     accordance with GAAP;

          (c) utility easements, rights of way, zoning restrictions,  covenants,
     conditions,   restrictions,   reservations,   and   such   other   burdens,
     encumbrances or charges against Real Estate, or other minor  irregularities
     of title, as are of a nature generally  existing with respect to properties
     of a similar  character and which do not in any material way interfere with
     the use thereof or the sale thereof in the  ordinary  course of business of
     such Loan Party or  materially  detract  from the value of the Real  Estate
     subject thereto;

          (d) easements,  dedications,  assessment  district or similar Liens in
     connection  with  municipal  financing  and other similar  encumbrances  or
     charges,  in  each  case  reasonably   necessary  or  appropriate  for  the
     development of Real Estate of such Loan Party, and which are granted in the
     ordinary  course  of the  business  of such  Loan  Party,  and which in the
     aggregate do not  materially  burden or impair the fair market value or use
     of such real  property  (or the  Project  to which it is  related)  for the
     purposes for which it is or may reasonably be expected to be held;

          (e) any option or right of first  refusal to purchase real property or
     marketing  deed of trust  granted to the master  developer or the seller of
     real property that arises as a result of the non-use or  non-development of

                                       20
<PAGE>
     such  real  property  by such  Loan  Party or  relates  to the  coordinated
     marketing and promotion by the master developer;

          (f) any agreement or contract to  participate  in income or revenue or
     pay lot  premiums,  in each case derived from the sale of Units or Finished
     Lots and  granted in the  ordinary  course of business to the seller of the
     real  property  upon  which  the Unit or  Finished  Lot is  constructed  or
     improved, as the case may be;

          (g) leases or  subleases  (or any Liens  related  thereto)  granted to
     others  that do not  materially  interfere  with  the  ordinary  course  of
     business of a Loan Party;

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

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

          (j) any option, contract or other agreement to sell an asset, provided
     such sale is not otherwise prohibited under this Agreement.

     "PERMITTED UNRESTRICTED  SUBSIDIARY  INDEBTEDNESS" means Indebtedness of an
Unrestricted  Subsidiary (a) as to which neither the Borrower nor any Restricted
Subsidiary (i) provides credit support of any kind  (including any  undertaking,
agreement or instrument that would constitute Indebtedness), (ii) is directly or
indirectly liable as a guarantor or otherwise,  or (iii) constitutes the lender;
(b) no default  with  respect to which  (including  any rights  that the holders
thereof may have to take enforcement action against an Unrestricted  Subsidiary)
would  permit  upon  notice,  lapse  of time or both  any  holder  of any  other
Indebtedness (other than the Notes) of the Borrower 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;  and (c) as to which the
lenders  have been  notified in writing  that they will not have any recourse to
the Equity Interests or assets of the Borrower or any Restricted Subsidiary.

     "PERSON" means any natural person, corporation,  limited liability company,
trust, joint venture, association, company, partnership,  Governmental Authority
or other entity.

     "PLAN"  means any  "employee  benefit  plan" (as such  term is  defined  in
Section 3(3) of ERISA)  established by the Borrower or, with respect to any such
plan that is subject to Section 412 of the Code or Title IV of ERISA,  any ERISA
Affiliate.

     "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 Closing Date.

     "PRESOLD  UNITS"  means a Unit owned by any Loan Party that is subject to a
Contract For Sale for sale in the ordinary course of such Loan Party's  business
of such Unit and the related lot.

     "PRO RATA SHARE"  means with respect to each Lender at any time, a fraction
(expressed  as a  percentage,  carried  out to the  ninth  decimal  place),  the
numerator of which is the amount of the  Commitment  of such Lender at such time

                                       21
<PAGE>
and the denominator of which is the amount of the Aggregate  Commitments at such
time;  PROVIDED  that if the  commitment  of each  Lender to make  Loans and the
obligation of the L/C Issuer to make L/C Credit  Extensions have been terminated
pursuant  to  SECTION  8.02,  then the Pro Rata  Share of each  Lender  shall be
determined based on the Pro Rata Share of such Lender  immediately prior to such
termination and after giving effect to any subsequent  assignments made pursuant
to the terms  hereof.  The  initial  Pro Rata Share of each  Lender is set forth
opposite  the name of such  Lender on  SCHEDULE  2.01 or in the  Assignment  and
Assumption pursuant to which such Lender becomes a party hereto, as applicable.

     "PROJECT"  means a parcel of Real Estate  owned by a Loan Party which is to
be developed or sold as a part of a common scheme.

     "PUBLIC  INDEBTEDNESS"  means  unsecured  Indebtedness  evidenced by notes,
debentures,  or other similar instruments issued after the Closing Date pursuant
to either (a) a registered  public  offering or (b) a private  placement of such
instruments  in  accordance  with  an  exemption  from  registration  under  the
Securities  Act of 1933 and/or the  Securities  Exchange  Act of 1934 or similar
law.

     "REAL ESTATE" means land, rights in land and interests therein  (including,
without   limitation,   leasehold   interests),   and   equipment,   structures,
improvements,  furnishings,  fixtures and buildings  (including a mobile home of
the type usually installed on a developed site) located on or used in connection
with land, rights in land or interests therein (including leasehold  interests),
but shall not include mortgages or interests therein.

     "RECEIVABLES"  means the net proceeds  payable to, but not received by, any
Loan Party following a Unit Closing.

     "RECEIVABLES   FACILITY  ATTRIBUTED   INDEBTEDNESS"  means  the  amount  of
obligations  outstanding  under a receivables  purchase  facility on any date of
determination  that would be  characterized as principal if such were structured
as a secured lending transaction rather than a purchase.

     "REDEEMABLE STOCK" means any Equity Interests of the Borrower or any of its
Restricted  Subsidiaries  which  prior to January  12,  2006 is (a)  mandatorily
redeemable,  (b)  redeemable  at  the  option  of  the  holder  thereof  or  (c)
convertible  into  Indebtedness  of  the  Borrower  or  any  of  its  Restricted
Subsidiaries.

     "REFINANCING  INDEBTEDNESS"  has the meaning set forth in the definition of
Restricted Payments.

     "REGISTER" has the meaning set forth in SECTION 10.07(c).

     "RELEASE DATE" means the date upon which all  Obligations  are paid in full
and the Commitments are terminated.

     "REPORTABLE  EVENT" means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

                                       22
<PAGE>
     "REQUEST  FOR CREDIT  EXTENSION"  means (a) with  respect  to a  Borrowing,
conversion or continuation of Revolving Loans, a Revolving Loan Notice, (b) with
respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with
respect to a Swing Line Loan, a Swing Line Loan Notice.

     "REQUIRED LENDERS" means as of any date of determination, Lenders having at
least 66 2/3% of the Aggregate  Commitments or, if the commitment of each Lender
to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions
have been terminated  pursuant to SECTION 8.02, Lenders holding in the aggregate
at least 66 2/3% of the Total  Outstandings  (with the aggregate  amount of each
Lender's risk  participation  and funded  participation  in L/C  Obligations and
Swing  Line Loans  being  deemed  "held" by such  Lender  for  purposes  of this
definition);  PROVIDED  that the  Commitment  of,  and the  portion of the Total
Outstandings held or deemed held by, any Defaulting Lender shall be excluded for
purposes of making a determination of Required Lenders.

     "RESPONSIBLE OFFICER" means the chief executive officer,  president,  chief
financial  officer,  treasurer  or  assistant  treasurer  of a Loan Party or the
controller of the Borrower. Any document delivered hereunder that is signed by a
Responsible Officer of a Loan Party shall be conclusively  presumed to have been
authorized by all necessary  corporate,  partnership  and/or other action on the
part of such  Loan  Party and such  Responsible  Officer  shall be  conclusively
presumed to have acted on behalf of such Loan Party.

     "RESTRICTED PAYMENT" means (a) any dividend or other distribution  (whether
in cash,  securities or other  property) with respect to any Equity  Interest of
the  Borrower or any  Restricted  Subsidiary,  or any payment  (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption,  retirement,  acquisition,  cancellation or
termination of any such Equity Interest or of any option, warrant or other right
to  acquire  any such  Equity  Interest  and (b) any  payment or  prepayment  of
principal,  interest, premium or penalty on the Senior Notes or any other Public
Indebtedness  or  Subordinated  Debt  of  any  Loan  Party  or  any  defeasance,
redemption,  purchase,  repurchase or other acquisition or retirement for value,
in whole or in part,  of the Senior  Notes or any other Public  Indebtedness  or
Subordinated  Debt  (including,  without  limitation,  the setting  aside or the
deposit of funds therefor); PROVIDED, HOWEVER, a refinancing of the Senior Notes
or any other Public  Indebtedness or Subordinated Debt, to the extent consisting
of the  repayment of the Senior Notes or any other Public  Indebtedness  or such
Subordinated Debt and the simultaneous  incurring of new Indebtedness in respect
of the Senior  Notes or such other  Public  Indebtedness  or  Subordinated  Debt
("REFINANCING  INDEBTEDNESS"),  respectively,  shall not constitute a Restricted
Payment so long as (i) the  Refinancing  Indebtedness is subordinated to or PARI
PASSU with the Obligations (or Guarantor's  obligations  under its Guaranty,  as
applicable) to the same extent as the Indebtedness being refunded, refinanced or
extended,  and (ii) the  Refinancing  Indebtedness  is  scheduled  to  mature no
earlier than the current maturity date of such Indebtedness.

     "RESTRICTED  SUBSIDIARY"  means any Subsidiary of the Borrower which is not
an Unrestricted Subsidiary.

                                       23
<PAGE>
     "REVOLVING   BORROWING"  means  a  borrowing   consisting  of  simultaneous
Revolving  Loans of the same Type and,  in the case of  Eurodollar  Rate  Loans,
having the same Interest Period made by each of the Lenders  pursuant to SECTION
2.01.

     "REVOLVING LOAN" has the meaning specified in SECTION 2.01.

     "REVOLVING LOAN NOTICE" means a notice of (a) a Revolving Borrowing,  (b) a
conversion of Revolving  Loans from one Type to the other, or (c) a continuation
of Eurodollar  Rate Loans,  pursuant to SECTION  2.02(A),  which, if in writing,
shall be substantially in the form of EXHIBIT A.

     "REVOLVING NOTE" means a promissory note made by the Borrower in favor of a
Lender evidencing Revolving Loans made by such Lender, substantially in the form
of EXHIBIT C.

     "SALE AND LEASEBACK  TRANSACTION"  means any transaction  providing for the
leasing to any Loan Party of any property or to any Person in exchange for funds
which have been or are to be advanced by such Person on the  security of, or for
the transfer of, such property.

     "SCHEDULED  MATURITY  DATE" means  December  12,  2005,  as the same may be
extended pursuant to SECTION 2.14.

     "S&P" means Standard & Poor's  Ratings  Group,  a division of  McGraw-Hill,
Inc., or any successor rating agency.

     "SEC" means the Securities  and Exchange  Commission,  or any  Governmental
Authority succeeding to any of its principal functions.

     "SENIOR  AND  SUBORDINATED  INDEBTEDNESS"  means the  Senior  Notes and any
Subordinated Debt.

     "SENIOR NOTE INDENTURE" means that certain  Indenture,  dated as of May 30,
2001, among the Borrower,  the guarantors  named therein,  and Wells Fargo Bank,
National Association, as Trustee, entered into with respect to the Senior Notes.

     "SENIOR  NOTES"  means the 9-3/4%  Senior Notes of the Borrower due 2011 in
the original  principal  amount of  $165,000,000,  with any such  amendments  or
modifications as permitted by SECTION 7.13, and any Refinancing  Indebtedness in
respect of the Senior Notes.

     SHAREHOLDERS'  EQUITY" means as of any date of determination,  consolidated
shareholders'  equity  of  the  Loan  Parties  as of  that  date  determined  in
accordance with GAAP.

     "SOLVENT"  means,   with  respect  to  any  Person,   as  of  any  date  of
determination,  that  the fair  value  of the  assets  of such  Person  (at fair
valuation)  is, on the date of  determination,  greater than the total amount of
liabilities  (including contingent and unliquidated  liabilities) of such Person
as of such date,  that the  present  fair  saleable  value of the assets of such
Person will,  as of such date,  be greater than the amount that will be required
to pay the  probable  liability of such Person on its debts as such debts become
absolute and matured, and that, as of such date, such Person will be able to pay
all liabilities of such Person as such  liabilities  mature and such Person does
not have  unreasonably  small  capital with which to carry on its  business.  In
computing the amount of contingent or unliquidated liabilities at any time, such

                                       24
<PAGE>
liabilities  will be computed at the amount which, in light of all the facts and
circumstances  existing at such time,  represents the amount that can reasonably
be expected to become an actual or matured liability discounted to present value
at rates believed to be reasonable by such Person.

     "SUBORDINATED   DEBT"  means  any  Indebtedness  of  the  Borrower  or  any
Restricted Subsidiary which is expressly  subordinated to the Obligations at all
times (including in respect of any amendment or modification  thereto)  pursuant
to terms satisfactory to the Required Lenders.

     "SUBSIDIARY"  of a  Person  means  with  respect  to  any  Person  (a)  any
corporation,  limited  liability  company,  association or other business entity
(other than a partnership),  of which more than fifty percent (50%) of the total
voting power of the Equity Interests  entitled (without regard to the occurrence
of any  contingency)  to vote in the election of the Board of Directors or other
governing  body  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) and (b) any  partnership (i) the sole general
partner or the managing  general partner of which is such Person or a Subsidiary
of such Person or (ii) the only general partners of which are such Person or one
or  more  Subsidiaries  of  such  Person  (or any  combination  hereof).  Unless
otherwise   specified,   all  references   herein  to  a   "SUBSIDIARY"   or  to
"SUBSIDIARIES" shall refer to a Subsidiary or Subsidiaries of the Borrower.

     "SWAP CONTRACT" means (a) any and all rate swap transactions,  basis swaps,
credit  derivative  transactions,  forward rate  transactions,  commodity swaps,
commodity options, forward commodity contracts,  equity or equity index swaps or
options,  bond or bond price or bond index  swaps or options or forward  bond or
forward bond price or forward bond index  transactions,  interest  rate options,
forward foreign exchange  transactions,  cap transactions,  floor  transactions,
collar  transactions,  currency  swap  transactions,  cross-currency  rate  swap
transactions,   currency   options,   spot  contracts,   or  any  other  similar
transactions or any  combination of any of the foregoing  (including any options
to enter  into any of the  foregoing),  whether or not any such  transaction  is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related  confirmations,  which are subject to the terms and
conditions  of, or governed  by, any form of master  agreement  published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange  Master  Agreement,  or any other  master  agreement  (any such  master
agreement, together with any related schedules, a "MASTER AGREEMENT"), including
any such obligations or liabilities under any Master Agreement.

     "SWAP  TERMINATION  VALUE"  means  in  respect  of  any  one or  more  Swap
Contracts,  after  taking into  account  the effect of any  legally  enforceable
netting agreement relating to such Swap Contracts,  (a) for any date on or after
the date such Swap  Contracts  have been  closed  out and  termination  value(s)
determined in accordance therewith,  such termination value(s),  and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts  (which may include a Lender or any Affiliate of a
Lender).

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<PAGE>
     "SWING LINE" means the  revolving  credit  facility  made  available by the
Swing Line Lender pursuant to SECTION 2.04.

     "SWING LINE  BORROWING"  means a borrowing of a Swing Line Loan pursuant to
SECTION 2.04.

     "SWING LINE  LENDER"  means  Guaranty  Bank in its  capacity as provider of
Swing Line Loans, or any successor swing line lender hereunder.

     "SWING LINE LOAN" has the meaning specified in SECTION 2.04(a).

     "SWING LINE LOAN NOTICE" means a notice of a Swing Line Borrowing  pursuant
to SECTION 2.04(B),  which, if in writing, shall be substantially in the form of
EXHIBIT B.  "SWING LINE NOTE" means a  promissory  note made by the  Borrower in
favor of the Swing Line Lender  evidencing Swing Line Loans made by such Lender,
substantially in the favor of EXHIBIT I.

     "SWING  LINE  SUBLIMIT"  means  an  amount  equal  to  the  lesser  of  (a)
$25,000,000 and (b) the Aggregate  Commitments.  The Swing Line Sublimit is part
of, and not in addition to, the Aggregate Commitments.

     "SYNDICATION   AGENT"  means  Fleet  National  Bank,  in  its  capacity  as
syndication agent under any of the Loan Documents.

     "SYNTHETIC  LEASE  OBLIGATION"  means the monetary  obligation  of a Person
under (a) a so-called  synthetic,  off-balance  sheet or tax retention lease, or
(b) an agreement for the use or possession of property creating obligations that
do not appear on the balance sheet of such Person but which, upon the insolvency
or bankruptcy of such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment);  PROVIDED,  HOWEVER, that model
home leases  entered into in the ordinary  course of business of such Person and
consistent  with practices of such Person prior to the Closing Date shall not be
considered Synthetic Lease Obligations.

     "TOTAL  OUTSTANDINGS"  means the aggregate  Outstanding Amount of all Loans
and all L/C Obligations.

     "TYPE" means with respect to a Revolving Loan, its character as a Base Rate
Loan or a Eurodollar Rate Loan.

     "UNENTITLED LAND" means any Land which is not zoned to permit single family
residences as a use by right (or a comparable classification under local Law).

     "UNFUNDED  PENSION  LIABILITY" means the excess of a Pension Plan's benefit
liabilities  under Section  4001(a)(16) of ERISA, over the current value of that
Pension Plan's assets,  determined in accordance with the  assumptions  used for
funding the Pension Plan pursuant to Section 412 of the Code for the  applicable
plan year.

                                       26
<PAGE>
     "UNIMPROVED  ENTITLED LAND" means Entitled Land that is not Land/Lots Under
Development,  Finished Lots or any real property upon which the  construction of
Units has  commenced  (as  described in the  definition  of "UNSOLD  UNITS UNDER
CONSTRUCTION").

     "UNIT" means a single-family  dwelling (where construction has commenced as
described  in the  definition  of "UNSOLD  UNITS UNDER  CONSTRUCTION"),  whether
detached or attached  (including  condominiums,  but  excluding  mobile  homes),
including the parcel of Land in which such dwelling is located.

     "UNIT  CLOSING"  means a closing of the sale of a Unit by a Loan Party to a
bona fide purchaser for value that is not an Affiliate of a Loan Party.

     "UNITED STATES" and "U.S." mean the United States of America.

     "UNREIMBURSED AMOUNT" has the meaning set forth in SECTION 2.03(c)(i).

     "UNRESTRICTED   SUBSIDIARY"  means  (1)  any  Subsidiary  of  the  Borrower
designated  by the board of  directors  of the  Borrower  from time to time as a
"Unrestricted Subsidiary" pursuant to a resolution of the board of directors and
(2) any Subsidiary of an  Unrestricted  Subsidiary,  but only to the extent such
Subsidiary:

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

     (ii) is not party to any agreement,  contract, arrangement or understanding
with the Borrower or any Restricted  Subsidiary of the Borrower unless the terms
of any  such  agreement,  contract,  arrangement  or  understanding  are no less
favorable to the Borrower or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Borrower;

     (iii) is a Person with respect to which neither the Borrower nor any of its
Restricted  Subsidiaries has any direct or indirect  obligation (a) to subscribe
for  additional  Equity  Interests  or (b)  maintain or preserve  such  Person's
financial  condition or to cause such person to achieve any specified  levels of
operating results;

     (iv) has not guaranteed or otherwise directly or indirectly provided credit
support  for  any  Indebtedness  of  the  Borrower  or  any  of  its  Restricted
Subsidiaries,  unless such  guarantee  or credit  support is released  upon such
designation; and

     (v) is  designated  an  "Unrestricted  Subsidiary"  under the  Senior  Note
Indenture or any Refinancing Indebtedness relating thereto.

Any  designation of a Restricted  Subsidiary of the Borrower as an  Unrestricted
Subsidiary  shall be  evidenced to the  Administrative  Agent by filing with the
Administrative  Agent  a  certified  copy  of the  resolution  of the  board  of
directors  giving effect to such designation and an certificate of a Responsible
Officer certifying that such designation complied with the preceding conditions.
If at any time an  Unrestricted  Subsidiary  shall  fail to meet  the  preceding
requirements  as an Unrestricted  Subsidiary,  it shall  thereafter  cease to be
deemed  an  Unrestricted  Subsidiary  for  purposes  of this  Agreement  and any
Indebtedness of such  Subsidiary  shall be deemed to be incurred by a Restricted

                                       27
<PAGE>
Subsidiary  of the  Borrower  as of such date.  Notwithstanding  anything to the
contrary  contained  herein,  each Guarantor  shall at all times be a Restricted
Subsidiary  for all  purposes  hereunder,  and  Borrower  shall not  designate a
Guarantor as an  Unrestricted  Subsidiary.  As of the Closing Date, the Borrower
shall  be  deemed  to  have  designated  Texas  Home  Mortgage  Corporation  and
MTH-Mortgage, LLC as Unrestricted Subsidiaries.

     "UNSOLD UNITS" means any Unit which is not a Presold Unit or a Model Unit.

     "UNSOLD  UNITS  UNDER  CONSTRUCTION"  means all  Units  for which  building
permits have been issued and construction  has commenced but not completed,  and
for which there is no Contract For Sale. Construction will be considered to have
"commenced" when the slab or foundation for the Unit has been completed.

     "VOTING STOCK" of any Person means Equity Interests of any class or classes
having  ordinary  voting  power for the  election  of at least a majority of the
members of the board of directors,  managing  general partners or the equivalent
governing  body of such Person,  irrespective  of whether,  at the time,  Equity
Interests  of any other class or classes or such entity shall have or might have
voting power by reason of the happening of any contingency.

     1.02 OTHER  INTERPRETIVE  PROVISIONS.  With reference to this Agreement and
each other Loan Document,  unless  otherwise  specified  herein or in such other
Loan Document:

     (a) The meanings of defined  terms are equally  applicable  to the singular
and plural forms of the defined terms.

     (b)  (i) The words "HEREIN,"  "HERETO,"  "HEREOF" and "HEREUNDER" and words
of  similar  import  when  used in any Loan  Document  shall  refer to such Loan
Document as a whole and not to any particular provision thereof.

          (ii) Article, Section, Exhibit and Schedule references are to the Loan
     Document in which such reference appears.

          (iii) The term "INCLUDING" is by way of example and not limitation.

          (iv) The term "DOCUMENTS" includes any and all instruments, documents,
     agreements,  certificates, notices, reports, financial statements and other
     writings, however evidenced, whether in physical or electronic form.

     (c) In the  computation of periods of time from a specified date to a later
specified  date, the word "FROM" means "FROM AND  INCLUDING;" the words "TO" and
"UNTIL"  each  mean "TO BUT  EXCLUDING;"  and the word  "THROUGH"  means "TO AND
INCLUDING."

     (d) Section  headings  herein and in the other Loan  Documents are included
for  convenience  of reference only and shall not affect the  interpretation  of
this Agreement or any other Loan Document.

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<PAGE>
     1.03 ACCOUNTING TERMS.

     (a) All  accounting  terms not  specifically  or completely  defined herein
shall be  construed  in  conformity  with,  and all  financial  data  (including
financial  ratios and other  financial  calculations)  required to be  submitted
pursuant to this Agreement shall be prepared in conformity with, GAAP applied on
a  consistent  basis,  as in  effect  from  time to  time,  applied  in a manner
consistent with that used in preparing the Audited Financial Statements,  EXCEPT
as otherwise specifically prescribed herein.

     (b) If at any time any change in GAAP would affect the  computation  of any
financial  ratio or requirement  set forth in any Loan Document,  and either the
Borrower or the Required Lenders shall so request, the Administrative Agent, the
Lenders and the  Borrower  shall  negotiate in good faith to amend such ratio or
requirement  to preserve the original  intent thereof in light of such change in
GAAP (subject to the approval of the Required Lenders);  PROVIDED THAT, until so
amended,  (i)  such  ratio or  requirement  shall  continue  to be  computed  in
accordance  with GAAP prior to such change  therein and (ii) the Borrower  shall
provide to the  Administrative  Agent and the Lenders  financial  statements and
other  documents  required  under  this  Agreement  or as  reasonably  requested
hereunder setting forth a reconciliation  between  calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.

     (c)  In  the  event  that  the  Borrower  shall  acquire,  pursuant  to  an
Acquisition  permitted  under  this  Agreement,  (i) a  majority  of the  Equity
Interests  of another  Person,  (ii) all or  substantially  all of the assets of
another  Person  or (iii)  all or  substantially  all of a line of  business  of
another Person (the  "ACQUIRED  BUSINESS")  and,  provided that (A) the Borrower
shall have furnished to the Administrative  Agent, and the Administrative  Agent
shall have approved (1)  consolidated  balance  sheets and related  consolidated
statements  of  earnings,  stockholders'  equity and cash flows of the  Acquired
Business for the most recently  concluded fiscal year of the Acquired  Business,
prepared in accordance with GAAP  consistently  applied and audited and reported
upon  by a firm  of  independent  certified  public  accountants  of  recognized
standing  acceptable to the Administrative  Agent (such audit to be unqualified)
and (2) for any quarters of the next  succeeding  fiscal year that are concluded
as of the date of such Acquisition, a consolidated balance sheet of the Acquired
Business as of the end of the most recent quarter,  and the related consolidated
statement  of earnings  and cash flows of the  Acquired  Business for the period
from the beginning of the current  fiscal year to the end of that  quarter,  all
prepared in accordance with GAAP consistently  applied,  unaudited but certified
to be true and accurate,  subject to normal year-end audit  adjustments,  by the
chief financial  officer of the Acquired  Business and (B) the Acquired Business
shall  either  become or be merged  into,  or its assets shall be acquired by, a
Guarantor hereunder,  then, from and after such Acquisition,  the Borrower shall
include in the  determination  of  Consolidated  EBITDA,  Consolidated  Interest
Expense,  Consolidated  Interest  Incurred and Consolidated Net Income,  for any
applicable  period for which such amounts are to be determined  pursuant to this
Agreement,  such Acquired  Business as if such Acquired Business had been a Loan
Party during such period.

     1.04  ROUNDING.  Any  financial  ratios  required to be  maintained  by the
Borrower  pursuant  to this  Agreement  shall  be  calculated  by  dividing  the
appropriate  component by the other component,  carrying the result to one place
more than the  number of places by which  such  ratio is  expressed  herein  and

                                       29
<PAGE>
rounding  the result up or down to the nearest  number  (with a  rounding-up  if
there is no nearest number).

     1.05 REFERENCES TO AGREEMENTS AND LAWS. Unless otherwise expressly provided
herein, (a) references to Organization Documents, agreements (including the Loan
Documents)  and other  contractual  instruments  shall be deemed to include  all
subsequent   amendments,   restatements,   extensions,   supplements  and  other
modifications   thereto,   but  only  to  the  extent   that  such   amendments,
restatements, extensions, supplements and other modifications are not prohibited
by any Loan Document;  and (b) references to any Law shall include all statutory
and  regulatory  provisions  and  rulings  consolidating,  amending,  replacing,
supplementing or interpreting such Law.

     1.06 TIMES OF DAY. Unless  otherwise  specified,  all references  herein to
times of day shall be  references  to Central Time  (daylight  or  standard,  as
applicable).

     1.07 LETTER OF CREDIT AMOUNTS.  Unless otherwise specified,  all references
herein to the  amount of a Letter of Credit at any time  shall be deemed to mean
the  maximum  face amount of such Letter of Credit  after  giving  effect to all
increases thereof  contemplated by such Letter of Credit or the Letter of Credit
Application  therefor,  whether or not such  maximum face amount is in effect at
such time.

                                   ARTICLE II.

                      THE COMMITMENTS AND CREDIT EXTENSIONS

     2.01 REVOLVING LOANS.

     (a)  Subject to the terms and  conditions  set forth  herein,  each  Lender
severally  agrees to make  loans  (each such loan,  a  "REVOLVING  LOAN") to the
Borrower from time to time, on any Business Day during the Availability  Period,
in an aggregate  amount not to exceed at any time outstanding the amount of such
Lender's  Commitment;  PROVIDED,  HOWEVER,  that  after  giving  effect  to  any
Revolving  Borrowing,  (i) the Total Outstandings shall not exceed the Aggregate
Commitments, (ii) the aggregate Outstanding Amount of the Revolving Loans of any
Lender,  plus such Lender's Pro Rata Share of the Outstanding  Amount of all L/C
Obligations,  PLUS such Lender's Pro Rata Share of the Outstanding Amount of all
Swing Line Loans shall not exceed such Lender's  Commitment  and (iii) except as
provided  in  Section  2.01(b)  below,  the  aggregate  principal  amount of all
Borrowing  Base Debt shall not exceed the  Borrowing  Base  determined as of the
most  recent  Inventory  Valuation  Date.  Within  the  limits of each  Lender's
Commitment,  and subject to the other terms and conditions  hereof, the Borrower
may borrow under this SECTION  2.01,  prepay under  SECTION  2.05,  and reborrow
under this SECTION  2.01.  Revolving  Loans may be Base Rate Loans or Eurodollar
Rate Loans, as further provided herein.

     (b)  Notwithstanding  the provisions of SECTION 2.01(A) above, the Borrower
may elect to deliver to  Administrative  Agent a Borrowing  Base  Certificate in
anticipation  of an Investment as a result of an  Acquisition  that includes all
assets that would have been included in the Borrowing  Base had the  Acquisition
been  consummated as of the last Inventory  Valuation Date,  provided,  however,
that such Borrowing Base  Certificate  shall (i) be delivered by the Borrower to

                                       30
<PAGE>
the Administrative Agent at least three days prior to the anticipated closing of
such  Acquisition  and (ii) expressly state that it is delivered in anticipation
of,  and  shall  only be  effective  hereunder  for  purposes  of the  Revolving
Borrowings made on or after, the consummation of such Acquisition. Upon or after
the consummation of such  Acquisition,  such Borrowing Base Certificate shall be
effective for determining the maximum amount available for any Revolving Loan in
accordance with SECTION 2.01(a) above.

     2.02 BORROWINGS, CONVERSIONS AND CONTINUATIONS OF REVOLVING LOANS.

     (a) Each Revolving  Borrowing,  each conversion of Revolving Loans from one
Type to the other, and each  continuation of Eurodollar Rate Loans shall be made
upon the Borrower's irrevocable notice to the Administrative Agent, which may be
given by  telephone.  Each such notice  must be  received by the  Administrative
Agent not later than 11:00 a.m. (i) three  Business  Days prior to the requested
date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans
or of any conversion of Eurodollar Rate Loans to Base Rate Revolving  Loans, and
(ii) on the requested date of any Borrowing of Base Rate Revolving  Loans.  Each
telephonic  notice by the  Borrower  pursuant to this  SECTION  2.02(b)  must be
confirmed  promptly  by  delivery  to  the  Administrative  Agent  of a  written
Revolving  Loan  Notice,  appropriately  completed  and signed by a  Responsible
Officer of the Borrower.  Each Borrowing of,  conversion to or  continuation  of
Eurodollar  Rate Loans shall be in a principal  amount of  $5,000,000 or a whole
multiple of $1,000,000 in excess thereof. Except as provided in SECTIONS 2.03(c)
and 2.04(c),  each Borrowing of or conversion to Base Rate Revolving Loans shall
be in a principal  amount of $500,000 or a whole  multiple of $100,000 in excess
thereof.  Each  Revolving  Loan Notice  (whether  telephonic  or written)  shall
specify  (i)  whether  the  Borrower is  requesting  a  Revolving  Borrowing,  a
conversion of Revolving  Loans from one Type to the other,  or a continuation of
Eurodollar Rate Loans,  (ii) the requested date of the Borrowing,  conversion or
continuation,  as the case may be (which  shall be a  Business  Day),  (iii) the
principal amount of Revolving Loans to be borrowed, converted or continued, (iv)
the Type of Revolving Loans to be borrowed or to which existing  Revolving Loans
are to be converted, and (v) if applicable,  the duration of the Interest Period
with respect thereto.  If the Borrower fails to specify a Type of Revolving Loan
in a Revolving  Loan  Notice or if the  Borrower  fails to give a timely  notice
requesting a conversion or  continuation,  then the applicable  Revolving  Loans
shall  be made as,  or  converted  to,  Base  Rate  Loans.  Any  such  automatic
conversion  to Base  Rate  Loans  shall be  effective  as of the last day of the
Interest  Period then in effect with respect to the applicable  Eurodollar  Rate
Loans. If the Borrower  requests a Borrowing of,  conversion to, or continuation
of Eurodollar Rate Loans in any such Revolving Loan Notice, but fails to specify
an Interest  Period,  it will be deemed to have specified an Interest  Period of
one month.

     (b) Following receipt of a Revolving Loan Notice, the Administrative  Agent
shall  promptly  notify  each  Lender of the amount of its Pro Rata Share of the
applicable  Revolving  Loans,  and  if  no  timely  notice  of a  conversion  or
continuation is provided by the Borrower,  the Administrative Agent shall notify
each  Lender of the  details  of any  automatic  conversion  to Base Rate  Loans
described in the  preceding  subsection.  In the case of a Revolving  Borrowing,
each  Lender  shall  make the  amount of its  Revolving  Loan  available  to the
Administrative  Agent  in  immediately  available  funds  at the  Administrative
Agent's  Office not later than 1:00 p.m. on the  Business  Day  specified in the
applicable Revolving Loan Notice. Upon satisfaction of the applicable conditions
set  forth in  SECTION  4.02  (and,  if such  Borrowing  is the  initial  Credit

                                       31
<PAGE>
Extension,  SECTION  4.01),  the  Administrative  Agent  shall make all funds so
received   available   to  the  Borrower  in  like  funds  as  received  by  the
Administrative  Agent either by (i) crediting the account of the Borrower on the
books of  Guaranty  Bank with the amount of such funds or (ii) wire  transfer of
such  funds,  in each case in  accordance  with  instructions  provided  to (and
reasonably  acceptable to) the Administrative  Agent by the Borrower;  PROVIDED,
HOWEVER,  that if, on the date the  Revolving  Loan Notice with  respect to such
Borrowing is given by the Borrower, there are Swing Line Loans or L/C Borrowings
outstanding, then the proceeds of such Borrowing shall be applied, FIRST, to the
payment in full of any such L/C  Borrowings,  SECOND,  to the payment in full of
any such Swing Line Loans, and THIRD, to the Borrower as provided above.

     (c) Except as otherwise  provided  herein,  a  Eurodollar  Rate Loan may be
continued  or  converted  only on the last day of an  Interest  Period  for such
Eurodollar  Rate  Loan.  During  the  existence  of a  Default,  no Loans may be
requested  as,  converted to or continued as  Eurodollar  Rate Loans without the
consent of the Required Lenders.

     (d) The  Administrative  Agent shall  promptly  notify the Borrower and the
Lenders of the interest rate  applicable to any Interest  Period for  Eurodollar
Rate Loans upon  determination  of such interest rate. The  determination of the
Eurodollar Rate by the  Administrative  Agent shall be conclusive in the absence
of  manifest  error.  At any time  that Base Rate  Loans  are  outstanding,  the
Administrative  Agent shall notify the Borrower and the Lenders of any change in
Guaranty Bank's prime rate used in determining the Base Rate promptly  following
the public announcement of such change.

     (e) After giving effect to all Revolving  Borrowings,  all  conversions  of
Revolving Loans from one Type to the other,  and all  continuations of Revolving
Loans as the same Type,  there  shall not be more than ten  Interest  Periods in
effect with respect to Revolving Loans.

     2.03 LETTERS OF CREDIT.

     (a) THE LETTER OF CREDIT COMMITMENT.

          (i) Subject to the terms and conditions set forth herein,  (A) the L/C
     Issuer  agrees,  in reliance  upon the  agreements of the other Lenders set
     forth in this  SECTION  2.03,  (1) from  time to time on any  Business  Day
     during  the  period  from the  Closing  Date  until  the  Letter  of Credit
     Expiration Date, to issue Letters of Credit for the account of the Borrower
     or certain Restricted Subsidiaries, and to amend or renew Letters of Credit
     previously  issued by it, in accordance with subsection (b) below,  and (2)
     to honor drafts under the Letters of Credit;  and (B) the Lenders severally
     agree to  participate  in Letters of Credit  issued for the  account of the
     Borrower;  PROVIDED  that no L/C Issuer  shall be obligated to make any L/C
     Credit Extension with respect to any Letter of Credit,  and no Lender shall
     be  obligated to  participate  in any Letter of Credit if as of the date of
     such L/C Credit  Extension,  (I) the Total  Outstandings  would  exceed the
     Aggregate  Commitments,  (II)  the  aggregate  Outstanding  Amount  of  the
     Revolving  Loans of any Lender,  PLUS such  Lender's  Pro Rata Share of the
     Outstanding  Amount of all L/C  Obligations,  PLUS such  Lender's  Pro Rata
     Share of the  Outstanding  Amount of all Swing Line Loans would exceed such
     Lender's  Commitment,  (III) the Outstanding  Amount of the L/C Obligations
     would exceed the Letter of Credit Sublimit or (IV) the aggregate  principal

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<PAGE>
     amount  of  all  Borrowing  Base  Debt  would  exceed  the  Borrowing  Base
     determined  as of the most  recent  Inventory  Valuation  Date.  Within the
     foregoing  limits,  and  subject to the terms and  conditions  hereof,  the
     Borrower's  ability to obtain  Letters of Credit shall be fully  revolving,
     and  accordingly  the Borrower  may,  during the foregoing  period,  obtain
     Letters of Credit to replace  Letters of Credit  that have  expired or that
     have been drawn upon and reimbursed.

          (ii) No L/C Issuer shall be under any  obligation  to issue any Letter
     of Credit if:

               (A) any order,  judgment or decree of any Governmental  Authority
          or arbitrator shall by its terms purport to enjoin or restrain the L/C
          Issuer from issuing such Letter of Credit,  or any Law  applicable  to
          the L/C Issuer or any request or directive  (whether or not having the
          force of law) from any Governmental  Authority with  jurisdiction over
          the L/C Issuer shall prohibit,  or request that the L/C Issuer refrain
          from,  the  issuance of letters of credit  generally or such Letter of
          Credit in  particular or shall impose upon the L/C Issuer with respect
          to  such  Letter  of  Credit  any  restriction,   reserve  or  capital
          requirement  (for  which the L/C Issuer is not  otherwise  compensated
          hereunder) not in effect on the Closing Date, or shall impose upon the
          L/C  Issuer  any  unreimbursed  loss,  cost or  expense  which was not
          applicable  on the Closing Date and which the L/C Issuer in good faith
          deems material to it;

               (B) the  expiry  date of such  requested  Letter of Credit  would
          occur more than twenty-four  months after the date of issuance or last
          renewal, unless the Required Lenders have approved such expiry date;

               (C) the  expiry  date of such  requested  Letter of Credit  would
          occur  after the  Letter of Credit  Expiration  Date,  unless  all the
          Lenders have approved such expiry date;

               (D) the  issuance of such Letter of Credit  would  violate one or
          more policies of the L/C Issuer;

               (E) such Letter of Credit is denominated in a currency other than
          Dollars; or

               (F) the face amount of such Letter of Credit exceeds $20,000,000.

          (iii) The L/C Issuer shall be under no  obligation to amend any Letter
     of Credit if (A) the L/C Issuer  would have no  obligation  at such time to
     issue such Letter of Credit in its amended form under the terms hereof,  or
     (B) the  beneficiary  of such Letter of Credit does not accept the proposed
     amendment to such Letter of Credit.

     (b) PROCEDURES FOR ISSUANCE AND AMENDMENT OF LETTERS OF CREDIT.

          (i) Each Letter of Credit shall be issued or amended,  as the case may
     be,  upon the  request  of the  Borrower  delivered  to the L/C  Issuer for
     Letters  of Credit  to be  issued by it (with a copy to the  Administrative

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<PAGE>
     Agent)  in the  form  of a  Letter  of  Credit  Application,  appropriately
     completed and signed by a Responsible Officer of the Borrower.  Such Letter
     of  Credit  Application  must  be  received  by  the  L/C  Issuer  and  the
     Administrative  Agent not later than 11:00 a.m. at least two Business  Days
     (or such later  date and time as the L/C  Issuer may agree in a  particular
     instance in its sole  discretion)  prior to the proposed  issuance  date or
     date of  amendment,  as the case may be.  In the case of a  request  for an
     initial issuance of a Letter of Credit,  such Letter of Credit  Application
     shall specify in form and detail  satisfactory  to the L/C Issuer:  (A) the
     proposed  issuance date of the requested Letter of Credit (which shall be a
     Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the
     name and  address  of the  beneficiary  thereof;  (E) the  documents  to be
     presented by such  beneficiary in case of any drawing  thereunder;  (F) the
     full text of any certificate to be presented by such beneficiary in case of
     any drawing  thereunder;  and (G) such other  matters as the L/C Issuer may
     require.  In the case of a  request  for an  amendment  of any  outstanding
     Letter of Credit,  such Letter of Credit  Application shall specify in form
     and  detail  satisfactory  to the L/C Issuer (A) the Letter of Credit to be
     amended;  (B) the  proposed  date of  amendment  thereof  (which shall be a
     Business Day); (C) the nature of the proposed amendment; and (D) such other
     matters as the L/C Issuer may require.

          (ii) Promptly after receipt of any Letter of Credit  Application,  the
     L/C Issuer will confirm with the  Administrative  Agent (by telephone or in
     writing) that the  Administrative  Agent has received a copy of such Letter
     of Credit  Application  from the Borrower  and, if not, the L/C Issuer will
     provide the Administrative  Agent with a copy thereof.  Upon receipt by the
     L/C Issuer of confirmation from the Administrative Agent that the requested
     issuance or amendment is permitted  in  accordance  with the terms  hereof,
     then,  subject to the terms and conditions hereof, the L/C Issuer shall, on
     the  requested  date,  issue a Letter  of  Credit  for the  account  of the
     Borrower  or enter into the  applicable  amendment,  as the case may be, in
     each case in accordance with the L/C Issuer's usual and customary  business
     practices.  Immediately  upon the  issuance of each Letter of Credit,  each
     Lender  shall be deemed  to,  and hereby  irrevocably  and  unconditionally
     agrees to,  purchase  from the L/C Issuer  issuing  such Letter of Credit a
     risk  participation  in such  Letter of  Credit  in an amount  equal to the
     product of such  Lender's Pro Rata Share TIMES the amount of such Letter of
     Credit.

          (iii)  Promptly  after  its  delivery  of any  Letter of Credit or any
     amendment to a Letter of Credit to an advising bank with respect thereto or
     to the  beneficiary  thereof,  the L/C  Issuer  will  also  deliver  to the
     Borrower  and the  Administrative  Agent a true and  complete  copy of such
     Letter of Credit or amendment.

     (c) DRAWINGS AND REIMBURSEMENTS; FUNDING OF PARTICIPATIONS.

          (i) Upon receipt from the  beneficiary  of any Letter of Credit of any
     notice of a drawing  under such  Letter of Credit,  the L/C Issuer for such
     Letter of Credit shall notify the  Borrower  and the  Administrative  Agent
     thereof.  Not later than 11:00 a.m.  on the date of any  payment by the L/C
     Issuer  under a Letter of Credit  (each such date,  an "HONOR  DATE"),  the
     Borrower shall reimburse the L/C Issuer through the Administrative Agent in
     an amount equal to the amount of such drawing.  If the Borrower fails to so
     reimburse  the L/C  Issuer by such time,  the  Administrative  Agent  shall

                                       34
<PAGE>
     promptly  notify  each  Lender  of  the  Honor  Date,  the  amount  of  the
     unreimbursed  drawing (the "UNREIMBURSED  AMOUNT"),  and the amount of such
     Lender's  Pro Rata Share  thereof.  In such event,  the  Borrower  shall be
     deemed to have  requested  a Revolving  Borrowing  of Base Rate Loans to be
     disbursed on the Honor Date in an amount equal to the Unreimbursed  Amount,
     without  regard to the minimum and multiples  specified in SECTION 2.02 for
     the principal  amount of Base Rate Loans,  but subject to the amount of the
     unutilized  portion of the Aggregate  Commitments  and the  conditions  set
     forth in SECTION 4.02 (other than the delivery of a Revolving Loan Notice).
     Any notice given by the L/C Issuer or the Administrative  Agent pursuant to
     this SECTION 2.03(C)(I) may be given by telephone if immediately  confirmed
     in writing;  PROVIDED that the lack of such an immediate confirmation shall
     not affect the conclusiveness or binding effect of such notice.

          (ii) Each Lender  (including  the Lender  acting as L/C Issuer)  shall
     upon any notice pursuant to SECTION  2.03(c)(i) make funds available to the
     Administrative   Agent  for  the   account   of  the  L/C   Issuer  at  the
     Administrative  Agent's  Office in an amount equal to its Pro Rata Share of
     the  Unreimbursed  Amount  not later  than 1:00 p.m.  on the  Business  Day
     specified in such notice by the Administrative Agent, whereupon, subject to
     the  provisions  of SECTION  2.03(c)(iii),  each Lender that so makes funds
     available  shall be deemed to have made a Base Rate  Revolving  Loan to the
     Borrower in such amount. The Administrative  Agent shall remit the funds so
     received to the L/C Issuer.

          (iii)  With  respect  to any  Unreimbursed  Amount  that is not  fully
     refinanced  by a  Revolving  Borrowing  of  Base  Rate  Loans  because  the
     conditions  set forth in SECTION  4.02 cannot be satisfied or for any other
     reason,  the Borrower  shall be deemed to have incurred from the L/C Issuer
     an L/C  Borrowing in the amount of the  Unreimbursed  Amount that is not so
     refinanced,  which  L/C  Borrowing  shall  be due  and  payable  on  demand
     (together  with  interest)  and shall bear interest at the Default Rate. In
     such  event,  each  Lender's  payment to the  Administrative  Agent for the
     account of the L/C Issuer pursuant to SECTION  2.03(c)(ii)  shall be deemed
     payment in respect of its  participation  in such L/C  Borrowing  and shall
     constitute  an  L/C  Advance  from  such  Lender  in  satisfaction  of  its
     participation obligation under this SECTION 2.03.

          (iv)  Until  each  Lender  funds  its  Revolving  Loan or L/C  Advance
     pursuant to this SECTION 2.03(c) to reimburse the L/C Issuer for any amount
     drawn under any Letter of Credit,  interest in respect of such Lender's Pro
     Rata  Share of such  amount  shall be  solely  for the  account  of the L/C
     Issuer.

          (v) Each Lender's  obligation to make Revolving  Loans or L/C Advances
     to reimburse the L/C Issuer for amounts  drawn under Letters of Credit,  as
     contemplated by this SECTION 2.03(c),  shall be absolute and  unconditional
     and shall not be affected by any  circumstance,  including (A) any set-off,
     counterclaim, recoupment, defense or other right which such Lender may have
     against the L/C  Issuer,  the  Borrower or any other  Person for any reason
     whatsoever;  (B) the  occurrence or  continuance  of a Default,  or (C) any
     other occurrence,  event or condition, whether or not similar to any of the
     foregoing.  No such making of an L/C  Advance  shall  relieve or  otherwise
     impair the  obligation  of the Borrower to reimburse the L/C Issuer for the

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<PAGE>
     amount of any  payment  made by the L/C Issuer  under any Letter of Credit,
     together with interest as provided herein.

          (vi) If any Lender fails to make available to the Administrative Agent
     for the  account of the L/C Issuer any amount  required  to be paid by such
     Lender pursuant to the foregoing  provisions of this SECTION 2.03(c) by the
     time specified in SECTION 2.03(c)(ii),  the L/C Issuer shall be entitled to
     recover from such Lender  (acting  through the  Administrative  Agent),  on
     demand, such amount with interest thereon for the period from the date such
     payment  is  required  to the date on which  such  payment  is  immediately
     available to the L/C Issuer at a rate per annum equal to the Federal  Funds
     Rate from time to time in effect. A certificate of the L/C Issuer submitted
     to any  Lender  (through  the  Administrative  Agent)  with  respect to any
     amounts  owing under this clause (vi) shall be conclusive  absent  manifest
     error.

     (d) REPAYMENT OF PARTICIPATIONS.

          (i) At any time  after the L/C  Issuer  has made a  payment  under any
     Letter of Credit and has received from any Lender such Lender's L/C Advance
     in respect of such  payment in  accordance  with  SECTION  2.03(c),  if the
     Administrative Agent receives for the account of the L/C Issuer any payment
     in respect of the related  Unreimbursed Amount or interest thereon (whether
     directly  from  the  Borrower  or  otherwise,  including  proceeds  of Cash
     Collateral applied thereto by the Administrative Agent), the Administrative
     Agent  will   distribute   to  such  Lender  its  Pro  Rata  Share  thereof
     (appropriately  adjusted,  in the case of interest payments, to reflect the
     period of time during which such Lender's L/C Advance was  outstanding)  in
     the same funds as those received by the Administrative Agent.

          (ii) If any  payment  received  by the  Administrative  Agent  for the
     account of the L/C Issuer pursuant to SECTION  2.03(c)(i) is required to be
     returned  under  any  of  the  circumstances  described  in  SECTION  10.06
     (including pursuant to any settlement entered into by the L/C Issuer in its
     discretion),  each  Lender  shall pay to the  Administrative  Agent for the
     account  of the L/C  Issuer  its Pro Rata  Share  thereof  on demand of the
     Administrative Agent, plus interest thereon from the date of such demand to
     the date such amount is returned by such Lender,  at a rate per annum equal
     to the Federal Funds Rate from time to time in effect.

     (e) OBLIGATIONS  ABSOLUTE.  The obligation of the Borrower to reimburse the
L/C Issuer for each  drawing  under each  Letter of Credit and to repay each L/C
Borrowing shall be absolute,  unconditional  and irrevocable,  and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances,
including the following:

          (i) any lack of validity or  enforceability  of such Letter of Credit,
     this Agreement, or any other agreement or instrument relating thereto;

          (ii) the  existence of any claim,  counterclaim,  set-off,  defense or
     other right that the Borrower may have at any time against any  beneficiary
     or any transferee of such Letter of Credit (or any Person for whom any such
     beneficiary or any such  transferee  may be acting),  any L/C Issuer or any

                                       36
<PAGE>
     other Person,  whether in connection with this Agreement,  the transactions
     contemplated  hereby  or by such  Letter  of  Credit  or any  agreement  or
     instrument relating thereto, or any unrelated transaction;

          (iii) any draft, demand, certificate or other document presented under
     such  Letter  of  Credit  proving  to be  forged,  fraudulent,  invalid  or
     insufficient  in any  respect  or any  statement  therein  being  untrue or
     inaccurate  in any  respect;  or any loss or delay in the  transmission  or
     otherwise  of any document  required in order to make a drawing  under such
     Letter of Credit;

          (iv) any payment by any L/C Issuer under such Letter of Credit against
     presentation  of a draft or certificate  that does not strictly comply with
     the terms of such Letter of Credit;  or any payment  made by any L/C Issuer
     under  such  Letter of Credit to any Person  purporting  to be a trustee in
     bankruptcy,  debtor-in-possession,  assignee for the benefit of  creditors,
     liquidator,  receiver  or  other  representative  of or  successor  to  any
     beneficiary  or any  transferee  of such  Letter of Credit,  including  any
     arising in connection with any proceeding under any Debtor Relief Law; or

          (v) any other  circumstance  or happening  whatsoever,  whether or not
     similar to any of the  foregoing,  including  any other  circumstance  that
     might otherwise  constitute a defense  available to, or a discharge of, the
     Borrower.

     The  Borrower  shall  promptly  examine a copy of each Letter of Credit and
each amendment thereto that is delivered to it and, in the event of any claim of
noncompliance  with  the  Borrower's  instructions  or other  irregularity,  the
Borrower  will  immediately  notify  the  L/C  Issuer.  The  Borrower  shall  be
conclusively deemed to have waived any such claim against the L/C Issuer and its
correspondents unless such notice is given as aforesaid.

     (f) ROLE OF L/C ISSUER.  Each Lender and the Borrower agree that, in paying
any  drawing   under  a  Letter  of  Credit,   no  L/C  Issuer  shall  have  any
responsibility to obtain any document (other than any sight draft,  certificates
and  documents  expressly  required by the Letter of Credit) or to  ascertain or
inquire as to the validity or accuracy of any such  document or the authority of
the Person  executing or delivering any such  document.  None of the L/C Issuer,
any Agent-Related Person nor any of the respective correspondents,  participants
or  assignees of the L/C Issuer shall be liable to any Lender for (i) any action
taken or omitted in  connection  herewith at the request or with the approval of
the Lenders or the Required  Lenders,  as  applicable;  (ii) any action taken or
omitted in the absence of gross negligence or willful  misconduct;  or (iii) the
due  execution,  effectiveness,  validity or  enforceability  of any document or
instrument related to any Letter of Credit or Letter of Credit Application.  The
Borrower hereby assumes all risks of the acts or omissions of any beneficiary or
transferee with respect to its use of any Letter of Credit;  PROVIDED,  HOWEVER,
that this assumption is not intended to, and shall not,  preclude the Borrower's
pursuing  such rights and  remedies as it may have  against the  beneficiary  or
transferee  at law or under any other  agreement.  None of any L/C  Issuer,  any
Agent-Related Person, nor any of the respective correspondents,  participants or
assignees  of any L/C  Issuer,  shall be  liable or  responsible  for any of the
matters  described  in clauses  (i) through  (v) of SECTION  2.03(e);  PROVIDED,
HOWEVER,  that  anything in such  clauses to the contrary  notwithstanding,  the
Borrower  may have a claim  against a L/C  Issuer,  and such L/C  Issuer  may be

                                       37
<PAGE>
liable to the Borrower, to the extent, but only to the extent, of any direct, as
opposed to  consequential  or exemplary,  damages suffered by the Borrower which
the Borrower proves were caused by the L/C Issuer's willful  misconduct or gross
negligence or the L/C Issuer's willful failure to pay under any Letter of Credit
issued by it after the  presentation  to it by the  beneficiary of a sight draft
and  certificate(s)  strictly  complying  with the terms and  conditions of such
Letter of Credit. In furtherance and not in limitation of the foregoing, any L/C
Issuer may accept  documents  that appear on their face to be in order,  without
responsibility   for  further   investigation,   regardless  of  any  notice  or
information  to the  contrary,  and no L/C Issuer shall be  responsible  for the
validity  or  sufficiency  of  any  instrument   transferring  or  assigning  or
purporting  to transfer or assign a Letter of Credit  issued by it or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.

     (g) CASH COLLATERAL.  Upon the request of the Administrative  Agent, (i) if
any L/C Issuer has honored any full or partial  drawing request under any Letter
of Credit and such drawing has resulted in an L/C  Borrowing,  or (ii) if, as of
the Letter of Credit  Expiration  Date,  any Letter of Credit may for any reason
remain  outstanding  and  partially  or  wholly  undrawn,   the  Borrower  shall
immediately  Cash   Collateralize  the  then  Outstanding   Amount  of  all  L/C
Obligations (in an amount equal to such Outstanding  Amount determined as of the
date of such L/C Borrowing or the Letter of Credit  Expiration Date, as the case
may be). For purposes hereof,  "CASH  Collateralize" means to pledge and deposit
with or deliver to the Administrative  Agent, for the benefit of each L/C Issuer
and the Lenders, as collateral for the L/C Obligations,  cash or deposit account
balances  pursuant to  documentation  in form and substance  satisfactory to the
Administrative  Agent and the L/C Issuers (which  documents are hereby consented
to by the Lenders).  Derivatives of such term have corresponding  meanings.  The
Borrower hereby grants to the  Administrative  Agent, for the benefit of the L/C
Issuers and the Lenders,  a security interest in all such cash, deposit accounts
and all balances  therein and all  proceeds of the  foregoing.  Cash  collateral
shall be  maintained  in  blocked,  non-interest  bearing  deposit  accounts  at
Guaranty Bank.

     (h)  APPLICABILITY OF ISP98 AND UCP. Unless  otherwise  expressly agreed by
the L/C Issuer and the Borrower when a Letter of Credit is, (i) the rules of the
"International   Standby   Practices   1998"   published  by  the  Institute  of
International Banking Law & Practice (or such later version thereof as may be in
effect at the time of issuance)  shall apply to each  standby  Letter of Credit,
and (ii) the rules of the Uniform Customs and Practice for Documentary  Credits,
as most recently published by the International  Chamber of Commerce (the "ICC")
at the time of issuance  (including the ICC decision published by the Commission
on Banking Technique and Practice on April 6, 1998 regarding the European single
currency (euro)) shall apply to each commercial Letter of Credit.

     (i) LETTER OF CREDIT  FEES.  The Borrower  shall pay to the  Administrative
Agent for the  account of each  Lender in  accordance  with its Pro Rata Share a
Letter of Credit fee for each Letter of Credit equal to the Applicable  Rate for
Letters of Credit  TIMES the daily  maximum  amount  available to be drawn under
such  Letter of Credit  (whether  or not such  maximum  amount is then in effect
under such Letter of Credit).  Such letter of credit fees shall be computed on a
quarterly basis in arrears.  Such letter of credit fees shall be due and payable
on the first Business Day of each January,  April, July and October,  commencing
with the first such date to occur  after the  issuance of such Letter of Credit,

                                       38
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on the Letter of Credit  Expiration  Date and thereafter on demand.  If there is
any change in the Applicable  Rate during any quarter,  the daily maximum amount
of each Letter of Credit shall be computed and multiplied by the Applicable Rate
separately for each period during such quarter that such  Applicable Rate was in
effect.

     (j) FRONTING FEE AND  DOCUMENTARY  AND  PROCESSING  CHARGES  PAYABLE TO L/C
ISSUER.  The Borrower shall pay directly to the L/C Issuer for its own account a
fronting fee with respect to each Letter of Credit issued by the L/C Issuer at a
per annum rate equal to 0.125% TIMES the daily  maximum  amount  available to be
drawn under such Letter of Credit (whether or not such maximum amount is then in
effect  under  such  Letter of  Credit).  Such  letter of credit  fees  shall be
computed  on a quarterly  basis in arrears.  Such letter of credit fees shall be
due and payable on the first  Business  Day after the end of each  March,  June,
September and December,  commencing  with the first such date to occur after the
issuance of such Letter of Credit,  or the Letter of Credit  Expiration Date and
thereafter on demand.  In addition,  the Borrower  shall pay directly to the L/C
Issuer for its own account the customary issuance,  presentation,  amendment and
other processing  fees, and other standard costs and charges,  of the L/C Issuer
relating  to letters of credit as from time to time in  effect.  Such  customary
fees and  standard  costs and  charges  are due and  payable  on demand  and are
nonrefundable.

     (k)  CONFLICT  WITH  LETTER  OF  CREDIT  APPLICATION.  In the  event of any
conflict  between  the  terms  hereof  and the  terms of any  Letter  of  Credit
Application, the terms hereof shall control.

     (l)  OBLIGATIONS  OF L/C ISSUER.  Except to the extent that a Lender  shall
have  agreed  to be  designated  as a L/C  Issuer,  no  Lender  shall  have  any
obligation  to accept or approve any request for, or to issue,  amend or extend,
any Letter of Credit.

     (m) EXISTING LETTERS OF CREDIT. The  Administrative  Agent and Wells Fargo,
each as a letter of credit issuer  pursuant to the Existing  Credit  Facilities,
issued prior to the date hereof and there are currently  outstanding pursuant to
the Existing Credit  Facilities  those certain  letters of credit  identified on
SCHEDULE  2.03(m) hereto (the "EXISTING  L/CS").  The Existing L/Cs shall remain
outstanding  after the date of this  Agreement  and,  from and after the date of
this Agreement,  shall constitute  Letters of Credit for all purposes under this
Agreement  and  shall be  subject  to all terms and  conditions  hereof.  On the
Closing Date the  participation  of the Lenders  pursuant to the Existing Credit
Facilities in the Existing L/Cs shall terminate and the Administrative Agent and
Wells  Fargo,   as  the  case  may  be,  as  issuer  shall  be  deemed  to  have
unconditionally  and  irrevocably  sold to each Lender and each Lender  shall be
deemed,  without further action by any party hereto, to have unconditionally and
irrevocably  purchased from the such issuer a participation in each Existing L/C
as a Letter of Credit pursuant to SECTION 2.03(c).

     2.04 SWING LINE LOANS.

     (a) THE SWING LINE.  Subject to the terms and  conditions set forth herein,
the Swing Line Lender agrees to make loans (each such loan, a "SWING LINE LOAN")
to the Borrower  from time to time on any  Business Day during the  Availability
Period in an aggregate  amount not to exceed at any time  outstanding the amount
of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans,
when aggregated  with the Pro Rata Share of the Outstanding  Amount of Revolving
Loans and L/C Obligations of the Lender acting as Swing Line Lender,  may exceed

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<PAGE>
the amount of such Lender's  Commitment;  PROVIDED,  HOWEVER,  that after giving
effect to any Swing Line Loan, (i) the Total  Outstandings  shall not exceed the
Aggregate  Commitments,  (ii) the aggregate  Outstanding Amount of the Revolving
Loans of any Lender (other than the Swing Line  Lender),  PLUS such Lender's Pro
Rata Share of the Outstanding Amount of all L/C Obligations,  PLUS such Lender's
Pro Rata  Share of the  Outstanding  Amount of all Swing  Line  Loans  shall not
exceed such Lender's Commitment, and (iii) the aggregate principal amount of all
Borrowing  Base Debt shall not exceed the  Borrowing  Base  determined as of the
most recent Inventory Valuation Date, and PROVIDED,  FURTHER,  that the Borrower
shall not use the proceeds of any Swing Line Loan to refinance  any  outstanding
Swing Line Loan. Within the foregoing limits, and subject to the other terms and
conditions hereof, the Borrower may borrow under this SECTION 2.04, prepay under
SECTION 2.05, and reborrow  under this Section 2.04.  Each Swing Line Loan shall
be a Base Rate Loan.  Immediately  upon the  making of a Swing  Line Loan,  each
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Swing Line Lender a risk participation in such Swing Line Loan
in an amount  equal to the  product of such  Lender's  Pro Rata Share  TIMES the
amount of such Swing Line Loan.

     (b) BORROWING PROCEDURES.  Each Swing Line Borrowing shall be made upon the
Borrower's  irrevocable  notice to the Swing Line Lender and the  Administrative
Agent, which may be given by telephone. Each such notice must be received by the
Swing Line Lender and the  Administrative  Agent not later than 1:00 p.m. on the
requested borrowing date, and shall specify (i) the amount to be borrowed, which
shall be a minimum of $100,000,  and (ii) the requested  borrowing  date,  which
shall be a Business Day. Each such telephonic notice must be confirmed  promptly
by delivery to the Swing Line Lender and the  Administrative  Agent of a written
Swing Line Loan  Notice,  appropriately  completed  and signed by a  Responsible
Officer of the Borrower.  Promptly after receipt by the Swing Line Lender of any
telephonic  Swing Line Loan Notice,  the Swing Line Lender will confirm with the
Administrative  Agent (by telephone or in writing) that the Administrative Agent
has also received such Swing Line Loan Notice and, if not, the Swing Line Lender
will  notify  the  Administrative  Agent (by  telephone  or in  writing)  of the
contents thereof. Unless the Swing Line Lender has received notice (by telephone
or in writing) from the  Administrative  Agent  (including at the request of any
Lender) prior to 2:00 p.m. on the date of the proposed  Swing Line Borrowing (A)
directing  the Swing Line Lender not to make such Swing Line Loan as a result of
the  limitations  set forth in the  proviso  to the first  sentence  of  SECTION
2.04(A),  or (B)  that one or more of the  applicable  conditions  specified  in
ARTICLE IV is not then  satisfied,  then,  subject  to the terms and  conditions
hereof,  the Swing Line Lender will,  not later than 3:00 p.m. on the  borrowing
date specified in such Swing Line Loan Notice, make the amount of its Swing Line
Loan  available to the  Borrower at its office by  crediting  the account of the
Borrower on the books of the Swing Line Lender in immediately available funds.

     (c) REFINANCING OF SWING LINE LOANS.

          (i) The  Swing  Line  Lender  at any  time in its  sole  and  absolute
     discretion may request, on behalf of the Borrower (which hereby irrevocably
     authorizes  the Swing Line Lender to so request on its  behalf),  that each
     Lender make a Base Rate  Revolving Loan in an amount equal to such Lender's
     Pro Rata Share of the amount of Swing  Line  Loans then  outstanding.  Such
     request shall be made in writing (which written  request shall be deemed to

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<PAGE>
     be a Revolving Loan Notice for purposes  hereof) and in accordance with the
     requirements  of SECTION 2.02,  without regard to the minimum and multiples
     specified  therein for the principal amount of Base Rate Loans, but subject
     to the  unutilized  portion of the  Aggregate  Commitments.  The Swing Line
     Lender shall furnish the Borrower with a copy of the  applicable  Revolving
     Loan Notice  promptly after  delivering  such notice to the  Administrative
     Agent.  Each Lender shall make an amount equal to its Pro Rata Share of the
     amount   specified  in  such  Revolving   Loan  Notice   available  to  the
     Administrative Agent in immediately  available funds for the account of the
     Swing Line Lender at the Administrative  Agent's Office not later than 1:00
     p.m. on the day specified in such Revolving Loan Notice, whereupon, subject
     to SECTION 2.04(c)(ii),  each Lender that so makes funds available shall be
     deemed to have  made a Base Rate  Revolving  Loan to the  Borrower  in such
     amount. The  Administrative  Agent shall remit the funds so received to the
     Swing Line Lender.

          (ii) If for any  reason any Swing Line Loan  cannot be  refinanced  by
     such a Revolving  Borrowing  in  accordance  with SECTION  2.04(c)(i),  the
     request for Base Rate Revolving Loans submitted by the Swing Line Lender as
     set forth  herein  shall be deemed to be a request by the Swing Line Lender
     that each of the Lenders fund its risk  participation in the relevant Swing
     Line Loan and each  Lender's  payment to the  Administrative  Agent for the
     account of the Swing Line Lender  pursuant to SECTION  2.04(c)(i)  shall be
     deemed payment in respect of such participation.

          (iii) If any  Lender  fails to make  available  to the  Administrative
     Agent for the  account of the Swing Line  Lender any amount  required to be
     paid by such Lender  pursuant to the  foregoing  provisions of this SECTION
     2.04(c) by the time specified in SECTION 2.04(c)(i),  the Swing Line Lender
     shall  be  entitled  to  recover  from  such  Lender  (acting  through  the
     Administrative Agent), on demand, such amount with interest thereon for the
     period  from the date such  payment is  required  to the date on which such
     payment is  immediately  available  to the Swing Line  Lender at a rate per
     annum  equal to the  Federal  Funds  Rate  from time to time in  effect.  A
     certificate of the Swing Line Lender  submitted to any Lender  (through the
     Administrative  Agent) with respect to any amounts  owing under this clause
     (iii) shall be conclusive absent manifest error.

          (iv) Each Lender's  obligation to make Revolving  Loans or to purchase
     and fund risk  participations  in Swing Line Loans pursuant to this SECTION
     2.04(c)  shall be absolute and  unconditional  and shall not be affected by
     any  circumstance,  including  (A) any set-off,  counterclaim,  recoupment,
     defense or other right  which such  Lender may have  against the Swing Line
     Lender, the Borrower or any other Person for any reason whatsoever, (B) the
     occurrence or continuance of a Default, or (C) any other occurrence,  event
     or  condition,  whether  or not  similar to any of the  foregoing.  No such
     funding  of risk  participations  shall  relieve  or  otherwise  impair the
     obligation  of the  Borrower  to repay  Swing  Line  Loans,  together  with
     interest as provided herein.

     (d) REPAYMENT OF PARTICIPATIONS.

          (i) At any time  after any  Lender  has  purchased  and  funded a risk
     participation  in a Swing Line Loan, if the Swing Line Lender  receives any
     payment on account of such  Swing  Line Loan,  the Swing Line  Lender  will

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<PAGE>
     distribute to such Lender its Pro Rata Share of such payment (appropriately
     adjusted,  in the case of interest payments,  to reflect the period of time
     during which such Lender's risk participation was funded) in the same funds
     as those received by the Swing Line Lender.

          (ii) If any  payment  received  by the Swing Line Lender in respect of
     principal  or interest on any Swing Line Loan is required to be returned by
     the Swing Line Lender under any of the  circumstances  described in SECTION
     10.06 (including  pursuant to any settlement entered into by the Swing Line
     Lender in its  discretion),  each Lender shall pay to the Swing Line Lender
     its Pro Rata Share  thereof  on demand of the  Administrative  Agent,  plus
     interest  thereon  from the date of such  demand to the date such amount is
     returned,  at a rate  per  annum  equal  to the  Federal  Funds  Rate.  The
     Administrative  Agent will make such  demand  upon the request of the Swing
     Line Lender.

     (e) INTEREST FOR ACCOUNT OF SWING LINE LENDER.  The Swing Line Lender shall
be responsible  for invoicing the Borrower for interest on the Swing Line Loans.
Until  each  Lender  funds its Base Rate  Revolving  Loan or risk  participation
pursuant to this SECTION 2.04 to refinance  such  Lender's Pro Rata Share of any
Swing Line Loan,  interest in respect of such Pro Rata Share shall be solely for
the account of the Swing Line Lender.

     (f)  PAYMENTS  DIRECTLY TO SWING LINE LENDER.  The Borrower  shall make all
payments of principal  and interest in respect of the Swing Line Loans  directly
to the Swing Line Lender.

     2.05 PREPAYMENTS.

     (a) The Borrower may, upon notice to the Administrative  Agent, at any time
or from  time to time  voluntarily  prepay  Revolving  Loans in whole or in part
without  premium or penalty;  PROVIDED  that (i) such notice must be received by
the Administrative Agent not later than 11:00 a.m. (A) three Business Days prior
to any  date of  prepayment  of  Eurodollar  Rate  Loans  and (B) on the date of
prepayment of Base Rate Revolving Loans;  (ii) any prepayment of Eurodollar Rate
Loans  shall be in a  principal  amount of  $5,000,000  or a whole  multiple  of
$1,000,000 in excess  thereof;  and (iii) any  prepayment of Base Rate Revolving
Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000
in excess thereof or, in each case, if less, the entire principal amount thereof
then  outstanding.  Each such notice  shall  specify the date and amount of such
prepayment and the Type(s) of Revolving Loans to be prepaid.  The Administrative
Agent will promptly  notify each Lender of its receipt of each such notice,  and
of the amount of such Lender's Pro Rata Share of such prepayment. If such notice
is given by the  Borrower,  the  Borrower  shall  make such  prepayment  and the
payment  amount  specified  in such notice  shall be due and payable on the date
specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied
by all accrued interest thereon,  together with any additional  amounts required
pursuant to SECTION 3.05. Each such prepayment shall be applied to the Revolving
Loans of the Lenders in accordance with their respective Pro Rata Shares.

     (b) The Borrower  may, upon notice to the Swing Line Lender (with a copy to
the Administrative  Agent), at any time or from time to time, voluntarily prepay
Swing Line Loans in whole or in part without  premium or penalty;  PROVIDED that
(i) such notice must be received by the Swing Line Lender and the Administrative
Agent not later than 1:00 p.m. on the date of the prepayment,  and (ii) any such

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<PAGE>
prepayment shall be in a minimum principal amount of $100,000.  Each such notice
shall specify the date and amount of such prepayment. If such notice is given by
the Borrower,  the Borrower  shall make such  prepayment  and the payment amount
specified in such notice shall be due and payable on the date specified therein.

     (c) If for any  reason  the  Total  Outstandings  at any  time  exceed  the
Aggregate  Commitments  then in effect,  the Borrower shall  immediately  prepay
Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal
to such excess;  PROVIDED,  HOWEVER,  that the Borrower shall not be required to
Cash  Collateralize the L/C Obligations  pursuant to this SECTION 2.05(c) unless
after the  prepayment  in full of the  Revolving  Loans and Swing Line Loans the
Total Outstandings exceed the Aggregate Commitments then in effect.

     2.06 TERMINATION OR REDUCTION OF COMMITMENTS. The Borrower may, upon notice
to the Administrative Agent, terminate the Aggregate  Commitments,  or from time
to time permanently reduce the Aggregate Commitments; PROVIDED that (i) any such
notice shall be received by the  Administrative  Agent not later than 11:00 a.m.
five Business Days prior to the date of termination or reduction,  (ii) any such
partial  reduction  shall be in an aggregate  amount of $10,000,000 or any whole
multiple of $1,000,000 in excess thereof, (iii) the Borrower shall not terminate
or reduce the Aggregate  Commitments  if, after giving effect thereto and to any
concurrent  prepayments  hereunder,  the Total  Outstandings  would  exceed  the
Aggregate Commitments,  and (iv) if, after giving effect to any reduction of the
Aggregate Commitments,  the Letter of Credit Sublimit or the Swing Line Sublimit
exceeds  the  amount  of the  Aggregate  Commitments,  such  Sublimit  shall  be
automatically  reduced by the amount of such excess.  The  Administrative  Agent
will promptly  notify the Lenders of any such notice of termination or reduction
of the Aggregate  Commitments.  Any reduction of the Aggregate Commitments shall
be applied to the Commitment of each Lender according to its Pro Rata Share. All
commitment  fees accrued  until the  effective  date of any  termination  of the
Aggregate Commitments shall be paid on the effective date of such termination.

     2.07 REPAYMENT OF LOANS.

     (a) The  Borrower  shall  repay to the  Lenders  on the  Maturity  Date the
aggregate  principal amount of Revolving Loans  outstanding on such date and all
other outstanding and unpaid Obligations.

     (b) The  Borrower  shall repay each Swing Line Loan on the earlier to occur
of (i) the date five Business Days after such Loan is made and (ii) the Maturity
Date.

     2.08 INTEREST.

     (a) Subject to the provisions of subsection (b) below,  (i) each Eurodollar
Rate Loan shall bear interest on the  outstanding  principal  amount thereof for
each  Interest  Period  at a rate  per  annum  equal  to the  lesser  of (A) the
Eurodollar  Rate for such Interest  Period PLUS the  Applicable  Rate or (B) the
Highest  Lawful Rate;  (ii) each Base Rate Revolving Loan shall bear interest on
the outstanding principal amount thereof from the applicable borrowing date at a
rate per annum equal to the lesser of (A) the Base Rate PLUS the Applicable Rate
or (B) the  Highest  Lawful  Rate;  and (iii)  each  Swing  Line Loan shall bear
interest  on the  outstanding  principal  amount  thereof  from  the  applicable

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<PAGE>
borrowing date at a rate per annum equal to the lesser of (A) the Base Rate PLUS
the Applicable Rate or (B) the Highest Lawful Rate.

     (b) If any amount  payable by the Borrower  under any Loan  Document is not
paid when due  (without  regard to any  applicable  grace  periods),  whether at
stated maturity, by acceleration or otherwise, such amount shall thereafter bear
interest  at a  fluctuating  interest  rate per annum at all times  equal to the
Default Rate to the fullest extent  permitted by applicable  Laws.  Furthermore,
upon the request of the Required Lenders, while any Event of Default exists, the
Borrower  shall  pay  interest  on  the  principal  amount  of  all  outstanding
Obligations  hereunder  at a  fluctuating  interest  rate per annum at all times
equal to the Default Rate to the fullest  extent  permitted by applicable  Laws.
Accrued and unpaid interest on past due amounts (including  interest on past due
interest) shall be due and payable upon demand.

     (c)  Interest  on each Loan  shall be due and  payable  in  arrears on each
Interest  Payment  Date  applicable  thereto  and at such other  times as may be
specified herein. Interest hereunder shall be due and payable in accordance with
the  terms  hereof  before  and  after  judgment,   and  before  and  after  the
commencement of any proceeding under any Debtor Relief Law.

     2.09 FEES. In addition to certain fees described in subsections (i) and (j)
of SECTION 2.03:

     (a) COMMITMENT FEE. The Borrower shall pay to the Administrative  Agent for
the account of each Lender in accordance  with its Pro Rata Share,  a commitment
fee equal to the  Applicable  Rate  TIMES the actual  daily  amount by which the
Aggregate  Commitments exceed the sum of (i) the Outstanding Amount of Revolving
Loans and (ii) the  Outstanding  Amount of L/C  Obligations.  The commitment fee
shall accrue at all times during the Availability Period,  including at any time
during which one or more of the  conditions  in ARTICLE IV is not met, and shall
be due and payable  quarterly in arrears on the last Business Day of each March,
June, September and December, commencing with the first such date to occur after
the  Closing  Date,  and on the  Maturity  Date.  The  commitment  fee  shall be
calculated  quarterly in arrears,  and if there is any change in the  Applicable
Rate  during  any  quarter,  the  actual  daily  amount  shall be  computed  and
multiplied by the Applicable Rate separately for each period during such quarter
that such Applicable Rate was in effect.

     (b) OTHER FEES.

          (i) The  Borrower  shall pay to the  Arranger  and the  Administrative
     Agent for their own  respective  accounts  fees in the  amounts  and at the
     times  specified  in the Fee Letter.  Such fees shall be fully  earned when
     paid and shall not be refundable for any reason whatsoever.

          (ii) The  Borrower  shall pay to the  Lenders  such fees as shall have
     been  separately  agreed upon in writing in the amounts and at the times so
     specified.  Such  fees  shall be fully  earned  when  paid and shall not be
     refundable for any reason whatsoever.

     2.10  COMPUTATION  OF INTEREST AND FEES. All  computations  of interest for
Base Rate Loans when the Base Rate is determined by Guaranty Bank's "prime rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and

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<PAGE>
actual days elapsed.  All other  computations of fees and interest shall be made
on the basis of a 360-day  year and actual days elapsed  (which  results in more
fees or interest,  as applicable,  being paid than if computed on the basis of a
365-day year).  Interest shall accrue on each Loan for the day on which the Loan
is made, and shall not accrue on a Loan, or any portion thereof,  for the day on
which the Loan or such portion is paid, PROVIDED that any Loan that is repaid on
the same day on  which  it is made  shall,  subject  to  Section  2.12(a),  bear
interest for one day.

     2.11 EVIDENCE OF DEBT.

     (a) The Credit  Extensions made by each Lender shall be evidenced by one or
more  accounts or records  maintained  by such Lender and by the  Administrative
Agent in the ordinary course of business.  The accounts or records maintained by
the  Administrative  Agent and each Lender shall be conclusive  absent  manifest
error of the amount of the Credit Extensions made by the Lenders to the Borrower
and the interest and payments thereon.  Any failure to so record or any error in
doing so shall not,  however,  limit or otherwise  affect the  obligation of the
Borrower  hereunder to pay any amount owing with respect to the Obligations.  In
the event of any conflict  between the accounts  and records  maintained  by any
Lender and the  accounts and records of the  Administrative  Agent in respect of
such matters, the accounts and records of the Administrative Agent shall control
in the absence of manifest  error.  Upon the request of any Lender made  through
the Administrative  Agent, the Borrower shall execute and deliver to such Lender
(through the  Administrative  Agent) a Note,  which shall evidence such Lender's
Loans in addition to such accounts or records.  Each Lender may attach schedules
to its Note and  endorse  thereon  the date,  Type (if  applicable),  amount and
maturity of its Loans and payments with respect thereto.

     (b) In addition to the accounts and records  referred to in subsection (a),
each Lender and the  Administrative  Agent shall maintain in accordance with its
usual  practice  accounts or records  evidencing the purchases and sales by such
Lender of participations in Letters of Credit and Swing Line Loans. In the event
of  any  conflict   between  the  accounts   and  records   maintained   by  the
Administrative  Agent and the  accounts  and records of any Lender in respect of
such matters, the accounts and records of the Administrative Agent shall control
in the absence of manifest error.

     2.12 PAYMENTS GENERALLY.

     (a) All payments to be made by the Borrower shall be made without condition
or deduction for any  counterclaim,  defense,  recoupment  or setoff.  Except as
otherwise  expressly  provided  herein,  all payments by the Borrower  hereunder
shall be made to the  Administrative  Agent,  for the account of the  respective
Lenders to which such payment is owed, at the  Administrative  Agent's Office in
Dollars and in immediately  available funds not later than 2:00 p.m. on the date
specified  herein.  The  Administrative  Agent will promptly  distribute to each
Lender its Pro Rata Share (or other applicable share as provided herein) of such
payment in like funds as received  by wire  transfer  to such  Lender's  Lending
Office. All payments received by the Administrative  Agent after 1:00 p.m. shall
be  deemed  received  on the next  succeeding  Business  Day and any  applicable
interest or fee shall continue to accrue.

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<PAGE>
     (b) Subject to the  provisions of the definition of "INTEREST  PERIOD",  if
any  payment  to be made by the  Borrower  shall  come due on a day other than a
Business Day, payment shall be made on the next following Business Day, and such
extension of time shall be reflected in computing  interest or fees, as the case
may be.

     (c) Unless the  Borrower  or any Lender  has  notified  the  Administrative
Agent,  prior  to the  date  any  payment  is  required  to be made by it to the
Administrative  Agent hereunder,  that the Borrower or such Lender,  as the case
may be, will not make such payment, the Administrative Agent may assume that the
Borrower or such  Lender,  as the case may be, has timely made such  payment and
may (but shall not be so required  to), in reliance  thereon,  make  available a
corresponding  amount to the Person entitled thereto.  If and to the extent that
such  payment was not in fact made to the  Administrative  Agent in  immediately
available funds, then:

          (i) if the  Borrower  failed to make such  payment,  each Lender shall
     forthwith on demand repay to the  Administrative  Agent the portion of such
     assumed  payment  that was made  available  to such  Lender in  immediately
     available funds, together with interest thereon in respect of each day from
     and including the date such amount was made available by the Administrative
     Agent  to  such   Lender  to  the  date  such   amount  is  repaid  to  the
     Administrative  Agent in immediately  available  funds at the Federal Funds
     Rate from time to time in effect; and

          (ii) if any Lender  failed to make such  payment,  such  Lender  shall
     forthwith on demand pay to the  Administrative  Agent the amount thereof in
     immediately  available funds, together with interest thereon for the period
     from the date such amount was made available by the Administrative Agent to
     the  Borrower to the date such amount is  recovered  by the  Administrative
     Agent (the "COMPENSATION  PERIOD") at a rate per annum equal to the Federal
     Funds Rate from time to time in effect.  If such Lender pays such amount to
     the  Administrative  Agent, then such amount shall constitute such Lender's
     Revolving  Loan included in the applicable  Borrowing.  If such Lender does
     not pay such  amount  forthwith  upon  the  Administrative  Agent's  demand
     therefor,  the  Administrative  Agent may make a demand  therefor  upon the
     Borrower,  and the  Borrower  shall pay such  amount to the  Administrative
     Agent, together with interest thereon for the Compensation Period at a rate
     per  annum  equal  to the rate of  interest  applicable  to the  applicable
     Borrowing.  Nothing  herein  shall be deemed to relieve any Lender from its
     obligation  to fulfill its  Commitment or to prejudice any rights which the
     Administrative  Agent or the  Borrower  may have  against  any  Lender as a
     result of any default by such Lender hereunder.

     A notice of the  Administrative  Agent to any Lender or the  Borrower  with
respect  to any amount  owing  under this  subsection  (c) shall be  conclusive,
absent manifest error.

     (d) If any Lender makes available to the Administrative Agent funds for any
Loan to be made by such Lender as provided in the  foregoing  provisions of this
ARTICLE  II,  and such  funds  are not made  available  to the  Borrower  by the
Administrative  Agent because the conditions to the applicable  Credit Extension
set forth in ARTICLE IV are not satisfied or waived in accordance with the terms
hereof,  the  Administrative  Agent  shall  return  such funds (in like funds as

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<PAGE>
received  from such Lender) to such Lender,  with  interest at the Federal Funds
Rate for each day that such funds are not returned to such Lender.

     (e) The obligations of the Lenders hereunder to make Revolving Loans and to
fund  participations  in Letters of Credit and Swing Line Loans are  several and
not joint.  The failure of any Lender to make any Revolving  Loan or to fund any
such  participation  on any date required  hereunder shall not relieve any other
Lender of its  corresponding  obligation  to do so on such  date,  and no Lender
shall  be  responsible  for the  failure  of any  other  Lender  to so make  its
Revolving Loan or purchase its participation.

     (f) Nothing  herein  shall be deemed to  obligate  any Lender to obtain the
funds  for any  Loan in any  particular  place  or  manner  or to  constitute  a
representation  by any Lender that it has  obtained or will obtain the funds for
any Loan in any particular place or manner.

     2.13 SHARING OF PAYMENTS.  If, other than as expressly  provided  elsewhere
herein, any Lender shall obtain on account of the Revolving Loans made by it, or
the  participations  in L/C  Obligations  or in Swing Line Loans held by it, any
payment (whether  voluntary,  involuntary,  through the exercise of any right of
set-off,  or  otherwise)  in  excess  of  its  ratable  share  (or  other  share
contemplated  hereunder)  thereof,  such Lender shall immediately (a) notify the
Administrative  Agent of such fact, and (b) purchase from the other Lenders such
participations in the Revolving Loans made by them and/or such subparticipations
in the  participations  in L/C  Obligations or Swing Line Loans held by them, as
the case may be, as shall be necessary to cause such purchasing  Lender to share
the excess payment in respect of such Revolving Loans or such participations, as
the case may be, pro rata with each of them; PROVIDED,  HOWEVER,  that if all or
any portion of such excess  payment is thereafter  recovered from the purchasing
Lender  under any of the  circumstances  described in SECTION  10.06  (including
pursuant  to any  settlement  entered  into  by  the  purchasing  Lender  in its
discretion),  such  purchase  shall to that extent be  rescinded  and each other
Lender shall repay to the  purchasing  Lender the purchase  price paid therefor,
together with an amount equal to such paying Lender's  ratable share  (according
to the proportion of (i) the amount of such paying Lender's  required  repayment
to (ii) the  total  amount  so  recovered  from the  purchasing  Lender)  of any
interest or other amount paid or payable by the purchasing  Lender in respect of
the total amount so recovered,  without further interest  thereon.  The Borrower
agrees that any Lender so purchasing a participation from another Lender may, to
the  fullest  extent  permitted  by law,  exercise  all its  rights  of  payment
(including  the right of set-off,  but subject to SECTION 10.09) with respect to
such  participation  as fully as if such Lender were the direct  creditor of the
Borrower in the amount of such participation. The Administrative Agent will keep
records (which shall be conclusive and binding in the absence of manifest error)
of participations  purchased under this Section and will in each case notify the
Lenders following any such purchases or repayments. Each Lender that purchases a
participation  pursuant to this Section  shall from and after such purchase have
the  right  to  give  all  notices,  requests,  demands,  directions  and  other
communications  under  this  Agreement  with  respect  to  the  portion  of  the
Obligations  purchased to the same extent as though the  purchasing  Lender were
the original owner of the Obligations purchased.

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     2.14 EXTENSION OF SCHEDULED MATURITY DATE.

     (a) The Borrower may request extensions of the then Scheduled Maturity Date
by making  such  request  in  writing  at least  ninety  (90) days prior to each
anniversary of this Agreement.  Within 30 days of delivery of such notice,  each
Lender shall notify the Administrative  Agent whether or not it consents to such
extension  (which  consent may be given or withheld  in such  Lender's  sole and
absolute  discretion).  Any Lender not  responding  within the above time period
shall be deemed not to have  consented  to such  extension.  The  Administrative
Agent  shall  promptly  notify the  Borrower  and the  Lenders  of the  Lenders'
responses.  If any Lender declines, or is deemed to have declined, to consent to
such extension (such Lender being a "NON-CONSENTING  Lender"),  the Borrower may
cause any such  Non-Consenting  Lender to be  replaced  as a Lender  pursuant to
SECTION 10.16.

     (b) The Scheduled  Maturity Date shall be extended only if Lenders  holding
at least 66-2/3% of the Aggregate Commitments (calculated prior to giving effect
to any replacements of Non-Consenting  Lenders permitted herein) and all Lenders
(after giving effect to any  replacements of  Non-Consenting  Lenders  permitted
herein) (the "CONSENTING  LENDERS") have consented thereto. If so extended,  the
Maturity Date, as to the Consenting Lenders,  shall be extended to the same date
in the  following  year,  effective as of the Maturity Date then in effect (such
existing  Scheduled  Maturity  Date  being  the  "EXTENSION   EFFECTIVE  DATE");
PROVIDED,  HOWEVER,  the Scheduled  Maturity Date shall not be so extended as to
any Non-Consenting  Lender. To the extent that the Maturity Date is not extended
to any Lender  pursuant to this SECTION 2.14 and such  Non-Consenting  Lender is
not  replaced in  accordance  with  SECTION  10.16 on or prior to the  Extension
Effective  Date, the Commitment and  Obligations of such  Non-Consenting  Lender
shall  automatically  terminate  and  become due and  payable,  in whole on such
unextended Scheduled Maturity Date, without further notice or other action to or
by the Borrower, such Non-Consenting Lender or any other Person, and the failure
of the  Borrower  to pay the same shall  constitute  an Event of  Default  under
SECTION  8.1(a)(i) (which Event of Default may not be waived without the consent
of each Lender,  including  the  Non-Consenting  Lender,  as provided in SECTION
10.01(c)).  The Administrative  Agent and the Borrower shall promptly confirm to
the Lenders such  extension  and the  Extension  Effective  Date. As a condition
precedent to such  extension,  the Borrower shall deliver to the  Administrative
Agent a certificate of each Loan Party dated as of the Extension  Effective Date
(in sufficient  copies for each Lender) signed by a Responsible  Officer of such
Loan Party (i)  certifying  and attaching the  resolutions  adopted by such Loan
Party  approving or  consenting  to such  extension  and (ii) in the case of the
Borrower, certifying that, before and after giving effect to such extension, (A)
the  representations  and  warranties  contained in ARTICLE V and the other Loan
Documents are true and correct on and as of the Extension Effective Date, except
to the extent that such representations and warranties  specifically refer to an
earlier  date,  in which case they are true and correct as of such earlier date,
and except that for  purposes of this  SECTION  2.14,  the  representations  and
warranties  contained in subsections (a) and (b) of SECTION 5.05 shall be deemed
to refer to the most recent statements furnished pursuant to subsections (a) and
(b),  respectively,  of SECTION 6.01,  and (B) no Default  exists.  The Borrower
shall prepay any Revolving  Loans  outstanding  on the Extension  Effective Date
(and pay any additional amounts required pursuant to SECTION 3.05) to the extent
necessary to keep  outstanding  Revolving Loans ratable with any revised and new
Pro Rata Shares of all the Lenders effective as of the Extension Effective Date.

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     (c) This Section  shall  supersede  any  provisions in SECTION 10.01 to the
contrary.

                                  ARTICLE III.

                     TAXES, YIELD PROTECTION AND ILLEGALITY

     3.01 TAXES.

     (a) Except as provided  below in this SECTION 3.01, any and all payments by
the  Borrower  to or for the account of the  Administrative  Agent or any Lender
under any Loan  Document  shall be made free and clear of and without  deduction
for any and all present or future taxes, duties,  levies,  imposts,  deductions,
assessments,  fees,  withholdings or similar  charges,  and all liabilities with
respect thereto,  EXCLUDING,  in the case of the  Administrative  Agent and each
Lender or its applicable  lending  office,  or any branch or affiliate  thereof,
taxes  imposed on or  measured  by its net income  (including  net income  taxes
imposed by means of a backup  withholding  tax) franchise  taxes,  branch taxes,
taxes on doing  business  or taxes  measured  by or  imposed  under the  overall
capital  or net worth of any Lender or its  applicable  lending  office,  or any
branch or affiliate  thereof,  in each case imposed (i) by the  jurisdiction (or
any political  subdivision  thereof) under the Laws of which the  Administrative
Agent,  or such  Lender,  applicable  lending  office or branch or  affiliate is
organized  or is  located,  or in which the  principal  executive  office of the
Administrative  Agent or any Lender is located,  or any nation within which such
jurisdiction located (or any political  subdivision  thereof); or (ii) by reason
of any present or former connection  between the jurisdiction  imposing such tax
and the Administrative Agent or such Lender,  applicable lending office,  branch
or affiliate other than a connection  arising from the  Administrative  Agent or
such Lender having  executed,  delivered or performed its obligation  under,  or
received payment under or enforced this Agreement (all such non-excluded  taxes,
duties, levies, imposts, deductions,  assessments, fees, withholdings or similar
charges,  and  liabilities  being  hereinafter  referred to as "TAXES").  If the
Borrower shall be required by any Laws to deduct any Taxes from or in respect of
any sum  payable  under any Loan  Document  to the  Administrative  Agent or any
Lender,  (i) the sum payable  shall be  increased  as  necessary to yield to the
Administrative  Agent and such  Lender an amount  equal to the sum it would have
received had no such  deductions  been made,  (ii) the Borrower  shall make such
deductions,  (iii)  the  Borrower  shall  pay the full  amount  deducted  to the
relevant  taxation  authority or other  authority in accordance  with applicable
Laws, and (iv) within 30 days after the date of such payment, the Borrower shall
furnish  to the  Administrative  Agent  (which  shall  forward  the same to such
Lender)  the  original  or a  certified  copy of a  receipt  evidencing  payment
thereof;  PROVIDED,  however,  that  Borrower  shall be  entitled  to deduct and
withhold  any Taxes  and shall not be  required  to  increase  any such  amounts
payable to any Lender with respect to Taxes (i) that are  directly  attributable
to such  Lender's  failure to comply with the  requirements  of SECTION 10.15 of
this  Agreement  and (ii) that are U.S.  withholding  taxes  required on amounts
payable  to such  Lender  at the  time  such  Lender  becomes  a  party  to this
Agreement.

     (b) In addition,  the Borrower  agrees to pay any and all present or future
stamp,  court or  documentary  taxes and any other  excise or property  taxes or
charges or similar  levies  which  arise  from any  payment  made under any Loan
Document  or  from  the  execution,   delivery,   performance,   enforcement  or
registration  of, or otherwise  with respect to, any Loan Document  (hereinafter
referred to as "OTHER TAXES").

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<PAGE>
     (c) If the Borrower  shall be required to pay any Taxes or Other Taxes from
or in respect of any sum payable under any Loan  Document to the  Administrative
Agent or any Lender, the Borrower shall also pay to the Administrative  Agent or
to such Lender,  as the case may be, but without  duplication  in respect of any
other  such  amounts  payable  hereunder,  at the time  interest  is paid,  such
additional  amount that the  Administrative  Agent or such Lender  specifies  is
necessary  to  preserve  the  after-tax  yield  (after  factoring  in all taxes,
including  taxes  imposed on or measured by net income) that the  Administrative
Agent or such  Lender  would have  received if such Taxes or Other Taxes had not
been imposed.

     (d) The Borrower  agrees to  indemnify  the  Administrative  Agent and each
Lender for (i) the full amount of Taxes and Other Taxes  (including any Taxes or
Other Taxes  imposed or asserted by any  jurisdiction  on amounts  payable under
this Section)  paid by the  Administrative  Agent and such Lender,  (ii) amounts
payable under SECTION  3.01(c) and (iii) any liability  (including  additions to
tax,  penalties,  interest  and  expenses)  arising  therefrom  or with  respect
thereto, in each case whether or not such Taxes or Other Taxes were correctly or
legally  imposed or asserted by the  relevant  Governmental  Authority.  Payment
under this subsection (d) shall be made within 30 days after the date the Lender
or the Administrative Agent makes a demand therefor.

     (e) Any Lender  claiming any additional  amounts  payable  pursuant to this
SECTION 3.01 shall use its reasonable best efforts (consistent with its internal
policy and legal and regulatory  restrictions) to change the jurisdiction of its
lending  office,  if the making of such a change  would  avoid the need for,  or
reduce the amount of, any such  additional  amounts which may thereafter  accrue
and would not, in the reasonable  judgment of such Lender, be disadvantageous to
such Lender.

     (f) Each Lender (and the  Administrative  Agent with respect to payments to
the  Administrative  Agent for its own account) agrees that (i) it will take all
reasonable  actions  by all usual  means to  maintain  all  exemptions,  if any,
available  to it from United  States  withholding  taxes  (whether  available by
treaty,  existing  administrative  waiver,  by  virtue  of the  location  or any
Lender's  lending  office) and (ii)  otherwise  cooperate  with the  Borrower to
minimize amounts payable by it under this SECTION 3.01;  PROVIDED,  HOWEVER, the
Lenders and the  Administrative  Agent shall not be  obligated by reason of this
SECTION  3.01(f)  to  contest  the  payment  of any  Taxes or Other  Taxes or to
disclose  any  information  regarding  its tax  affairs or tax  computations  or
reorder  its tax or other  affairs  or tax or  other  planning.  Subject  to the
foregoing,  to the extent the Borrower  pays sums  pursuant to this SECTION 3.01
and any Lender or the  Administrative  Agent  receives a refund of any or all of
such sums, such refund shall be applied to reduce any amounts then due and owing
under this  Agreement  or, to the extent that no amounts are due and owing under
this Agreement at the time such refunds are received,  the party  receiving such
refund shall promptly pay over all such refunded sums to the Borrower,  provided
that no Default is in existence at such time.

     3.02  ILLEGALITY.  If any  Lender  determines  that  any  Law  has  made it
unlawful,  or that any Governmental  Authority has asserted that it is unlawful,
for any  Lender  or its  applicable  Lending  Office to make,  maintain  or fund
Eurodollar  Rate Loans,  or to determine or charge interest rates based upon the
Eurodollar  Rate, then, on notice thereof by such Lender to the Borrower through
the  Administrative  Agent,  any  obligation  of such Lender to make or continue

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<PAGE>
Eurodollar Rate Loans or to convert Base Rate Revolving Loans to Eurodollar Rate
Loans shall be suspended until such Lender notifies the Administrative Agent and
the Borrower that the circumstances  giving rise to such determination no longer
exist.  Upon receipt of such notice,  the Borrower shall,  upon demand from such
Lender  (with a copy to the  Administrative  Agent),  prepay or, if  applicable,
convert all Eurodollar  Rate Loans of such Lender to Base Rate Loans,  either on
the last day of the  Interest  Period  therefor,  if such  Lender  may  lawfully
continue to maintain such Eurodollar Rate Loans to such day, or immediately,  if
such Lender may not lawfully  continue to maintain such  Eurodollar  Rate Loans.
Upon any such  prepayment  or  conversion,  the Borrower  shall also pay accrued
interest on the amount so prepaid or converted.  Each Lender agrees to designate
a  different  Lending  Office if such  designation  will avoid the need for such
notice and will not, in the good faith  judgment of such  Lender,  otherwise  be
materially disadvantageous to such Lender.

     3.03 INABILITY TO DETERMINE RATES. If the Required  Lenders  determine that
for any reason  adequate and reasonable  means do not exist for  determining the
Eurodollar  Rate for any  requested  Interest  Period with respect to a proposed
Eurodollar  Rate Loan, or that the  Eurodollar  Rate for any requested  Interest
Period with respect to a proposed  Eurodollar  Rate Loan does not adequately and
fairly reflect the cost to such Lenders of funding such Loan, the Administrative
Agent will  promptly so notify the  Borrower and each  Lender.  Thereafter,  the
obligation  of the  Lenders to make or maintain  Eurodollar  Rate Loans shall be
suspended until the  Administrative  Agent (upon the instruction of the Required
Lenders)  revokes  such notice.  Upon  receipt of such notice,  the Borrower may
revoke any pending request for a Borrowing of,  conversion to or continuation of
Eurodollar  Rate Loans or,  failing that,  will be deemed to have converted such
request  into a request  for a  Revolving  Borrowing  of Base Rate  Loans in the
amount specified therein.

     3.04  INCREASED  COST AND REDUCED  RETURN;  CAPITAL  ADEQUACY;  RESERVES ON
EURODOLLAR RATE LOANS.

     (a) If any Lender determines that as a result of the introduction of or any
change  in or in the  interpretation  of any Law,  or such  Lender's  compliance
therewith, there shall be any increase in the cost to such Lender of agreeing to
make or making, funding or maintaining Eurodollar Rate Loans or (as the case may
be) issuing or participating in Letters of Credit,  or a reduction in the amount
received or receivable  by such Lender in  connection  with any of the foregoing
(excluding  for  purposes of this  subsection  (a) any such  increased  costs or
reduction in amount resulting from (i) Taxes or Other Taxes (as to which SECTION
3.01 shall govern),  (ii) changes in the basis of taxation of overall net income
or overall gross income by the United States or any foreign  jurisdiction or any
political  subdivision  of either thereof under the Laws of which such Lender is
organized or has its Lending Office, and (iii) reserve requirements contemplated
by SECTION  3.04(c),  then from time to time upon demand of such Lender  (with a
copy of such demand to the Administrative Agent), the Borrower shall pay to such
Lender such additional amounts as will compensate such Lender for such increased
cost or reduction.

     (b) If any Lender  determines  that the  introduction  of any Law regarding
capital  adequacy or any change  therein or in the  interpretation  thereof,  or
compliance by such Lender (or its Lending Office)  therewith,  has the effect of
reducing  the rate of return on the  capital of such  Lender or any  corporation
controlling such Lender as a consequence of such Lender's obligations  hereunder

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<PAGE>
(taking into  consideration  its policies  with respect to capital  adequacy and
such Lender's desired return on capital),  then from time to time upon demand of
such  Lender  (with a copy of such  demand  to the  Administrative  Agent),  the
Borrower  shall pay to such Lender such  additional  amounts as will  compensate
such Lender for such reduction.

     (c) The Borrower shall pay to each Lender,  as long as such Lender shall be
required to maintain  reserves with respect to liabilities or assets  consisting
of or including Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"),  additional  interest  on the  unpaid  principal  amount  of each
Eurodollar  Rate Loan equal to the actual  costs of such  reserves  allocated to
such Loan by such Lender (as  determined  by such  Lender in good  faith,  which
determination shall be conclusive),  which shall be due and payable on each date
on which  interest is payable on such Loan,  PROVIDED  the  Borrower  shall have
received  at least  15 days'  prior  notice  (with a copy to the  Administrative
Agent) of such additional  interest from such Lender.  If a Lender fails to give
notice 15 days prior to the relevant  Interest  Payment  Date,  such  additional
interest shall be due and payable 15 days from receipt of such notice.

     3.05  FUNDING  LOSSES.  Upon  demand  of any  Lender  (with  a copy  to the
Administrative  Agent) from time to time, the Borrower shall promptly compensate
such Lender for and hold such  Lender  harmless  from any loss,  cost or expense
incurred by it as a result of:

     (a) any continuation,  conversion,  payment or prepayment of any Loan other
than a Base Rate Loan on a day other  than the last day of the  Interest  Period
for  such  Loan  (whether  voluntary,   mandatory,   automatic,   by  reason  of
acceleration, or otherwise);

     (b) any  failure by the  Borrower  (for a reason  other than the failure of
such  Lender to make a Loan) to prepay,  borrow,  continue  or convert  any Loan
other  than a Base  Rate  Loan on the  date  or in the  amount  notified  by the
Borrower; or

     (c) any  assignment of a Eurodollar  Rate Loan on a day other than the last
day of the  Interest  Period  therefor as a result of a request by the  Borrower
pursuant to SECTION 10.16;

including any loss or expense  arising from the  liquidation or  reemployment of
funds obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were  obtained.  The Borrower  shall also pay any
customary  administrative  fees  charged by such Lender in  connection  with the
foregoing.

For purposes of calculating amounts payable by the Borrower to the Lenders under
this SECTION  3.05,  each Lender shall be deemed to have funded each  Eurodollar
Rate Loan made by it at the Eurodollar Rate for such Loan by a matching  deposit
or other borrowing in the London  interbank  eurodollar  market for a comparable
amount and for a comparable period, whether or not such Eurodollar Rate Loan was
in fact so funded.

     3.06 MATTERS APPLICABLE TO ALL REQUESTS FOR COMPENSATION.

     (a) A  certificate  of the  Administrative  Agent  or any  Lender  claiming
compensation  under this ARTICLE III and setting forth the additional  amount or
amounts  to be paid to it  hereunder  shall  be  conclusive  in the  absence  of
manifest error. In determining  such amount,  the  Administrative  Agent or such
Lender may use any reasonable averaging and attribution methods.

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<PAGE>
     (b) Upon any Lender's making a claim for compensation under SECTION 3.01 or
3.04, the Borrower may replace such Lender in accordance with SECTION 10.16.

     3.07  SURVIVAL.  All of the Borrower's  obligations  under this ARTICLE III
shall  survive  termination  of the Aggregate  Commitments  and repayment of all
other Obligations hereunder.

                                   ARTICLE IV.

                    CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

     4.01 CONDITIONS OF INITIAL CREDIT EXTENSION.  The obligation of each Lender
to make its initial Credit Extension hereunder is subject to satisfaction of the
following  conditions  precedent  in  form  and  substance  satisfactory  to the
Administrative Agent:

     (a) The  Administrative  Agent's  receipt of the  following,  each of which
shall be  originals  or  facsimiles  (followed  promptly  by  originals)  unless
otherwise  specified,  each properly  executed by a  Responsible  Officer of the
signing Loan Party, each dated the Closing Date (or, in the case of certificates
of  governmental  officials,  a recent date before the Closing Date) and each in
form and  substance  satisfactory  to the  Administrative  Agent  and its  legal
counsel:

          (i)  executed   counterparts  of  this  Agreement  and  the  Guaranty,
     sufficient in number for  distribution to the  Administrative  Agent,  each
     Lender and the Borrower;

          (ii)  Revolving  Loan Notes  executed by the Borrower in favor of each
     Lender  requesting a Revolving Loan Note, each in a principal  amount equal
     to such Lender's Commitment;

          (iii) a Swing Line Note executed by the Borrower in favor of the Swing
     Line Lender, in a principal amount equal to the Swing Line Sublimit;

          (iv) such  certificates  of  resolutions  or other action,  incumbency
     certificates and/or other certificates of Responsible Officers of each Loan
     Party as the  Administrative  Agent may require  evidencing  the  identity,
     authority and capacity of each  Responsible  Officer thereof  authorized to
     act as a  Responsible  Officer in  connection  with this  Agreement and the
     other Loan Documents to which such Loan Party is a party;

          (v) such documents and certifications as the Administrative  Agent may
     reasonably  require to evidence  that each Loan Party is duly  organized or
     formed, and that each Loan Party is validly existing,  in good standing and
     qualified to engage in business in each  jurisdiction  where its ownership,
     lease or operation of  properties  or the conduct of its business  requires
     such  qualification,  except to the extent that  failure to do so could not
     reasonably be expected to have a Material Adverse Effect;

          (vi) a  favorable  opinion of Snell & Wilmer,  L.L.P.,  counsel to the
     Loan Parties (and local counsel for each Loan Party that is organized under
     the Laws of other than Arizona,  California  and Nevada),  addressed to the
     Administrative  Agent  and each  Lender,  as to the  matters  set  forth in
     EXHIBIT G and such other matters  concerning  the Loan Parties and the Loan
     Documents as the Required Lenders may reasonably request;

                                       53
<PAGE>
          (vii)  copies of central  filing UCC  searches of the Borrower and its
     Subsidiaries,  each such search  showing no Liens  except  Liens  permitted
     pursuant to SECTION 7.01;

          (viii) a  certificate  of a  Responsible  Officer  of each Loan  Party
     either  (A)  attaching  copies  of all  consents,  licenses  and  approvals
     required in connection with the execution, delivery and performance by such
     Loan Party and the validity  against such Loan Party of the Loan  Documents
     to which it is a party, and such consents,  licenses and approvals shall be
     in full force and effect, or (B) stating that no such consents, licenses or
     approvals are so required;

          (ix) a  certificate  signed by a  Responsible  Officer of the Borrower
     certifying  (A) that the conditions  specified in SECTIONS  4.02(a) and (b)
     have been  satisfied,  and (B) that there has been no event or circumstance
     since the date of the Audited Financial Statements that has had or could be
     reasonably  expected to have,  either  individually or in the aggregate,  a
     Material Adverse Effect;  and (C) a calculation of the Leverage Ratio as of
     the last day of the fiscal  quarter of the  Borrower  most  recently  ended
     prior to the Closing Date;

          (x) evidence that all insurance required to be maintained  pursuant to
     the Loan Documents has been obtained and is in effect;

          (xi)  evidence  that  the  Existing  Credit  Facilities  have  been or
     concurrently  with the  Closing  Date is  being  terminated  and all  Liens
     securing  obligations  under the  Existing  Credit  Agreement  have been or
     concurrently with the Closing Date are being released;

          (xii) an executed Borrowing Base Certificate as of October 31, 2002;

          (xiii) evidence satisfactory to the Agent that as of the Closing Date,
     assuming the Total Outstandings equal to the Aggregate Commitment, that the
     Total  Outstanding would be permitted under Section 4.06 of the Senior Note
     Indenture;

          (xiv) evidence that  MTH-Mortgage has been designated an "Unrestricted
     Subsidiary" under the Senior Note Indenture; and

          (xv) such  other  assurances,  certificates,  documents,  consents  or
     opinions as the Administrative Agent, the L/C Issuer, the Swing Line Lender
     or the Required Lenders reasonably may require.

     (b) Any fees  required to be paid on or before the Closing  Date shall have
been paid, and all Fee Letters shall be in full force and effect.

     (c) Unless waived by the Administrative Agent, the Borrower shall have paid
all Attorney Costs of the  Administrative  Agent to the extent invoiced prior to
or on the Closing Date, plus such additional  amounts of Attorney Costs as shall
constitute its reasonable  estimate of Attorney Costs incurred or to be incurred
by it through the closing  proceedings  (provided  that such estimate  shall not
thereafter  preclude a final  settling of accounts  between the Borrower and the
Administrative Agent).

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     (d) The Closing Date shall have occurred on or before December 31, 2002.

     4.02 CONDITIONS TO ALL CREDIT EXTENSIONS.  The obligation of each Lender to
honor any Request  for Credit  Extension  (other  than a  Revolving  Loan Notice
requesting  only a  conversion  of  Revolving  Loans  to the  other  Type,  or a
continuation  of Eurodollar  Rate Loans) is subject to the following  conditions
precedent:

     (a) The  representations and warranties of the Borrower and each other Loan
Party contained in ARTICLE V or any other Loan Document,  or which are contained
in any  document  furnished  at any time  under  or in  connection  herewith  or
therewith,  shall  be true  and  correct  on and as of the  date of such  Credit
Extension,  except  to the  extent  that  such  representations  and  warranties
specifically  refer to an  earlier  date,  in which  case they shall be true and
correct as of such  earlier  date,  and except that for purposes of this SECTION
4.02, the representations and warranties contained in subsections (a) and (b) of
SECTION  5.05 shall be deemed to refer to the most recent  statements  furnished
pursuant to clauses (a) and (b), respectively, of SECTION 6.01.

     (b) No Default  shall  exist,  or would  result from such  proposed  Credit
Extension.

     (c) The  Administrative  Agent and,  if  applicable,  the L/C Issuer or the
Swing  Line  Lender  shall  have  received a Request  for  Credit  Extension  in
accordance with the requirements hereof.

     Each  Request for Credit  Extension  (other  than a  Revolving  Loan Notice
requesting  only a  conversion  of  Revolving  Loans  to  the  other  Type  or a
continuation of Eurodollar Rate Loans) submitted by the Borrower shall be deemed
to be a  representation  and  warranty  that  (a) the  conditions  specified  in
SECTIONS  4.02(A)  and (B)  have  been  satisfied  on and as of the  date of the
applicable  Credit  Extension and (b) the proposed Credit Extension is permitted
to be made pursuant to Section 4.06 of the Senior Note Indenture.

                                   ARTICLE V.

                         REPRESENTATIONS AND WARRANTIES

     The Borrower  represents and warrants to the  Administrative  Agent and the
Lenders that:

     5.01 EXISTENCE,  QUALIFICATION  AND POWER;  COMPLIANCE WITH LAWS. Each Loan
Party (a) is a  corporation,  partnership  or  limited  liability  company  duly
organized or formed, validly existing and in good standing under the Laws of the
jurisdiction of its  incorporation or organization,  (b) has all requisite power
and authority and all requisite governmental licenses, authorizations,  consents
and  approvals to (i) own its assets and carry on its business and (ii) execute,
deliver and perform its  obligations  under the Loan  Documents to which it is a
party, (c) is duly qualified and is licensed and in good standing under the Laws
of each  jurisdiction  where its ownership,  lease or operation of properties or
the conduct of its business requires such  qualification or license,  and (d) is
in compliance  with all Laws;  except in each case referred to in clause (b)(i),
(c) or (d), to the extent that failure to do so could not reasonably be expected
to have a Material Adverse Effect.

                                       55
<PAGE>
     5.02  AUTHORIZATION;   NO  CONTRAVENTION.   The  execution,   delivery  and
performance  by each Loan Party of each Loan  Document  to which such  Person is
party,   have  been  duly  authorized  by  all  necessary   corporate  or  other
organizational  action,  and do not and will not (a) contravene the terms of any
of such  Person's  Organization  Documents;  (b) conflict  with or result in any
breach  or  contravention  of,  or the  creation  of any  Lien  under,  (i)  any
Contractual  Obligation  to which  such  Person  is a party  or (ii) any  order,
injunction,  writ or decree of any Governmental  Authority or any arbitral award
to which such Person or its property is subject; or (c) violate any Law.

     5.03  GOVERNMENTAL  AUTHORIZATION;  OTHER CONSENTS.  No approval,  consent,
exemption,  authorization, or other action by, or notice to, or filing with, any
Governmental  Authority  or  any  other  Person  is  necessary  or  required  in
connection  with the  execution,  delivery  or  performance  by, or  enforcement
against, any Loan Party of this Agreement or any other Loan Document.

     5.04 BINDING EFFECT. This Agreement has been, and each other Loan Document,
when delivered  hereunder,  will have been,  duly executed and delivered by each
Loan Party that is party  thereto.  This Agreement  constitutes,  and each other
Loan  Document when so delivered  will  constitute,  a legal,  valid and binding
obligation of such Loan Party, enforceable against each Loan Party that is party
thereto in accordance with its terms.

     5.05 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT.

     (a) The Audited  Financial  Statements (i) were prepared in accordance with
GAAP  consistently  applied  throughout  the period covered  thereby,  except as
otherwise  expressly noted therein;  (ii) fairly present the financial condition
of the Borrower and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance  with GAAP  consistently
applied  throughout the period covered  thereby,  except as otherwise  expressly
noted therein;  and (iii) show all material  indebtedness and other liabilities,
direct  or  contingent,  of the  Borrower  and its  Subsidiaries  as of the date
thereof, including liabilities for taxes, material commitments and Indebtedness.

     (b) The unaudited consolidated financial statements of the Borrower and its
Subsidiaries dated September 30, 2002, and the related  consolidated  statements
of income or  operations,  shareholders'  equity  and cash  flows for the fiscal
quarter  ended  on  that  date  (i)  were  prepared  in  accordance   with  GAAP
consistently applied throughout the period covered thereby,  except as otherwise
expressly noted therein,  and (ii) fairly present the financial condition of the
Borrower  and its  Subsidiaries  as of the date  thereof  and their  results  of
operations for the period covered thereby,  subject,  in the case of clauses (i)
and (ii), to the absence of footnotes and to normal year-end audit adjustments.

     (c)  SCHEDULE  5.05  sets  forth  all  material   indebtedness   and  other
liabilities,  direct  or  contingent,  of  the  Borrower  and  its  consolidated
Restricted  Subsidiaries  incurred  since the date of the  financial  statements
referred to in SECTION 5.05(b) which the Borrower  reasonably  believes would be
required  to be  reported  on its  financial  statements  as filed with the SEC,
including   material   commitments  and  Indebtedness   (but  excluding  accrued
liabilities for taxes).

                                       56
<PAGE>
     (d) Since the date of the Audited Financial  Statements,  there has been no
event or circumstance,  either individually or in the aggregate, that has had or
could reasonably be expected to have a Material Adverse Effect.

     (e) The Borrower and its Restricted  Subsidiaries have no Off-Balance Sheet
Liabilities, except as set forth on SCHEDULE 5.05(e).

     5.06  LITIGATION.  Except  as set  forth on  SCHEDULE  5.06,  there  are no
actions, suits, proceedings,  claims or disputes pending or, to the knowledge of
the Borrower after due and diligent  investigation,  threatened or contemplated,
at law, in equity,  in arbitration or before any Governmental  Authority,  by or
against the  Borrower or any of its  Restricted  Subsidiaries  or against any of
their  properties  or  revenues  that (a)  purport  to affect or pertain to this
Agreement or any other Loan Document,  or any of the  transactions  contemplated
hereby, or (b) either individually or in the aggregate, if determined adversely,
could  reasonably  be  expected  to have a Material  Adverse  Effect;  PROVIDED,
HOWEVER, that actions, suits, proceedings,  claims or disputes for damages in an
aggregate amount not greater than  $10,000,000  shall not be deemed for purposes
of this SECTION 5.06 to result in a Material Adverse Effect.

     5.07 NO DEFAULT.  Neither the Borrower nor any Restricted  Subsidiary is in
default under or with respect to any Contractual  Obligation that could,  either
individually  or in the  aggregate,  reasonably  be  expected to have a Material
Adverse  Effect.  No Default has occurred and is continuing or would result from
the consummation of the transactions contemplated by this Agreement or any other
Loan Document.

     5.08 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and each Restricted
Subsidiary  has good  record  and  marketable  title in fee  simple to, or valid
leasehold  interests  in, all real  property  necessary  or used in the ordinary
conduct  of its  business,  except  for such  defects  in  title  as could  not,
individually  or in the  aggregate,  reasonably  be  expected to have a Material
Adverse Effect. The property of the Borrower and its Restricted  Subsidiaries is
subject to no Liens, other than Liens permitted by SECTION 7.01.

     5.09 ENVIRONMENTAL COMPLIANCE. The Borrower and its Restricted Subsidiaries
conduct in the  ordinary  course of  business a review of the effect of existing
Environmental Laws and claims alleging potential liability or responsibility for
violation of any  Environmental Law on their respective  businesses,  operations
and  properties,  and as a result thereof the Borrower has reasonably  concluded
that such  Environmental  Laws and  claims  could  not,  individually  or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

     5.10  INSURANCE.   The  properties  of  the  Borrower  and  its  Restricted
Subsidiaries  are  insured  with  financially  sound  and  reputable   insurance
companies not Affiliates of the Borrower, in such amounts, with such deductibles
and  covering  such risks as are  customarily  carried by  companies  engaged in
similar  businesses  and  owning  similar  properties  in  localities  where the
Borrower or the applicable Restricted Subsidiary operates.

     5.11 TAXES.  The Borrower and its  Restricted  Subsidiaries  have filed all
Federal,  state and other material tax returns and reports required to be filed,
and have paid all Federal, state and other material taxes, assessments, fees and
other  governmental  charges  levied or imposed  upon them or their  properties,

                                       57
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income  or  assets  otherwise  due and  payable,  except  those  which are being
contested in good faith by appropriate  proceedings diligently conducted and for
which adequate  reserves have been provided in accordance with GAAP. There is no
proposed tax assessment  against the Borrower or any Restricted  Subsidiary that
would,  if made,  have a Material  Adverse  Effect,  and there are no items that
would give rise to a substantial  understatement penalty for the Borrower or any
Restricted Subsidiary. There are no tax agreements among any of the Borrower and
its Restricted  Subsidiaries.  With respect to Federal tax returns through 1998,
the period for assessment under Applicable Law has expired.

     5.12 ERISA COMPLIANCE.

     (a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is
intended to qualify  under  Section  401(a) of the Code has received a favorable
determination  letter  from  the IRS or an  application  for  such a  letter  is
currently  being  processed  by the IRS with  respect  thereto  and, to the best
knowledge of the Borrower,  nothing has occurred which would  prevent,  or cause
the loss of, such qualification. The Borrower and each ERISA Affiliate have made
all required  contributions to each Plan subject to Section 412 of the Code, and
no application for a funding waiver or an extension of any  amortization  period
pursuant to Section 412 of the Code has been made with respect to any Plan.

     (b)  There  are no  pending  or,  to the best  knowledge  of the  Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan that could be reasonably be expected to have a Material
Adverse  Effect.  There has been no prohibited  transaction  or violation of the
fiduciary  responsibility  rules with  respect to any Plan that has  resulted or
could reasonably be expected to result in a Material Adverse Effect.

     (c) (i) No ERISA  Event has  occurred or is  reasonably  expected to occur;
(ii) no Pension  Plan has any  Unfunded  Pension  Liability;  (iii)  neither the
Borrower nor any ERISA Affiliate has incurred,  or reasonably  expects to incur,
any  liability  under Title IV of ERISA with  respect to any Pension Plan (other
than premiums due and not delinquent under Section 4007 of ERISA);  (iv) neither
the Borrower nor any ERISA  Affiliate  has incurred,  or  reasonably  expects to
incur, any liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Sections 4201
or 4243 of ERISA with  respect to a  Multiemployer  Plan;  and (v)  neither  the
Borrower  nor any ERISA  Affiliate  has engaged in a  transaction  that could be
subject to Sections 4069 or 4212(c) of ERISA.

     5.13 CAPITALIZATION; SUBSIDIARIES; JOINT VENTURES. SCHEDULE 5.13 contains a
complete and accurate list of (a) all  Subsidiaries of the Borrower,  including,
with respect to each Subsidiary, (i) its state of incorporation or organization,
(ii)  all  jurisdictions  (if  any)  in  which  it  is  qualified  as a  foreign
corporation, (iii) the number of shares of its Equity Interests outstanding, and
(iv) the number and  percentage of those shares owned by the Borrower  and/or by
any other Subsidiary, and (b) each entity investment in any corporation or other
entity  which is not a  Subsidiary.  All  Equity  Interests  of each  Restricted
Subsidiary of the Borrower are validly issued,  fully paid and nonassessable and
all  capital  contributions  and  other  consideration  required  to be  paid in
connection with the issuance of any Equity  Interests have been made or paid, as
the case may be. All of the  outstanding  Equity  Interests  of each  Restricted
Subsidiary owned by the Borrower or another  Restricted  Subsidiary as specified

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on  SCHEDULE  5.13 are owned  free and clear of all Liens,  security  interests,
equity or other  beneficial  interests,  charges  and  encumbrances  of any kind
whatsoever,  except for Permitted Liens. Neither the Borrower nor any other Loan
Party owns of record or beneficially any shares of the Equity Interests or other
equity  interests of any Person that is not a  Guarantor,  except (a) Persons in
which such Loan Party is permitted to invest  pursuant to SECTION  7.03(g),  (b)
Unrestricted  Subsidiaries  in existence on the Closing Date and (c) Investments
disclosed in SCHEDULE 5.13(b). None of the Borrower or any Restricted Subsidiary
has issued any Redeemable Stock.

     5.14 MARGIN  REGULATIONS;  INVESTMENT  COMPANY ACT;  PUBLIC UTILITY HOLDING
COMPANY ACT.

     (a) The Borrower is not engaged and will not engage,  principally or as one
of its important  activities,  in the business of purchasing or carrying  margin
stock  (within  the meaning of  Regulation  U issued by the FRB),  or  extending
credit for the purpose of  purchasing or carrying  margin  stock.  Following the
application  of the proceeds of each  Borrowing or drawing  under each Letter of
Credit,  not more than 25% of the value of the assets  (either  of the  Borrower
only or of the Borrower and its Restricted Subsidiaries on a consolidated basis)
subject  to the  provisions  of  SECTION  7.01  or  subject  to any  restriction
contained in any agreement or instrument  between the Borrower and any Lender or
any  Affiliate of any Lender  relating to  Indebtedness  and within the scope of
SECTION 8.01(e) will be margin stock.

     (b) None of the  Borrower,  any Person  Controlling  the  Borrower,  or any
Restricted Subsidiary (i) is a "holding company," or a "subsidiary company" of a
"holding  company," or an "affiliate" of a "holding company" or of a "subsidiary
company"  of a  "holding  company,"  within the  meaning  of the Public  Utility
Holding  Company Act of 1935,  or (ii) is or is required to be  registered as an
"investment company" under the Investment Company Act of 1940.

     5.15 DISCLOSURE. The Borrower has disclosed to the Administrative Agent and
the Lenders all agreements,  instruments and corporate or other  restrictions to
which it or any of its Restricted Subsidiaries is subject, and all other matters
known  to it,  that,  individually  or in the  aggregate,  could  reasonably  be
expected to result in a Material Adverse Effect. No report, financial statement,
certificate or other information  furnished (whether in writing or orally) by or
on  behalf  of any Loan  Party to the  Administrative  Agent  or any  Lender  in
connection with the transactions contemplated hereby and the negotiation of this
Agreement  or  delivered   hereunder  (as  modified  or  supplemented  by  other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements  therein,  in the light
of the circumstances under which they were made, not misleading;  PROVIDED that,
with respect to projected  financial  information,  the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.

     5.16  COMPLIANCE  WITH  LAWS.  Each of the  Borrower  and  each  Restricted
Subsidiary is in compliance in all material  respects with the  requirements  of
all Laws and all orders,  writs,  injunctions and decrees applicable to it or to
its properties, except in such instances in which (a) such requirement of Law or
order,  writ,  injunction  or  decree  is  being  contested  in  good  faith  by
appropriate  proceedings  diligently  conducted  or (b) the  failure  to  comply
therewith,  either  individually  or in the  aggregate,  could not reasonably be
expected to have a Material Adverse Effect.

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<PAGE>
     5.17 INTELLECTUAL PROPERTY;  LICENSES, ETC. The Borrower and its Restricted
Subsidiaries  own, or possess the right to use, all of the  trademarks,  service
marks, trade names, copyrights, patents, patent rights, franchises, licenses and
other  intellectual  property  rights  (collectively,   "IP  RIGHTS")  that  are
reasonably necessary for the operation of their respective  businesses,  without
conflict  with the  rights of any other  Person.  To the best  knowledge  of the
Borrower,  no slogan or other  advertising  device,  product,  process,  method,
substance,  part or other  material  now  employed,  or now  contemplated  to be
employed, by the Borrower or any Restricted Subsidiary infringes upon any rights
held by any other Person. No claim or litigation  regarding any of the foregoing
is pending or, to the best knowledge of the Borrower,  threatened, which, either
individually  or in the  aggregate,  could  reasonably  be  expected  to  have a
Material Adverse Effect.

     5.18  SOLVENCY.  The  Borrower  is,  and the  Borrower  and its  Restricted
Subsidiaries are on a consolidated basis, solvent.

     5.19 BUSINESSES.  The Borrower is presently  engaged,  or may in the future
engage,  directly or through wholly owned  Subsidiaries  in the business of home
building; land acquisition,  development and sale for home building; home sales;
and mortgage loan  origination,  title  insurance  and other  related  ancillary
business to such home sales,  including commercial  development for light retail
and mixed use ancillary to the Borrower's master plan communities; PROVIDED that
real estate  activity  outside of home  building  activity and not  ancillary to
existing  business  of the  Borrower  (including  industrial,  retail and office
development  other than as set forth above with respect to the Borrower's master
plan communities,  but excluding  development of corporate  headquarters for the
Borrower) shall not be a permitted business activity.

     5.20 COMMON  ENTERPRISE.  The Borrower and its Restricted  Subsidiaries are
engaged in the  businesses  set forth in SECTION 5.19 as of the Closing Date, as
well as in certain other  businesses.  These operations  require  financing on a
basis such that the credit  supplied can be made  available from time to time to
the Borrower  and various of its  Restricted  Subsidiaries,  as required for the
continued successful  operation of the Borrower and its Restricted  Subsidiaries
as a whole.  The  Borrower  has  requested  the Lender to make credit  available
hereunder primarily for the purposes set forth in SECTION 6.11 and generally for
the  purposes of financing  the  operations  of the Borrower and its  Restricted
Subsidiaries.  The Borrower and each of its Restricted  Subsidiaries  expects to
derive  benefit  (and the Board of  Directors  of the  Borrower  and each of its
Restricted  Subsidiaries  has  determined  that such  Restricted  Subsidiary may
reasonably  be  expected to derive  benefit),  directly  or  indirectly,  from a
portion of the credit  extended by the Lenders  hereunder,  both in its separate
capacity  and as a  member  of the  group of  companies,  since  the  successful
operation and condition of the Borrower and each of its Restricted  Subsidiaries
is dependent on the  continued  successful  performance  of the functions of the
group as a whole. The Borrower  acknowledges that, but for the agreement by each
of the Guarantors to execute and deliver the Guaranty,  the Administrative Agent
and the Lenders would not have made available the credit facilities  established
hereby on the terms set forth herein.

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                                   ARTICLE VI.

                              AFFIRMATIVE COVENANTS

     So long as any Lender  shall  have any  Commitment  hereunder,  any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied,  or any Letter of
Credit shall remain  outstanding,  the Borrower shall,  and shall (except in the
case of the covenants  set forth in SECTIONS  6.01,  6.02,  6.03 and 6.11) cause
each Restricted Subsidiary to:

     6.01 FINANCIAL  STATEMENTS.  Deliver to the  Administrative  Agent and each
Lender,  in form and detail  satisfactory  to the  Administrative  Agent and the
Required Lenders:

     (a) as soon as available,  but in any event within 90 days after the end of
each fiscal year of the Borrower, a consolidated and consolidating balance sheet
of the Borrower and its Subsidiaries,  a consolidated and consolidating  balance
sheet of the  Borrower  and its  Restricted  Subsidiaries  as at the end of such
fiscal year, and the related consolidated and consolidating statements of income
or operations, shareholders' equity and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all in  reasonable  detail and  prepared in  accordance  with GAAP,  audited and
accompanied  by a report with respect to the  consolidated  balance sheet of the
Borrower and its Subsidiaries and related  consolidated  statements of income or
operations,  shareholders'  equity and cash flows and opinion of an  independent
certified  public  accountant  of  nationally   recognized  standing  reasonably
acceptable to the Required  Lenders,  which report and opinion shall be prepared
in  accordance  with  generally  accepted  auditing  standards  and shall not be
subject  to any  "going  concern"  or like  qualification  or  exception  or any
qualification or exception as to the scope of such audit; and

     (b) as soon as available,  but in any event within 45 days after the end of
each of the first three fiscal  quarters of each fiscal year of the Borrower,  a
consolidated   and   consolidating   balance  sheet  of  the  Borrower  and  its
Subsidiaries, a consolidated and consolidating balance sheet of the Borrower and
its  Restricted  Subsidiaries  as at the end of  such  fiscal  quarter,  and the
related  consolidated  and  consolidating  statements  of income or  operations,
shareholders'  equity and cash flows for such fiscal quarter and for the portion
of the  Borrower's  fiscal  year  then  ended,  setting  forth  in each  case in
comparative  form  the  figures  for the  corresponding  fiscal  quarter  of the
previous fiscal year and the corresponding  portion of the previous fiscal year,
all in reasonable detail and certified by a Responsible  Officer of the Borrower
as  fairly   presenting   the  financial   condition,   results  of  operations,
shareholders'  equity  and  cash  flows  of  the  Borrower  and  its  Restricted
Subsidiaries  in accordance  with GAAP,  subject only to normal  year-end  audit
adjustments and the absence of footnotes.

As to any  information  contained  in  materials  furnished  pursuant to SECTION
6.02(e),  the  Borrower  shall  not  be  separately  required  to  furnish  such
information  under clause (a) or (b) above,  but the  foregoing  shall not be in
derogation  of the  obligation  of the Borrower to furnish the  information  and
materials  described  in  subsections  (a) and (b) above at the times  specified
therein.

     6.02 CERTIFICATES;  OTHER INFORMATION.  Deliver to the Administrative Agent
and each Lender, in form and detail satisfactory to the Administrative Agent and
the Required Lenders:

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     (a) concurrently with the delivery of the financial  statements referred to
in  SECTION  6.01(a),   a  certificate  of  its  independent   certified  public
accountants  certifying such financial statements and stating that in making the
examination  necessary  therefor no knowledge  was obtained of any Default under
the financial  covenants set forth in SECTION 7.11 or, if any such Default shall
exist, stating the nature and status of such event;

     (b) concurrently with the delivery of the financial  statements referred to
in SECTIONS 6.01(a) and (b), a duly completed Compliance Certificate signed by a
Responsible Officer of the Borrower;

     (c) as soon as  available,  and in any event  within 25 days after the last
day  of  each  calendar   month  or  more   frequently,   as  requested  by  the
Administrative  Agent, a Borrowing Base  Certificate  showing the computation of
the Borrowing Base in reasonable  detail as of the close of business on the last
day of such month, signed by a Responsible Officer of the Borrower;

     (d) promptly after any request by the Administrative  Agent,  copies of any
detailed audit reports,  management letters or recommendations  submitted to the
board of directors  (or the audit  committee of the board of  directors)  of the
Borrower by independent  accountants in connection with the accounts or books of
the Borrower or any Restricted Subsidiary, or any audit of any of them;

     (e) promptly  after the same are  available,  copies of each annual report,
proxy or  financial  statement  or other  report  or  communication  sent to the
stockholders of the Borrower,  and copies of all annual,  regular,  periodic and
special reports and  registration  statements  which the Borrower may file or be
required  to file  with the SEC  under  Section  13 or  15(d) of the  Securities
Exchange  Act of  1934,  and  not  otherwise  required  to be  delivered  to the
Administrative  Agent pursuant hereto,  including without limitation,  form 10-Q
within 45 days of each  fiscal  quarter end and form 10-K within 90 days of each
fiscal year end;

     (f) at least 15 days prior to the end of each fiscal year of the  Borrower,
an annual  budget of the Borrower and its  Restricted  Subsidiaries  containing,
among other things, pro forma financial statements for the next fiscal year; and

     (g) promptly, such additional information regarding the business, financial
or corporate affairs of the Borrower or any Restricted Subsidiary, or compliance
with the terms of the Loan Documents,  as the Administrative Agent may from time
to time reasonably request.

     Documents  required to be delivered  pursuant to SECTION  6.01(a) or (b) or
SECTION  6.02(e) (to the extent any such  documents  are  included in  materials
otherwise  filed  with  the  SEC)  may  be  delivered  electronically  and if so
delivered,  shall be deemed to have been  delivered on the date (i) on which the
Borrower  posts such  documents,  or provides a link  thereto on the  Borrower's
website on the Internet at the website address listed on SCHEDULE 10.02; or (ii)
on  which   such   documents   are   posted   on  the   Borrower's   behalf   on
IntraLinks/IntraAgency or another relevant website, if any, to which each Lender
and the  Administrative  Agent have access  (whether a  commercial,  third-party
website or whether sponsored by the  Administrative  Agent);  PROVIDED that: (i)
the Borrower shall deliver paper copies of such documents to the  Administrative
Agent or any Lender that  requests  the  Borrower to deliver  such paper  copies

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until a  written  request  to  cease  delivering  paper  copies  is given by the
Administrative  Agent or such Lender and (ii) the Borrower  shall notify  (which
may be by facsimile or electronic mail) the Administrative Agent and each Lender
of the posting of any such documents and provide to the Administrative  Agent by
electronic  mail  electronic  versions  (I.E.,  soft copies) of such  documents.
Notwithstanding  anything contained herein, in every instance the Borrower shall
be required to provide paper copies of the Compliance  Certificates  required by
SECTION 6.02(c) to the Administrative Agent and each of the Lenders.  Except for
such Compliance Certificates,  the Administrative Agent shall have no obligation
to request  the  delivery  or to maintain  copies of the  documents  referred to
above, and in any event shall have no  responsibility  to monitor  compliance by
the Borrower with any such request for delivery, and each Lender shall be solely
responsible  for  requesting  delivery to it or  maintaining  its copies of such
documents.

     6.03 NOTICES. Promptly notify the Administrative Agent:

     (a) of the occurrence of any Default;

     (b) of any matter  that has  resulted  or could  reasonably  be expected to
result in a Material Adverse Effect;

     (c) of the occurrence of any ERISA Event;

     (d) of any  announcement by Moody's or S&P of any change or possible change
or withdrawal in a Debt Rating; and

     (e) of any material  change in accounting  policies or financial  reporting
practices by the Borrower or any Restricted Subsidiary.

     Each notice pursuant to this Section shall be accompanied by a statement of
a Responsible  Officer of the Borrower  setting forth details of the  occurrence
referred to therein and stating  what action the Borrower has taken and proposes
to take with respect  thereto.  Each notice  pursuant to SECTION  6.03(a)  shall
describe with  particularity  any and all  provisions of this  Agreement and any
other Loan Document that have been breached.

     6.04 PAYMENT OF OBLIGATIONS. Pay and discharge as the same shall become due
and  payable,  all  its  obligations  and  liabilities,  including  (a)  all tax
liabilities,  assessments  and  governmental  charges  or levies  upon it or its
properties  or  assets,  unless  the same are being  contested  in good faith by
appropriate proceedings diligently conducted and adequate reserves in accordance
with GAAP are being  maintained by the Borrower or such  Restricted  Subsidiary;
(b) all lawful  claims  which,  if  unpaid,  would by law become a Lien upon its
property; and (c) all Indebtedness,  as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement evidencing
such  Indebtedness,  in each case where the failure to do so could reasonably be
expected to have a Material Adverse Effect.

     6.05  PRESERVATION OF EXISTENCE,  ETC. (a) Preserve,  renew and maintain in
full force and effect its legal  existence and good  standing  under the Laws of
the  jurisdiction  of its  organization  except in a  transaction  permitted  by
SECTION  7.04 or 7.05;  (b) take all  reasonable  action to maintain all rights,
privileges,  permits,  licenses  and  franchises  necessary  or desirable in the
normal conduct of its business, except to the extent that failure to do so could
not reasonably be expected to have a Material  Adverse Effect;  and (c) preserve

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or renew all of its  registered  patents,  trademarks,  trade  names and service
marks,  the  non-preservation  of which could  reasonably  be expected to have a
Material Adverse Effect.

     6.06 MAINTENANCE OF PROPERTIES.  (a) Maintain,  preserve and protect all of
its material properties and equipment necessary in the operation of its business
in good working order and condition,  ordinary wear and tear  excepted;  and (b)
make all necessary repairs thereto and renewals and replacements  thereof except
where the failure to do so could not  reasonably  be expected to have a Material
Adverse Effect.

     6.07  MAINTENANCE  OF  INSURANCE.   Maintain  with  financially  sound  and
reputable  insurance  companies not  Affiliates of the Borrower,  insurance with
respect  to its  properties  and  business  against  loss or damage of the kinds
customarily  insured against by Persons engaged in the same or similar business,
of such  types and in such  amounts as are  customarily  carried  under  similar
circumstances by such other Persons.

     6.08  COMPLIANCE  WITH  LAWS.  Comply  in all  material  respects  with the
requirements  of all  Laws  and  all  orders,  writs,  injunctions  and  decrees
applicable  to it or to its  business or property,  except in such  instances in
which (a) such requirement of Law or order, write, injunction or decree is being
contested in good faith by appropriate  proceedings diligently conducted; or (b)
the  failure to comply  therewith  could not  reasonably  be  expected to have a
Material Adverse Effect.

     6.09 BOOKS AND RECORDS.  Maintain  proper  books of record and account,  in
which  full,  true and  correct  entries in  conformity  with GAAP  consistently
applied shall be made of all financial  transactions  and matters  involving the
assets and business of the Borrower or such Restricted  Subsidiary,  as the case
may be.

     6.10 INSPECTION RIGHTS. Permit representatives and independent  contractors
of the  Administrative  Agent and each  Lender to visit and  inspect  any of its
properties, to examine its corporate,  financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss its affairs,  finances and
accounts with its directors,  officers, and independent public accountants,  all
at such  reasonable  times during normal  business  hours and as often as may be
reasonably  desired,  upon reasonable advance notice to the Borrower;  PROVIDED,
however,  (a)  other  than  inspections   conducted  during  the  existence  and
continuance  of an Event of Default,  no more than two such  inspections  may be
conducted  during any  fiscal  year,  one of which may be by the  Administrative
Agent,  and  the  Borrower  shall  only  be  liable  for  the  expenses  of  the
Administrative Agent in connection with any such inspection and (b) that when an
Event of Default exists and is continuing the Administrative Agent or any Lender
(or any of their respective  representatives or independent  contractors) may do
any of the  foregoing at the expense of the  Borrower at any time during  normal
business  hours with  twenty-four  hours advance  notice and without limit as to
number.

     6.11 USE OF  PROCEEDS.  Use the  proceeds of the Credit  Extensions  (a) to
repay all amounts owed under the Existing Credit  Facilities and (b) for general
corporate purposes,  including Acquisitions,  not in contravention of any Law or
of any Loan Document.

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     6.12 ADDITIONAL GUARANTORS.

     (a) Subject to SECTION 6.12(b), notify the Administrative Agent at the time
that any Person becomes a Restricted Subsidiary,  and within 30 days, cause such
Person  to  (i)  become  a  Guarantor  by  executing   and   delivering  to  the
Administrative Agent a counterpart of the Guaranty or such other document as the
Administrative  Agent shall deem appropriate for such purpose,  and (ii) deliver
to the Administrative  Agent documents of the types referred to in clauses (iii)
and (iv) of SECTION  4.01(a) and a  favorable  opinion of counsel to such Person
located in the jurisdiction of organization of such Person in form,  content and
scope reasonably satisfactory to the Administrative Agent.

     (b)  Notwithstanding  any other provision in this  Agreement,  a Subsidiary
shall not be  required  to become a  Guarantor  in the  manner  contemplated  by
SECTION  6.12(a)  if  prior  to the  expiration  of  such  30 day  period,  such
Subsidiary  is  designated an  Unrestricted  Subsidiary  in accordance  with the
provisions of this Agreement.

                                  ARTICLE VII.

                               NEGATIVE COVENANTS

     From the  Closing  Date,  so long as any Lender  shall have any  Commitment
hereunder,  any  Loan or other  Obligation  hereunder  shall  remain  unpaid  or
unsatisfied,  or any Letter of Credit  shall  remain  outstanding,  the Borrower
shall  not,  nor shall it permit  any  Restricted  Subsidiary  to,  directly  or
indirectly:

     7.01 LIENS.  Create,  incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired, other
than the following:

     (a) Permitted Liens;

     (b) Liens pursuant to any Loan Document;

     (c) Liens  existing on the date hereof and listed on SCHEDULE  7.01 and any
renewals or extensions  thereof,  PROVIDED that the property  covered thereby is
not  increased  and any  renewal  or  extension  of the  obligations  secured or
benefited thereby is permitted by SECTION 7.03(a);

     (d) pledges or deposits in the  ordinary  course of business in  connection
with workers'  compensation,  unemployment  insurance and other social  security
legislation, other than any Lien imposed by ERISA;

     (e) deposits to secure the performance of bids,  trade contracts and leases
(other than Indebtedness), statutory obligations, surety bonds (other than bonds
related to judgments or litigation),  performance bonds and other obligations of
a like nature incurred in the ordinary course of business; and

     (f) Liens securing  Indebtedness  permitted under SECTION 7.03(f)  PROVIDED
that such Liens do not extend to any Borrowing Base Assets.

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     7.02 INVESTMENTS. Make any Investments, except:

     (a)  Investments  other than those permitted by subsections (b) through (i)
below existing on the Closing Date and listed on SCHEDULE 7.02;

     (b) Investments in Cash and Cash Equivalents;

     (c)  Investments  of  the  Borrower  in  any  wholly-owned   Guarantor  and
Investments  of  any  Restricted  Subsidiary  in  the  Borrower  or  in  another
wholly-owned Guarantor;

     (d)  Investments  consisting  of  extensions  of  credit  in the  nature of
accounts  receivable or notes receivable  arising from the grant of trade credit
in the ordinary course of business,  and Investments received in satisfaction or
partial  satisfaction  thereof from financially  troubled account debtors to the
extent reasonably necessary in order to prevent or limit loss;

     (e) Guarantees permitted by SECTION 7.03;

     (f)  Investments  as a result  of  Acquisitions,  if each of the  following
conditions has been satisfied: (i) immediately before and after giving effect to
such  Acquisition,  no Default shall have occurred and be continuing,  (ii) such
Acquisition  shall not be  opposed  by the board of  directors  of the Person or
assets  being  acquired,  (iii) the  Administrative  Agent  shall have  received
written  notice  thereof  at least 15  Business  Days  prior to the date of such
Acquisition,  (iv) for Acquisitions in which the Acquisition Consideration is in
excess of  $50,000,000,  the  Administrative  Agent shall have received at least
seven  Business  Days  prior  to the  date  of  such  Acquisition  a  Compliance
Certificate (A) setting forth the covenant  calculations both on or prior to and
after giving  effect to the proposed  Acquisition,  and (B)  certifying  that no
Default  shall have  occurred  and be  continuing  after  giving  effect to such
Acquisition,  (v) for  Acquisitions in which the  Acquisitions  Consideration is
equal to or less than $50,000,000,  the Administrative Agent shall have received
no  later  than  the  date of such  Acquisition  a  certificate,  executed  by a
Responsible Officer of the Borrower, certifying that, after giving effect to the
proposed Acquisition, no Default shall have occurred and be continuing, (vi) the
assets,  property or business  acquired  shall be in the  business  described in
SECTION 5.19, and (vii) if such Acquisition results in a Restricted  Subsidiary,
the requirements of SECTION 6.12 are satisfied;

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

     (h) Investments made by the Borrower or a Guarantor for consideration given
by the Borrower or any Guarantor  consisting only of Equity Interests other than
Disqualified Equity Interests; and

     (i)  Investments  other than those permitted by subsections (a) through (h)
above (but including any Investments in  Unrestricted  Subsidiaries in existence
on the Closing Date and Investments  disclosed on SCHEDULE  5.13(b) that are not
in Guarantors) in Persons that are in the business described in SECTION 5.19 not
to  exceed  in  aggregate  amount  outstanding  at any time 15% of  Consolidated
Tangible Net Worth.

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     7.03  INDEBTEDNESS.   Create,   incur,   assume  or  suffer  to  exist  any
Indebtedness, except:

     (a) Indebtedness,  other than that permitted by subsections (b) through (g)
below,  outstanding  on the  Closing  Date and listed on  SCHEDULE  7.03 and any
refinancings,  refundings,  renewals or  extensions  thereof;  PROVIDED that the
amount of such  Indebtedness  is not increased at the time of such  refinancing,
refunding,  renewal  or  extension  except  by an amount  equal to a  reasonable
premium  or other  reasonable  amount  paid,  and fees and  expenses  reasonably
incurred,  in  connection  with such  refinancing  plus an  amount  equal to any
existing commitments unutilized thereunder;

     (b) Indebtedness under the Loan Documents;

     (c) Guarantees of the Borrower or any Guarantor in respect of  Indebtedness
otherwise permitted hereunder of the Borrower or any other Guarantor;

     (d) obligations (contingent or otherwise) of the Borrower or any Restricted
Subsidiary  existing or arising under any Swap Contract,  PROVIDED that (i) such
obligations  are (or were) entered into by such Person in the ordinary course of
business  for  the  purpose  of  directly   mitigating   risks  associated  with
liabilities,  commitments,  investments,  assets, or property held or reasonably
anticipated by such Person, or changes in the value of securities issued by such
Person,  and not for purposes of speculation or taking a "market view;" and (ii)
such Swap Contract does not contain any provision exonerating the non-defaulting
party from its  obligation to make payments on outstanding  transactions  to the
defaulting party;

     (e) unsecured Indebtedness including Public Indebtedness (but excluding any
type of working capital or similar line of credit);  PROVIDED, that there exists
no Default both before and after giving effect to such Indebtedness;

     (f) (i)  secured  Indebtedness,  PROVIDED  that such  Liens  are  permitted
pursuant to SECTION  7.01 and are on assets  other than  Borrowing  Base Assets,
(ii) the  aggregate  amount of  Indebtedness  in respect of any of the foregoing
outstanding at any time (which shall include any Indebtedness listed on SCHEDULE
7.03 which is secured) shall not exceed 10% of  Consolidated  Tangible Net Worth
and (iii) there exists no Default  both before and after  giving  effect to such
Indebtedness; and

     (g)  Indebtedness of the Borrower to any Guarantor and  Indebtedness of any
Guarantor owed to the Borrower or another Guarantor.

     7.04 FUNDAMENTAL CHANGES. Merge, dissolve,  liquidate,  consolidate with or
into another Person, or Dispose of (whether in one transaction or in a series of
transactions)  all or  substantially  all of its  assets  (whether  now owned or
hereafter  acquired) to or in favor of any Person,  except  that,  so long as no
Default exists or would result therefrom:

     (a) any  Restricted  Subsidiary  may merge with (i) the Borrower,  PROVIDED
that the Borrower shall be the continuing or surviving  Person,  (ii) any one or
more other Restricted Subsidiaries,  PROVIDED that when any Guarantor is merging
with another  Restricted  Subsidiary,  the Guarantor  shall be the continuing or
surviving  Person or (iii) any Person,  provided  that such Person  formed by or

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surviving such  consolidation or merger becomes a Guarantor  pursuant to SECTION
6.12 and is a Restricted Subsidiary;

     (b) any Restricted  Subsidiary may Dispose of all or  substantially  all of
its assets  (upon  voluntary  liquidation  or  otherwise)  to the Borrower or to
another  Restricted  Subsidiary;  PROVIDED  that  if the  transferor  in  such a
transaction is a Guarantor, then the transferee must either be the Borrower or a
Guarantor; and

     (c) the  Borrower  or any  Restricted  Subsidiary  may make any  Investment
permitted by SECTION 7.02(f).

     7.05 DISPOSITIONS. Make any Disposition or enter into any agreement to make
any Disposition, except:

     (a)  Dispositions  of obsolete or worn out  property,  whether now owned or
hereafter acquired, in the ordinary course of business;

     (b)  Dispositions of assets 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 Units
and Land;

     (c)  Dispositions of assets in which the Net Available  Proceeds  therefrom
are used within one year to (i) repay any Indebtedness under the Loan Documents,
(ii)  repay  any  Indebtedness  which was  secured  by the  assets  sold in such
Disposition,  and/or (iii) 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 the business described
in SECTION 5.19, such entity becomes a Restricted Subsidiary and the Borrower or
a Restricted  Subsidiary  acquires voting and management control of such entity)
to be  used  by  the  Borrower  or any  Restricted  Subsidiary  in the  business
described  in  SECTION  5.19,  PROVIDED  HOWEVER,  if after  one year  from such
Disposition  and on the date of the  proposed  payment  referred to  immediately
hereafter,  there is no  Indebtedness  outstanding  under  this  Agreement,  the
Borrower may repay any amounts  required  under  Section 4.09 of the Senior Note
Indenture  or  similar  provisions  contained  in any  Refinancing  Indebtedness
relating thereto or in any Public Indebtedness;

     (d)  Dispositions of property by any Restricted  Subsidiary to the Borrower
or to a wholly-owned  Restricted Subsidiary;  PROVIDED that if the transferor of
such property is a Guarantor, the transferee thereof must either be the Borrower
or a Guarantor;

     (e) Dispositions permitted by SECTIONS 7.02, 7.04 and 7.06;

     (f) transfers of Cash and Cash Equivalents;

     (g) the creation or realization of any Lien permitted by SECTION 7.01; and

     (h)  dispositions  of mortgage liens and related assets and mortgage backed
securities in the ordinary course of business;

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PROVIDED,  HOWEVER,  that any Disposition pursuant to clauses (a), (b), (c), (f)
and (h) shall be for fair market value.

     7.06  RESTRICTED  PAYMENTS.  Declare or make,  directly or indirectly,  any
Restricted Payment, or incur any obligation  (contingent or otherwise) to do so,
except that:

     (a) each Restricted Subsidiary may declare and make dividends and any other
Restricted Payments to the Borrower and to any Guarantor;

     (b) the  Borrower  and each  Restricted  Subsidiary  may  declare  and make
dividend payments or other  distributions  payable solely in the common stock or
other common equity interests of such Person;

     (c) the Borrower may make  regularly  scheduled  payments of principal  and
interest on the Senior Notes or other Public  Indebtedness  or any  Subordinated
Debt of any Loan Party;

     (d) the Borrower  may (i) declare or pay cash  dividends,  (ii)  repurchase
shares of its capital  stock,  (iii) redeem its capital  stock held by officers,
directors  or  employees of 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; and
(iv)  repurchase  or acquire any  outstanding  Public  Indebtedness  Securities,
PROVIDED,  however,  in no event  shall  (y) the  aggregate  amount of such cash
dividends, repurchases,  redemptions and acquisitions referred to in clauses (i)
through  (iv)  immediately  above during any period of four  consecutive  fiscal
quarters  exceed 50% of  Consolidated  Net Income (if greater  than zero) earned
during the most recently completed four fiscal quarters and (z)  notwithstanding
anything in clause (y) immediately  preceding,  the aggregate proposed amount of
Public Indebtedness securities repurchased or acquired during any period of four
consecutive fiscal quarters exceed $10,000,000;  (e) the Borrower may repurchase
its  capital  stock upon the  exercise  of stock  options if the  capital  stock
represents a portion of the exercise price;

PROVIDED THAT immediately  before and immediately  after any Restricted  Payment
otherwise permitted above, no Default exists or would result therefrom.

     7.07 CHANGE IN NATURE OF BUSINESS.  Engage in any material line of business
substantially  different from those lines of business  conducted by the Borrower
and its Subsidiaries on the date hereof or any business substantially related or
incidental thereto.

     7.08 TRANSACTIONS  WITH AFFILIATES.  Enter into any transaction of any kind
with  any  Affiliate  (other  than  with the  Borrower  or a  Guarantor)  of the
Borrower,  whether or not in the ordinary course of business, other than on fair
and  reasonable  terms  substantially  as  favorable  to the  Borrower  or  such
Restricted  Subsidiary as would be obtainable by the Borrower or such Restricted
Subsidiary at the time in a comparable  arm's length  transaction  with a Person
other than an  Affiliate;  PROVIDED,  HOWEVER,  that  SECTION  7.08 shall not be
deemed to prohibit:

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     (a) reasonable  director,  officer,  employee and  consultant  compensation
(including bonuses) and other benefits (including retirement,  health, stock and
other benefit plans) and indemnification arrangement;

     (b) any  agreement  as in  effect  on the  Closing  Date  and set  forth on
SCHEDULE 7.08 or any extension,  amendment or  modification  thereto (so long as
any such extension,  amendment or modification  satisfies the  requirements  set
forth in the first paragraph of this SECTION 7.08);

     (c)  Restricted  Payments  of  the  type  described  in  clause  (a) of the
definition of "RESTRICTED PAYMENT" and which are made in accordance with SECTION
7.06; and

     (d) sale of Borrower's  capital stock or  Subordinated  Debt for cash to an
Affiliate.

     7.09 BURDENSOME AGREEMENTS.  Enter into any Contractual Obligation that (a)
limits the ability (i) of any Restricted  Subsidiary to make Restricted Payments
to the  Borrower  or any  Guarantor  or to  otherwise  transfer  property to the
Borrower or any Guarantor,  (ii) of any  Restricted  Subsidiary to Guarantee the
Indebtedness  of the  Borrower  or  (iii)  of  the  Borrower  or any  Restricted
Subsidiary to create, incur, assume or suffer to exist Liens on property of such
Person;  PROVIDED,  HOWEVER,  that this clause  (iii) shall not prohibit (1) any
negative  pledge  incurred or  provided  in favor of any holder of  Indebtedness
permitted  under SECTION  7.03(f) solely to the extent any such negative  pledge
relates to the property  financed by or the subject of such  Indebtedness or (2)
any  negative  pledge  incurred or provided in favor of any holder of any Public
Indebtedness  permitted  under SECTION  7.03(e);  or (b) requires the grant of a
Lien to secure an  obligation  of such  Person  if a Lien is  granted  to secure
another  obligation  of such  Person,  PROVIDED  that this  clause (b) shall not
prohibit the requirement of granting a pari passu Lien in favor of any holder of
any Public  Indebtedness  permitted  under  SECTION  7.03(e) if the  Obligations
hereunder  are  required  to be secured;  PROVIDED,  FURTHER,  HOWEVER,  (x) the
foregoing shall not apply to restrictions  imposed by Law, this Agreement or any
other Loan Documents or the Senior Notes,  (y) the foregoing  shall not apply to
customary restrictions and conditions contained in agreements relating to a sale
of a Subsidiary  or all or  substantially  all of its assets  pending such sale,
provided such  restrictions  and conditions apply only to the Subsidiary that is
sold and such sale is permitted hereunder,  and (z) clause (iii) shall not apply
to customary provisions in leases restricting the assignment thereof.

     7.10 USE OF  PROCEEDS.  Use the proceeds of any Credit  Extension,  whether
directly or indirectly, and whether immediately,  incidentally or ultimately, to
purchase or carry margin stock  (within the meaning of  Regulation U of the FRB)
or to extend credit to others for the purpose of  purchasing or carrying  margin
stock  or to  refund  indebtedness  originally  incurred  for  such  purpose  in
violation of Regulation U of FRB.

     7.11 FINANCIAL COVENANTS.

     (a) MINIMUM NET WORTH. Permit  Consolidated  Tangible Net Worth at any time
to be less  than  the sum of  $180,000,000  plus (b) an  amount  equal to 50% of
Consolidated  Net Income  earned in each full fiscal  quarter  ending  after the
Closing Date (with no deduction for a net loss in any such fiscal quarter), plus
(c) an amount equal to 75% of the aggregate  increases in Consolidated  Tangible
Net Worth of the Borrower and its Restricted Subsidiaries after the Closing Date

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by reason of the issuance and sale of Equity Interests or other equity interests
of the  Borrower  or any  Restricted  Subsidiary  (other than  issuances  to the
Borrower or a wholly-owned Restricted Subsidiary), including upon any conversion
of debt  securities of the Borrower  into such Equity  Interests or other equity
interests,  plus (d) an amount equal to the Net Worth of any Person that becomes
a Restricted  Subsidiary or is merged into or consolidated  with the Borrower or
any  Restricted  Subsidiary  or  substantially  all of the  assets  of which are
acquired by the Borrower or any  Restricted  Subsidiary,  in each case after the
Closing Date.

     (b) LEVERAGE RATIO. Permit the Leverage Ratio at any time during any period
of four fiscal quarters of the Borrower to be greater than 2.25 to 1.

     (c) INTEREST COVERAGE RATIO. Permit the Interest Coverage Ratio at any time
during any period of four fiscal  quarters of the  Borrower to be less than 2.00
to 1.

     (d) BORROWING BASE.  Permit the Borrowing Base Debt to exceed the Borrowing
Base at any time.

     (e) TOTAL  LAND  RESTRICTIONS.  Permit the sum of (a) the Net Book Value of
Unentitled  Land, plus (b) the Net Book Value of Unimproved  Entitled Land, plus
(c) the Net Book Value of  Land/Lots  Under  Development,  plus (d) the Net Book
Value of Finished Lots to exceed 125% of Consolidated  Tangible Net Worth at any
time.

     (f) RAW LAND  RESTRICTIONS.  Permit  the sum of (a) the Net  Book  Value of
Unentitled  Land  plus (b) the Net Book  Value of  Unimproved  Entitled  Land to
exceed 20% of Consolidated Tangible Net Worth.

     (g) UNSOLD UNITS.  Permit the number of Unsold Units existing as of the end
of any fiscal  quarter to exceed 25% of the number of Unit  Closings  within the
four fiscal quarters ending on the last day of such fiscal quarter.

     (h) MODEL UNITS. Permit the number of Model Units existing as of the end of
any fiscal quarter to exceed 10% of the number of Unit Closings  within the four
fiscal quarters ending on the last day of such fiscal quarter.

     7.12  FISCAL  YEAR AND  ACCOUNTING  METHODS.  Change its fiscal year or its
method of accounting (other than immaterial changes in methods or as required by
GAAP or to conform an Acquired Business to the Borrower's practices).

     7.13 AMENDMENT AND WAIVERS OF SENIOR NOTES. Change or permit any Restricted
Subsidiary  to change or amend or accept any waiver or consent  with respect to,
any document, instrument or agreement relating to the Senior Notes or the Senior
Note Indenture that would result in (a) an increase in the principal,  interest,
overdue  interest,  fees or other amounts payable under the Senior Notes, (b) an
acceleration in any date fixed for payment or prepayment of principal, interest,
fees or other  amounts  payable  under  the  Senior  Notes  (including,  without
limitation,  as a result of any  redemption),  (c) a change in the definition of
"CHANGE OF CONTROL" or "CHANGE IN  CONTROL"  or similar  event or  circumstance,
however  defined or  designated,  as provided in the Senior  Notes or the Senior
Note Indenture which would result in such definition being more restrictive than
such  definition  in this  Agreement,  (d) a  change  in any  covenant,  term or

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provision in the Senior Notes or the Senior Note Indenture which would result in
such term or provision being more  restrictive  than the terms of this Agreement
and the other Loan  Documents  or (e) a change in any term or  provision  of the
Senior Notes or the Senior Note Indenture  that could  reasonably be expected to
have, in any material respect, an adverse effect in the interest of the Lenders.

     7.14 SALE AND  LEASEBACK.  Enter  into any Sale and  Leaseback  Transaction
(directly or  indirectly)  with any person other than among the Borrower and any
Subsidiary  Guarantor  (to the extent such  transaction  is otherwise  permitted
hereunder), except for the sale and leaseback of Model Units.

     7.15 OFF-BALANCE  SHEET  LIABILITIES.  Create,  incur,  assume or suffer to
exist any Off-Balance Sheet Liabilities.

                                  ARTICLE VIII.

                         EVENTS OF DEFAULT AND REMEDIES

     8.01 EVENTS OF DEFAULT.  Any of the following shall  constitute an Event of
Default:

     (a) NON-PAYMENT. The Borrower or any other Loan Party fails to pay (i) when
and as required to be paid  herein,  any amount of  principal of any Loan or any
L/C  Obligation,  or (ii)  within  three days after the same  becomes  due,  any
interest on any Loan or on any L/C  Obligation,  or any  commitment or other fee
due  hereunder,  or (iii) within five days after the same becomes due, any other
amount payable hereunder or under any other Loan Document; or

     (b) SPECIFIC COVENANTS.  The Borrower fails to perform or observe any term,
covenant or agreement contained in any of SECTION 6.03(a), 6.05 (with respect to
the existence of the Borrower or its Restricted  Subsidiaries),  6.10 or 6.12 or
ARTICLE VII; or

     (c) OTHER  DEFAULTS.  Any Loan Party  fails to perform or observe any other
covenant or agreement (not  specified in subsection (a) or (b) above)  contained
in any Loan  Document on its part to be  performed  or observed and such failure
continues for 30 days; or

     (d)   REPRESENTATIONS  AND  WARRANTIES.   Any   representation,   warranty,
certification  or  statement  of fact made or deemed made by or on behalf of the
Borrower or any other Loan Party herein,  in any other Loan Document,  or in any
document  delivered in  connection  herewith or therewith  shall be incorrect or
misleading in any material respect when made or deemed made; or

     (e) CROSS-DEFAULT.  (i) The Borrower or any Restricted Subsidiary (A) fails
to  make  any  payment  when  due  (whether  by  scheduled  maturity,   required
prepayment,  acceleration,  demand, or otherwise) in respect of any Indebtedness
or Guarantee  (other than  Indebtedness  hereunder and  Indebtedness  under Swap
Contracts) having an aggregate  principal amount (including undrawn Revolving or
available  amounts  and  including  amounts  owing to all  creditors  under  any
combined or syndicated  credit  arrangement)  of more than  $7,500,000  and such
failure  continues after the expiration of any applicable  grace period,  or (B)
fails to  observe  or  perform  any other  agreement  or  condition  (after  the
expiration  of any  applicable  grace  period and after  notice from the holders

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thereof,  if  required)  relating  to any  such  Indebtedness  or  Guarantee  or
contained  in any  instrument  or  agreement  evidencing,  securing  or relating
thereto,  or any other event occurs,  the effect of which default or other event
is to cause,  or to permit the holder or  holders  of such  Indebtedness  or the
beneficiary or  beneficiaries of such Guarantee (or a trustee or agent on behalf
of such holder or holders or beneficiary or  beneficiaries)  to cause,  with the
giving of notice if required,  such Indebtedness to be demanded or to become due
or  to  be  repurchased,   prepaid,   defeased  or  redeemed  (automatically  or
otherwise),  or  an  offer  to  repurchase,   prepay,  defease  or  redeem  such
Indebtedness  to be made,  prior to its stated  maturity,  or such  Guarantee to
become  payable or cash  collateral in respect  thereof to be demanded;  or (ii)
there occurs under any Swap  Contract an Early  Termination  Date (as defined in
such Swap  Contract)  resulting  from (A) any event of  default  under such Swap
Contract as to which the Borrower or any Restricted Subsidiary is the Defaulting
Party (as defined in such Swap  Contract)  or (B) any  Termination  Event (as so
defined)  under such Swap  Contract as to which the  Borrower or any  Restricted
Subsidiary is an Affected  Party (as so defined) and, in either event,  the Swap
Termination Value owed by the Borrower or such Restricted Subsidiary as a result
thereof is greater $7,500,000; or

     (f) INSOLVENCY PROCEEDINGS,  ETC. Any Loan Party or any of its Subsidiaries
institutes or consents to the  institution  of any  proceeding  under any Debtor
Relief Law, or makes an assignment for the benefit of creditors;  or applies for
or consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator,  rehabilitator  or similar officer for it or for all or any material
part  of  its  property;  or  any  receiver,  trustee,  custodian,  conservator,
liquidator,   rehabilitator   or  similar  officer  is  appointed   without  the
application or consent of such Person and the appointment continues undischarged
or unstayed for 60 calendar days; or any proceeding  under any Debtor Relief Law
relating to any such Person or to all or any  material  part of its  property is
instituted  without  the  consent of such Person and  continues  undismissed  or
unstayed  for 60  calendar  days,  or an order for relief is entered in any such
proceeding; or

     (g) INABILITY TO PAY DEBTS; ATTACHMENT.  (i) The Borrower or any Restricted
Subsidiary  becomes unable or admits in writing its inability or fails generally
to pay its debts as they become  due, or (ii) any writ or warrant of  attachment
or execution or similar  process is issued or levied against all or any material
part of the  property of any such Person and is not  released,  vacated or fully
bonded within 30 days after its issue or levy; or

     (h)  JUDGMENTS.  There is entered  against the  Borrower or any  Restricted
Subsidiary  (i) a final  judgment  or  order  for the  payment  of  money  in an
aggregate amount exceeding  $7,500,000 (to the extent not covered by independent
third-party  insurance  as to which the insurer does not dispute  coverage),  or
(ii) any one or more non-monetary final judgments that have, or could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
and, in either case, (A)  enforcement  proceedings are commenced by any creditor
upon such  judgment or order,  or (B) there is a period of 10  consecutive  days
during  which a stay of  enforcement  of such  judgment,  by reason of a pending
appeal or otherwise, is not in effect; or

     (i) ERISA.  (i) An ERISA  Event  occurs with  respect to a Pension  Plan or
Multiemployer  Plan which has resulted or could reasonably be expected to result
in  liability  of the  Borrower  under  Title IV of ERISA to the  Pension  Plan,
Multiemployer  Plan or the PBGC in an aggregate  amount in excess of $7,500,000,
or (ii) the  Borrower or any ERISA  Affiliate  fails to pay when due,  after the

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expiration of any applicable grace period, any installment  payment with respect
to its withdrawal  liability  under Section 4201 of ERISA under a  Multiemployer
Plan in an aggregate amount in excess of $7,500,000; or

     (j) INVALIDITY OF LOAN DOCUMENTS.  Any Loan Document, at any time after its
execution  and delivery  and for any reason  other than as  expressly  permitted
hereunder or thereunder or satisfaction in full of all the  Obligations,  ceases
to be in full force and  effect;  or any Loan Party  contests  in any manner the
validity or enforceability  of any Loan Document;  or any Loan Party denies that
it has any or  further  liability  or  obligation  under any Loan  Document,  or
purports to revoke, terminate or rescind any Loan Document; or

     (k) CHANGE OF CONTROL.  There  occurs any Change of Control with respect to
the Borrower.

     8.02 REMEDIES UPON EVENT OF DEFAULT.  If any Event of Default occurs and is
continuing,  the  Administrative  Agent may in its discretion,  or shall, at the
request of, the Required Lenders (or any Non-Consenting  Lender that is not paid
all  amounts  due and  owing to such  Non-Consenting  Lender  on the date and as
further provided in the third sentence of SECTION  2.14(b)),  take any or all of
the following actions:

     (a)  declare  the  commitment  of each  Lender  to make  Loans  and/or  any
obligation  of the L/C Issuer to make L/C Credit  Extensions  to be  terminated,
whereupon  such  commitments   and/or   obligations  shall  be  terminated,   as
applicable;

     (b) declare  the unpaid  principal  amount of all  outstanding  Loans,  all
interest  accrued and unpaid  thereon,  and all other  amounts  owing or payable
hereunder or under any other Loan  Document to be  immediately  due and payable,
without presentment,  demand,  protest or other notice of any kind, all of which
are hereby expressly waived by the Borrower;

     (c) require that the Borrower Cash Collateralize the L/C Obligations (in an
amount equal to the then Outstanding Amount thereof); and

     (d)  exercise on behalf of itself and the  Lenders all rights and  remedies
available to it and the Lenders under the Loan Documents or applicable law;

     PROVIDED, HOWEVER, that upon the occurrence of an actual or deemed entry of
an order for relief  with  respect to the  Borrower or any  Guarantor  under the
Bankruptcy  Code of the United  States,  the  obligation  of each Lender to make
Loans and any obligation of any L/C Issuer to make L/C Credit  Extensions  shall
automatically  terminate,  the unpaid principal amount of all outstanding  Loans
and all interest and other amounts as aforesaid shall  automatically  become due
and payable,  and the obligation of the Borrower to Cash  Collateralize  the L/C
Obligations as aforesaid  shall  automatically  become  effective,  in each case
without further act of the Administrative Agent or any Lender.

     8.03 APPLICATION OF FUNDS. After the occurrence of an Event of Default, any
amounts  received  on  account  of  the  Obligations  shall  be  applied  by the
Administrative Agent in the following order:

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     FIRST,  to payment of that portion of the  Obligations  constituting  fees,
indemnities,  expenses and other amounts  (including  Attorney Costs and amounts
payable under ARTICLE III) payable to the  Administrative  Agent in its capacity
as such (other than the annual administrative fee of the Administrative Agent);

     SECOND,  to payment of that portion of the Obligations  constituting  fees,
indemnities and other amounts (other than principal and interest,  amounts owing
under any Swap Contracts and the annual administrative fee of the Administrative
Agent)  payable to the Lenders  (including  Attorney  Costs and amounts  payable
under Article III), ratably among them in proportion to the amounts described in
this clause SECOND payable to them;

     THIRD, to payment of that portion of the Obligations  constituting  accrued
and unpaid interest on the Loans and L/C  Borrowings,  ratably among the Lenders
in proportion to the respective  amounts  described in this clause THIRD payable
to them;

     FOURTH, to payment of that portion of the Obligations  constituting  unpaid
principal  of the  Loans  and L/C  Borrowings,  ratably  among  the  Lenders  in
proportion  to the  respective  amounts  described in this clause FOURTH held by
them;

     FIFTH, to the  Administrative  Agent for the account of the L/C Issuer,  to
Cash  Collateralize  that portion of L/C Obligations  comprised of the aggregate
undrawn amount of Letters of Credit;

     SIXTH, to the Administrative Agent, its annual administrative fee;

     SEVENTH,  to payment of that portion of the  Obligations  constituting  all
amounts owed under any Swap Contract  included in the  Obligations  (at the Swap
Termination  Value),  ratable among the Lenders in proportion to the  respective
amounts described in this clause SEVENTH held by them;

     EIGHTH, to any remaining outstanding and unpaid Obligations,  ratably among
the Lenders in proportion  to the  respective  amounts  described in this clause
EIGHTH held by them; and

     LAST,  the  balance,  if  any,  after  all of  the  Obligations  have  been
indefeasibly paid in full, to the Borrower or as otherwise required by Law.

Subject to SECTION  2.03(c),  amounts used to Cash  Collateralize  the aggregate
undrawn  amount of Letters of Credit  pursuant  to clause  FIFTH  above shall be
applied to satisfy  drawings under such Letters of Credit as they occur.  If any
amount  remains on deposit as Cash  Collateral  after all Letters of Credit have
either been fully drawn or expired,  such  remaining  amount shall be applied to
the other Obligations, if any, in the order set forth above.

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                                   ARTICLE IX.

                              ADMINISTRATIVE AGENT

     9.01 APPOINTMENT AND AUTHORIZATION OF ADMINISTRATIVE AGENT.

     (a) Each Lender hereby irrevocably appoints,  designates and authorizes the
Administrative  Agent to take such action on its behalf under the  provisions of
this  Agreement  and each other Loan  Document  and to exercise  such powers and
perform  such  duties  as are  expressly  delegated  to it by the  terms of this
Agreement  or  any  other  Loan  Document,  together  with  such  powers  as are
reasonably  incidental  thereto.  Notwithstanding  any provision to the contrary
contained  elsewhere  herein or in any other Loan Document,  the  Administrative
Agent shall not have any duties or responsibilities,  except those expressly set
forth herein, nor shall the  Administrative  Agent have or be deemed to have any
fiduciary relationship with any Lender or participant, and no implied covenants,
functions,  responsibilities,  duties,  obligations or liabilities shall be read
into this  Agreement or any other Loan  Document or otherwise  exist against the
Administrative Agent. Without limiting the generality of the foregoing sentence,
the  use of the  term  "agent"  herein  and in the  other  Loan  Documents  with
reference to the  Administrative  Agent is not intended to connote any fiduciary
or other implied (or express)  obligations  arising under agency doctrine of any
applicable Law. Instead,  such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship between
independent contracting parties.

     (b) Each L/C Issuer  shall act on behalf of the Lenders with respect to any
Letters of Credit issued by it and the documents associated therewith,  and each
L/C Issuer  shall have all of the benefits  and  immunities  (i) provided to the
Administrative  Agent in this  ARTICLE  IX with  respect  to any  acts  taken or
omissions  suffered  by such L/C  Issuer in  connection  with  Letters of Credit
issued by it or proposed to be issued by it and the  applications and agreements
for letters of credit  pertaining  to such  Letters of Credit as fully as if the
term "Administrative  Agent" as used in this ARTICLE IX and in the definition of
"Agent-Related  Person"  included  such L/C Issuer with  respect to such acts or
omissions,  and (ii) as  additionally  provided  herein with respect to such L/C
Issuer.

     9.02 DELEGATION OF DUTIES. The Administrative  Agent may execute any of its
duties  under this  Agreement or any other Loan  Document by or through  agents,
employees  or  attorneys-in-fact  and shall be entitled to advice of counsel and
other consultants or experts  concerning all matters  pertaining to such duties.
The  Administrative  Agent  shall  not be  responsible  for  the  negligence  or
misconduct  of any agent or  attorney-in-fact  that it selects in the absence of
gross negligence or willful misconduct.

     9.03 LIABILITY OF ADMINISTRATIVE  AGENT. No Agent-Related  Person shall (a)
be liable for any action taken or omitted to be taken by any of them under or in
connection  with this  Agreement or any other Loan Document or the  transactions
contemplated  hereby (except for its own gross negligence or willful  misconduct
in connection with its duties expressly set forth herein), or (b) be responsible
in any  manner  to  any  Lender  or  participant  for  any  recital,  statement,
representation  or  warranty  made by any  Loan  Party or any  officer  thereof,
contained herein or in any other Loan Document,  or in any certificate,  report,
statement or other  document  referred to or provided for in, or received by the

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Administrative  Agent under or in connection  with,  this Agreement or any other
Loan Document, or the validity,  effectiveness,  genuineness,  enforceability or
sufficiency of this Agreement or any other Loan Document,  or for any failure of
any  Loan  Party  or any  other  party  to any  Loan  Document  to  perform  its
obligations hereunder or thereunder.  No Agent-Related Person shall be under any
obligation  to any Lender or  participant  to  ascertain or to inquire as to the
observance or performance  of any of the agreements  contained in, or conditions
of, this  Agreement or any other Loan  Document,  or to inspect the  properties,
books or records of any Loan Party or any Affiliate thereof.

     9.04 RELIANCE BY ADMINISTRATIVE AGENT.

     (a) The Administrative  Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing,  communication,  signature,  resolution,
representation,  notice,  consent,  certificate,  affidavit,  letter,  telegram,
facsimile,  telex or telephone  message,  electronic mail message,  statement or
other document or  conversation  believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons,  and upon advice
and  statements  of  legal  counsel  (including  counsel  to  any  Loan  Party),
independent  accountants and other experts selected by the Administrative Agent.
The Administrative Agent shall be fully justified in failing or refusing to take
any action under any Loan Document  unless it shall first receive such advice or
concurrence  of the  Required  Lenders  as it deems  appropriate  and,  if it so
requests,  it shall  first be  indemnified  to its  satisfaction  by the Lenders
against any and all  liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative  Agent shall
in all cases be fully protected in acting,  or in refraining from acting,  under
this  Agreement  or any other  Loan  Document  in  accordance  with a request or
consent of the Required Lenders (or (i) such greater number of Lenders as may be
expressly required hereby in any instance or (ii) any Non-Consenting Lender that
is not paid all amounts due and owing to such Non-Consenting  Lender on the date
and as further  provided  in the third  sentence  of SECTION  2.14(b))  and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders.

     (b) For purposes of determining compliance with the conditions specified in
SECTION 4.01, each Lender that has signed this Agreement shall be deemed to have
consented  to,  approved or accepted or to be satisfied  with,  each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative  Agent shall have received
notice  from such Lender  prior to the  proposed  Closing  Date  specifying  its
objection thereto.

     9.05 NOTICE OF  DEFAULT.  The  Administrative  Agent shall not be deemed to
have knowledge or notice of the  occurrence of any Default,  except with respect
to defaults in the payment of  principal,  interest and fees required to be paid
to the  Administrative  Agent  for  the  account  of  the  Lenders,  unless  the
Administrative  Agent shall have  received  written  notice from a Lender or the
Borrower  referring to this Agreement,  describing such Default and stating that
such notice is a "notice of default." The  Administrative  Agent will notify the
Lenders of its receipt of any such notice. The  Administrative  Agent shall take
such action  with  respect to such  Default as may be  directed by the  Required
Lenders in accordance  with ARTICLE  VIII;  PROVIDED,  HOWEVER,  that unless and
until  the   Administrative   Agent  has  received  any  such   direction,   the
Administrative  Agent may (but shall not be obligated  to) take such action,  or
refrain from taking such  action,  with respect to such Default as it shall deem
advisable or in the best interest of the Lenders.

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     9.06 CREDIT DECISION;  DISCLOSURE OF INFORMATION BY  ADMINISTRATIVE  AGENT.
Each   Lender   acknowledges   that  no   Agent-Related   Person  has  made  any
representation  or warranty to it, and that no act by the  Administrative  Agent
hereafter  taken,  including any consent to and  acceptance of any assignment or
review of the  affairs  of any Loan  Party or any  Affiliate  thereof,  shall be
deemed to constitute any representation or warranty by any Agent-Related  Person
to any Lender as to any matter,  including  whether  Agent-Related  Persons have
disclosed  material  information in their possession.  Each Lender represents to
the  Administrative  Agent that it has,  independently and without reliance upon
any  Agent-Related  Person and based on such documents and information as it has
deemed  appropriate,  made  its own  appraisal  of and  investigation  into  the
business,  prospects,  operations,  property,  financial and other condition and
creditworthiness of the Loan Parties and their respective Subsidiaries,  and all
applicable  bank  or  other   regulatory  Laws  relating  to  the   transactions
contemplated  hereby, and made its own decision to enter into this Agreement and
to extend  credit to the  Borrower and the other Loan  Parties  hereunder.  Each
Lender also represents that it will, independently and without reliance upon any
Agent-Related  Person and based on such  documents and  information  as it shall
deem  appropriate  at the  time,  continue  to  make  its own  credit  analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents,  and to make such investigations as it deems necessary
to inform itself as to the business, prospects,  operations, property, and other
condition  and  creditworthiness  of the  Borrower  and the other Loan  Parties.
Except  for  notices,  reports  and other  documents  expressly  required  to be
furnished to the Lenders by the Administrative  Agent herein, the Administrative
Agent shall not have any duty or  responsibility  to provide any Lender with any
credit or other  information  concerning  the business,  prospects,  operations,
property,  financial and other condition or  creditworthiness of any of the Loan
Parties or any of their respective Affiliates which may come into the possession
of any Agent-Related Person.

     9.07   INDEMNIFICATION  OF  ADMINISTRATIVE   AGENT.   WHETHER  OR  NOT  THE
TRANSACTIONS  CONTEMPLATED  HEREBY ARE CONSUMMATED,  THE LENDERS SHALL SEVERALLY
INDEMNIFY UPON DEMAND EACH AGENT-RELATED PERSON (TO THE EXTENT NOT REIMBURSED BY
OR ON BEHALF OF ANY LOAN PARTY AND WITHOUT  LIMITING THE  OBLIGATION OF ANY LOAN
PARTY TO DO SO), PRO RATA IN ACCORDANCE  WITH ITS SPECIFIED PRO RATA SHARE,  AND
HOLD HARMLESS EACH AGENT-RELATED PERSON FROM AND AGAINST ANY AND ALL INDEMNIFIED
LIABILITIES  INCURRED BY IT;  (WHETHER OR NOT ARISING OUT OF THE  NEGLIGENCE  OF
SUCH AGENT-RELATED PERSON) PROVIDED, HOWEVER, THAT NO LENDER SHALL BE LIABLE FOR
THE  PAYMENT TO ANY  AGENT-RELATED  PERSON OF ANY  PORTION  OF SUCH  INDEMNIFIED
LIABILITIES  TO THE EXTENT  DETERMINED IN A FINAL,  NONAPPEALABLE  JUDGMENT BY A
COURT  OF  COMPETENT  JURISDICTION  TO HAVE  RESULTED  FROM  SUCH  AGENT-RELATED
PERSON'S OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT;  PROVIDED, HOWEVER, THAT NO
ACTION TAKEN IN ACCORDANCE WITH THE DIRECTIONS OF THE REQUIRED  LENDERS SHALL BE
DEEMED TO CONSTITUTE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT FOR PURPOSES OF THIS
SECTION.  WITHOUT  LIMITATION OF THE FOREGOING,  EACH LENDER SHALL REIMBURSE THE

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ADMINISTRATIVE  AGENT  UPON  DEMAND  FOR  ITS  RATABLE  SHARE  OF ANY  COSTS  OR
OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEY COSTS) INCURRED BY THE ADMINISTRATIVE
AGENT IN CONNECTION WITH THE PREPARATION,  EXECUTION, DELIVERY,  ADMINISTRATION,
MODIFICATION,  AMENDMENT OR ENFORCEMENT  (WHETHER  THROUGH  NEGOTIATIONS,  LEGAL
PROCEEDINGS  OR  OTHERWISE)  OF,  OR  LEGAL  ADVICE  IN  RESPECT  OF  RIGHTS  OR
RESPONSIBILITIES UNDER, THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY DOCUMENT
CONTEMPLATED  BY OR  REFERRED TO HEREIN,  TO THE EXTENT THAT THE  ADMINISTRATIVE
AGENT IS NOT REIMBURSED  FOR SUCH EXPENSES BY OR ON BEHALF OF THE BORROWER.  THE
UNDERTAKING  IN  THIS  SECTION  SHALL  SURVIVE   TERMINATION  OF  THE  AGGREGATE
COMMITMENTS,  THE PAYMENT OF ALL OTHER  OBLIGATIONS  AND THE  RESIGNATION OF THE
ADMINISTRATIVE AGENT.

     9.08 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. Guaranty Bank and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from,  acquire equity  interests in and generally engage in any kind of
banking, trust, financial advisory,  underwriting or other business with each of
the Loan Parties and their  respective  Affiliates as though  Guaranty Bank were
not the Administrative  Agent or a L/C Issuer hereunder and without notice to or
consent  of  the  Lenders.  The  Lenders  acknowledge  that,  pursuant  to  such
activities,  Guaranty Bank or its Affiliates may receive  information  regarding
any Loan Party or its Affiliates  (including  information that may be subject to
confidentiality  obligations in favor of such Loan Party or such  Affiliate) and
acknowledge  that the  Administrative  Agent  shall be  under no  obligation  to
provide such information to them. With respect to its Loans, Guaranty Bank shall
have the same rights and powers under this Agreement as any other Lender and may
exercise such rights and powers as though it were not the  Administrative  Agent
or a L/C Issuer,  and the terms "Lender" and "Lenders"  include Guaranty Bank in
its individual capacity.

     9.09 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as
Administrative  Agent upon 30 days'  notice to the Lenders and may be removed at
any time with or without cause by the Required  Lenders;  provided that any such
removal or  resignation  by Guaranty Bank shall also  constitute its removal and
resignation as a L/C Issuer and Swing Line Lender. If the  Administrative  Agent
is removed or resigns under this Agreement,  the Required  Lenders shall appoint
from among the Lenders a successor  administrative agent for the Lenders,  which
successor administrative agent (a) shall be a commercial bank or federal savings
bank  organized  under the laws of the United  States of America or of any State
thereof and (b) shall be  consented  to by the  Borrower at all times other than
during the existence of an Event of Default (which consent of the Borrower shall
not be unreasonably withheld or delayed).  If no successor  administrative agent
is appointed  prior to the effective  date of the removal or  resignation of the
Administrative  Agent, the  Administrative  Agent may appoint,  after consulting
with the Lenders and the Borrower,  a successor  administrative agent from among
the Lenders. Upon the acceptance of its appointment as successor  administrative
agent hereunder,  the Person acting as such successor administrative agent shall
succeed to all the  rights,  powers and  duties of the  retiring  Administrative
Agent and Swing Line Lender and the respective terms "Administrative  Agent" and
"Swing Line Lender"  shall mean such  successor  administrative  agent and swing
line lender, and the retiring  Administrative  Agent's  appointment,  powers and
duties as  Administrative  Agent shall be terminated and the retiring Swing Line

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Lender's  rights,  powers and duties as such shall be  terminated,  without  any
other or further act or deed on the part of such retiring  Administrative  Agent
or Swing Line  Lender or any other  Lender.  After any  retiring  Administrative
Agent's resignation or removal hereunder as Administrative Agent, the provisions
of this ARTICLE IX and SECTIONS 10.04 and 10.05 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent
under  this  Agreement.  If  no  successor  administrative  agent  has  accepted
appointment  as  Administrative  Agent by the date which is 30 days  following a
retiring Administrative Agent's notice of resignation or removal by the Required
Lenders,  the  retiring  Administrative  Agent's  resignation  or removal  shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the  Administrative  Agent  hereunder  until such time, if any, as the
Required Lenders appoint a successor agent as provided for above.

     9.10 ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM. In case of the pendency
of  any  receivership,   insolvency,  liquidation,  bankruptcy,  reorganization,
arrangement,  adjustment,  composition or other judicial  proceeding relative to
any Loan Party, the Administrative  Agent (irrespective of whether the principal
of any Loan or L/C Obligation  shall then be due and payable as herein expressed
or by declaration or otherwise and  irrespective  of whether the  Administrative
Agent  shall  have  made any  demand  on the  Borrower)  shall be  entitled  and
empowered, by intervention in such proceeding or otherwise

     (a) to file and  prove a claim for the whole  amount of the  principal  and
interest owing and unpaid in respect of the Loans, L/C Obligations and all other
Obligations that are owing and unpaid and to file such other documents as may be
necessary  or  advisable  in order to have the  claims  of the  Lenders  and the
Administrative  Agent  (including  any  claim for the  reasonable  compensation,
expenses, disbursements and advances of the Lenders and the Administrative Agent
and their  respective  agents and counsel and all other  amounts due the Lenders
and the  Administrative  Agent under  SECTIONS  2.03(i) and (j), 2.09 and 10.04)
allowed in such judicial proceeding; and

     (b) to  collect  and  receive  any  monies  or other  property  payable  or
deliverable on any such claims and to distribute the same;

and any custodian,  receiver,  assignee,  trustee,  liquidator,  sequestrator or
other similar official in any such judicial  proceeding is hereby  authorized by
each Lender to make such payments to the Administrative  Agent and, in the event
that the  Administrative  Agent  shall  consent to the  making of such  payments
directly to the Lenders,  to pay to the Administrative  Agent any amount due for
the  reasonable  compensation,  expenses,  disbursements  and  advances  of  the
Administrative  Agent and its agents and counsel,  and any other amounts due the
Administrative Agent under SECTIONS 2.09 and 10.04.

     Nothing  contained  herein shall be deemed to authorize the  Administrative
Agent to  authorize or consent to or accept or adopt on behalf of any Lender any
plan of  reorganization,  arrangement,  adjustment or composition  affecting the
Obligations or the rights of any Lender or to authorize the Administrative Agent
to vote in respect of the claim of any Lender in any such proceeding.

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     9.11 GUARANTY MATTERS. The Lenders irrevocably authorize the Administrative
Agent, at its option and in its discretion,

     (a) to  release  any  Lien  on  any  property  granted  to or  held  by the
Administrative  Agent  under  any  Loan  Document  (i) upon  termination  of the
Aggregate  Commitments  and  payment  in full  of all  Obligations  (other  than
contingent indemnification obligations) and the expiration or termination of all
Letters of Credit,  (ii) that is sold or to be sold as part of or in  connection
with any sale  permitted  hereunder or under any other Loan  Document,  or (iii)
subject to SECTION 10.01, if approved,  authorized or ratified in writing by the
Required Lenders;

     (b) to release any  Guarantor  from its  obligations  under the Guaranty if
such Person  ceases to be a Restricted  Subsidiary  as a result of a transaction
permitted hereunder.

     Upon request by the Administrative  Agent at any time, the Required Lenders
will  confirm in writing  the  Administrative  Agent's  authority  to release or
subordinate its interest in particular types or items of property, or to release
any Guarantor from its obligations  under the Guaranty  pursuant to this SECTION
9.12.

     9.12 OTHER AGENTS;  ARRANGERS  AND  MANAGERS.  None of the Lenders or other
Persons  identified on the facing page or signature pages of this Agreement as a
"syndication  agent,"  "documentation  agent," "co-agent," "book manager," "lead
manager,"  "arranger,"  "lead arranger" or  "co-arranger"  shall have any right,
power, obligation, liability,  responsibility or duty under this Agreement other
than,  in the case of such  Lenders,  those  applicable  to all Lenders as such.
Without  limiting  the  foregoing,  none of the  Lenders  or  other  Persons  so
identified shall have or be deemed to have any fiduciary  relationship  with any
Lender.  Each Lender  acknowledges that it has not relied, and will not rely, on
any of the Lenders or other Persons so identified in deciding to enter into this
Agreement or in taking or not taking action hereunder.

     9.13 RELATED OBLIGATIONS.  If and to the extent this Agreement applies, the
benefit of the Loan  Documents and of the  provisions of this  Agreement and the
Guaranty shall extend to and be available in respect of any  obligation  arising
under any Swap Contract that is otherwise owed to any Lender or any Affiliate of
a Lender  (collectively,  "RELATED  OBLIGATIONS")  solely on the  condition  and
understanding,  as among the Administrative Agent and the Lenders,  that (a) the
Related  Obligations  shall be entitled to the benefit of the Loan  Documents to
the extent  expressly set forth in this  Agreement and the other Loan  Documents
and to such extent the  Administrative  Agent shall hold, and have the right and
power to act with  respect  to,  the  Guaranty  on  behalf  and as agent for the
holders of the Related  Obligations,  but the Administrative  Agent is otherwise
acting solely as agent for the Lenders and shall have no fiduciary duty, duty of
loyalty,  duty of care, duty of disclosure or other obligation whatsoever to any
holder of Related Obligations;  (b) all matters,  acts and omissions relating in
any manner to the Guaranty  shall be governed  solely by the  provisions of this
Agreement and the Guaranty and no separate  Lien,  right,  power or remedy shall
arise or exist in favor of any  Guarantied  Party (as  defined in the  Guaranty)
under  any  separate  instrument  or  agreement  or in  respect  of any  Related
Obligation;  (c) each  Guarantied  Party shall be bound by all actions  taken or
omitted,  in accordance with the terms of this Agreement and the Guaranty by the
Administrative Agent and the Required Lenders, each of whom shall be entitled to
act at its sole  discretion  and  exclusively  in its own interest given its own
Commitment  and its  own  interest  in the  Loans,  L/C  Obligations  and  other

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Obligations  to it arising  under this  Agreement  or the other Loan  Documents,
without any duty or liability to any other Guarantied Party or as to any Related
Obligation  and  without  regard  to  whether  any  Related  Obligation  remains
outstanding or is otherwise  affected or put in jeopardy thereby;  (d) no holder
of Related  Obligations and no other Guarantied Party (except the Administrative
Agent and the Lenders, to the extent set forth in this Agreement) shall have any
right to be notified of, or to direct,  require or be heard with respect to, any
action taken or omitted under this  Agreement or the other Loan  Documents;  and
(e) no holder of any  Related  Obligation  shall  exercise  any right of setoff,
banker's lien or similar right,  except as expressly  provided in SECTION 10.09.
Notwithstanding  any other  provision in this SECTION 9.13, no third party shall
obtain any rights or benefits  pursuant to this  SECTION 9.13 and no third party
shall  exercise any right of setoff,  bankers' lien or similar right pursuant to
SECTION 10.09.

                                   ARTICLE X.

                                  MISCELLANEOUS

     10.01  AMENDMENTS,  ETC. No  amendment  or waiver of any  provision of this
Agreement  or any other Loan  Document,  and no consent to any  departure by the
Borrower or any other Loan Party therefrom, shall be effective unless in writing
signed by the Required Lenders and the Borrower or the applicable Loan Party, as
the case may be, and  acknowledged by the  Administrative  Agent,  and each such
waiver or consent shall be effective  only in the specific  instance and for the
specific  purpose for which given;  PROVIDED,  HOWEVER,  that no such amendment,
waiver or consent shall:

     (a) waive any  condition set forth in SECTION  4.01(a)  without the written
consent of each Lender;

     (b) subject to SECTION  2.14,  extend or  increase  the  Commitment  of any
Lender (or reinstate any Commitment terminated pursuant to SECTION 8.02) without
the written consent of each Lender;

     (c)  postpone any date fixed by this  Agreement or any other Loan  Document
for any payment or mandatory  prepayment of principal,  interest,  fees or other
amounts due to the Lenders  (or any of them)  hereunder  or under any other Loan
Document without the written consent of each Lender directly affected thereby;

     (d) reduce the principal of, or the rate of interest  specified  herein on,
any Loan or L/C  Borrowing,  or (subject to clause (iv) of the second proviso to
this SECTION  10.01) any fees or other  amounts  payable  hereunder or under any
other Loan Document without the written consent of each Lender directly affected
thereby; PROVIDED,  HOWEVER, that only the consent of the Required Lenders shall
be  necessary  (i) to amend the  definition  of  "Default  Rate" or to waive any
obligation  of the Borrower to pay interest at the Default Rate or (ii) to amend
any financial  covenant  hereunder (or any defined term used herein)  unless the
effect of such amendment  would be to reduce the rate of interest on any Loan or
L/C Borrowing or to reduce any fee payable hereunder;

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     (e) change  SECTION  2.13 in a manner that would alter the pro rata sharing
of payments required thereby without the written consent of each Lender;

     (f) change any  provision  of this Section or the  definition  of "Required
Lenders" or any other  provision  hereof  specifying the number or percentage of
Lenders  required to amend,  waive or otherwise  modify any rights  hereunder or
make any  determination  or grant any  consent  hereunder,  without  the written
consent of each Lender;

     (g) release any Guarantor from the Guaranty  without the written consent of
each Lender; or

     (h) permit  the  Borrower  to  transfer  or assign  any of its  Obligations
hereunder without the written consent of each Lender;

and, PROVIDED FURTHER, that (i) no amendment, waiver or consent shall, unless in
writing and signed by a L/C Issuer in addition  to the Lenders  required  above,
affect  the  rights or duties of such L/C Issuer  under  this  Agreement  or any
Letter of Credit  Application  relating to any Letter of Credit  issued or to be
issued by it; (ii) no amendment,  waiver or consent shall, unless in writing and
signed by the Swing Line  Lender in  addition  to the  Lenders  required  above,
affect the rights or duties of the Swing Line Lender under this Agreement; (iii)
no  amendment,  waiver or consent  shall,  unless in  writing  and signed by the
Administrative  Agent in  addition  to the Lenders  required  above,  affect the
rights or duties of the  Administrative  Agent under this Agreement or any other
Loan Document;  and (iv) the Fee Letter may be amended,  or rights or privileges
thereunder   waived,  in  a  writing  executed  only  by  the  parties  thereto.
Notwithstanding anything to the contrary herein, no Defaulting Lender shall have
any right to approve or disapprove any amendment,  waiver or consent  hereunder,
except  that the  Commitment  of such  Lender may not be  increased  or extended
without the consent of such Lender.

     10.02 NOTICES AND OTHER COMMUNICATIONS; FACSIMILE COPIES.

     (a) GENERAL.  Unless otherwise  expressly  provided herein, all notices and
other  communications  provided for hereunder shall be in writing  (including by
facsimile  transmission).  All such written  notices  shall be mailed,  faxed or
delivered to the applicable address,  facsimile number or (subject to subsection
(c) below)  electronic  mail address,  and all notices and other  communications
expressly  permitted  hereunder  to be given by  telephone  shall be made to the
applicable telephone number, as follows:

          (i) if to the Borrower,  the Administrative Agent, a L/C Issuer or the
     Swing Line  Lender,  to the  address,  facsimile  number,  electronic  mail
     address or telephone  number specified for such Person on Schedule 10.02 or
     to such  other  address,  facsimile  number,  electronic  mail  address  or
     telephone  number as shall be  designated  by such party in a notice to the
     other parties; and

          (ii)  if to any  other  Lender,  to  the  address,  facsimile  number,
     electronic mail address or telephone number specified in its Administrative
     Questionnaire or to such other address,  facsimile number,  electronic mail
     address  or  telephone  number as shall be  designated  by such  party in a
     notice to the Borrower,  the  Administrative  Agent, the L/C Issuer and the
     Swing Line Lender.

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All such  notices and other  communications  shall be deemed to be given or made
upon the earlier to occur of (i) actual receipt by the relevant party hereto and
(ii) (A) if delivered by hand or by courier,  when signed for by or on behalf of
the relevant  party hereto;  (B) if delivered by mail,  four Business Days after
deposit in the mails, postage prepaid; (C) if delivered by facsimile,  when sent
and receipt has been confirmed by telephone;  and (D) if delivered by electronic
mail  (which form of delivery is subject to the  provisions  of  subsection  (c)
below), when delivered; PROVIDED, HOWEVER, that notices and other communications
to the  Administrative  Agent, the L/C Issuer and the Swing Line Lender pursuant
to ARTICLE II shall not be effective until actually  received by such Person. In
no event shall a voicemail  message be effective as a notice,  communication  or
confirmation hereunder.

     (b) EFFECTIVENESS OF FACSIMILE DOCUMENTS AND SIGNATURES. Loan Documents may
be  transmitted  and/or  signed  by  facsimile.  The  effectiveness  of any such
documents and signatures  shall,  subject to applicable Law, have the same force
and  effect  as  manually-signed  originals  and  shall be  binding  on all Loan
Parties,  the Administrative Agent and the Lenders. The Administrative Agent may
also  require  that  any  such  documents  and  signatures  be  confirmed  by  a
manually-signed original thereof; PROVIDED, HOWEVER, that the failure to request
or deliver the same shall not limit the effectiveness of any facsimile  document
or signature.

     (c)  LIMITED USE OF  ELECTRONIC  MAIL.  Electronic  mail and  Internet  and
intranet websites may be used only to distribute routine communications, such as
financial  statements and other  information as provided in Section 6.02, and to
distribute Loan Documents for execution by the parties  thereto,  and may not be
used for any other purpose.

     (d) RELIANCE BY ADMINISTRATIVE  AGENT AND LENDERS. The Administrative Agent
and the Lenders  shall be  entitled to rely and act upon any notices  (including
telephonic Revolving Loan Notices and Swing Line Loan Notices) purportedly given
by or on  behalf of the  Borrower  even if (i) such  notices  were not made in a
manner specified herein, were incomplete or were not preceded or followed by any
other form of notice specified herein, or (ii) the terms thereof,  as understood
by the  recipient,  varied from any  confirmation  thereof.  The Borrower  shall
indemnify  each  Agent-Related  Person and each Lender  from all losses,  costs,
expenses  and  liabilities  resulting  from the  reliance by such Person on each
notice purportedly given by or on behalf of the Borrower. All telephonic notices
to and other communications with the Administrative Agent may be recorded by the
Administrative  Agent,  and each of the parties  hereto hereby  consents to such
recording.

     10.03 NO  WAIVER;  CUMULATIVE  REMEDIES.  No  failure  by any Lender or the
Administrative Agent to exercise, and no delay by any such Person in exercising,
any  right,  remedy,  power or  privilege  hereunder  shall  operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege  hereunder  preclude  any other or  further  exercise  thereof  or the
exercise of any other right, remedy, power or privilege.  The rights,  remedies,
powers and  privileges  herein  provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.

     10.04 ATTORNEY COSTS, EXPENSES AND TAXES. The Borrower agrees (a) to pay or
reimburse the  Administrative  Agent and Arranger for all  reasonable  costs and
expenses incurred in connection with the development,  preparation,  negotiation
and execution of this  Agreement and the other Loan Documents and any amendment,

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waiver,  consent or other  modification  of the  provisions  hereof and  thereof
(whether   or  not  the   transactions   contemplated   hereby  or  thereby  are
consummated),  and  the  consummation  and  administration  of the  transactions
contemplated  hereby and thereby,  including all reasonable  Attorney Costs, and
(b) to pay or reimburse the  Administrative  Agent and each Lender for all costs
and expenses incurred in connection with the enforcement, attempted enforcement,
or preservation of any rights or remedies under this Agreement or the other Loan
Documents  (including all such costs and expenses  incurred during any "workout"
or restructuring in respect of the Obligations and during any legal  proceeding,
including any  proceeding  under any Debtor Relief Law),  including all Attorney
Costs.  The  foregoing  costs and  expenses  shall  include all search,  filing,
recording,  title  insurance  and  appraisal  charges and fees and taxes related
thereto,  and other out-of-pocket  expenses incurred by the Administrative Agent
and the  cost of  independent  public  accountants  and  other  outside  experts
retained by the  Administrative  Agent or any Lender. All amounts due under this
SECTION 10.04 shall be payable  within ten Business Days after demand  therefor.
The  agreements in this Section shall survive the  termination  of the Aggregate
Commitments and repayment of all other Obligations.

     10.05  INDEMNIFICATION  BY THE  BORROWER.  WHETHER OR NOT THE  TRANSACTIONS
CONTEMPLATED  HEREBY ARE  CONSUMMATED,  THE BORROWER  SHALL  INDEMNIFY  AND HOLD
HARMLESS EACH AGENT-RELATED PERSON, EACH LENDER AND THEIR RESPECTIVE AFFILIATES,
DIRECTORS,   OFFICERS,   EMPLOYEES,   COUNSEL,   AGENTS  AND   ATTORNEYS-IN-FACT
(COLLECTIVELY  THE  "INDEMNITEES")  FROM AND  AGAINST  ANY AND ALL  LIABILITIES,
OBLIGATIONS,  LOSSES, DAMAGES,  PENALTIES,  CLAIMS, DEMANDS, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES AND DISBURSEMENTS  (INCLUDING ATTORNEY COSTS) OF ANY KIND
OR  NATURE  WHATSOEVER  WHICH  MAY AT ANY TIME BE  IMPOSED  ON,  INCURRED  BY OR
ASSERTED AGAINST ANY SUCH INDEMNITEE IN ANY WAY RELATING TO OR ARISING OUT OF OR
IN CONNECTION  WITH (A) THE  EXECUTION,  DELIVERY,  ENFORCEMENT,  PERFORMANCE OR
ADMINISTRATION OF ANY LOAN DOCUMENT OR ANY OTHER AGREEMENT, LETTER OR INSTRUMENT
DELIVERED  IN  CONNECTION  WITH THE  TRANSACTIONS  CONTEMPLATED  THEREBY  OR THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, (B) ANY COMMITMENT,  LOAN
OR  LETTER  OF  CREDIT  OR THE USE OR  PROPOSED  USE OF THE  PROCEEDS  THEREFROM
(INCLUDING  ANY REFUSAL BY THE L/C ISSUER TO HONOR A DEMAND FOR PAYMENT  UNDER A
LETTER OF CREDIT IF THE DOCUMENTS  PRESENTED IN  CONNECTION  WITH SUCH DEMAND DO
NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT),  OR (C) ANY ACTUAL
OR ALLEGED  PRESENCE OR RELEASE OF  HAZARDOUS  MATERIALS ON OR FROM ANY PROPERTY
CURRENTLY OR FORMERLY  OWNED OR OPERATED BY THE BORROWER,  ANY SUBSIDIARY OR ANY
OTHER  LOAN  PARTY,  OR ANY  ENVIRONMENTAL  LIABILITY  RELATED IN ANY WAY TO THE
BORROWER,  ANY  SUBSIDIARY  OR ANY OTHER LOAN PARTY,  IN EACH CASE WHICH  ARISES
BECAUSE OF ANY  TRANSACTIONS  UNDER OR IN  CONNECTION  WITH ANY LOAN DOCUMENT OR
WHICH RELATES TO PROPERTY  OBTAINED BY ANY LENDER  PURSUANT TO OR AS A RESULT OF
ANY  LOAN  DOCUMENT,  OR  (D)  ANY  ACTUAL  OR  PROSPECTIVE  CLAIM,  LITIGATION,
INVESTIGATION OR PROCEEDING  RELATING TO ANY OF THE FOREGOING,  WHETHER BASED ON
CONTRACT,  TORT OR ANY OTHER THEORY (INCLUDING ANY INVESTIGATION OF, PREPARATION

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FOR,   SETTLEMENT   OF,  OR  DEFENSE  OF  ANY  PENDING  OR   THREATENED   CLAIM,
INVESTIGATION,   LITIGATION  OR  PROCEEDING)   AND  REGARDLESS  OF  WHETHER  ANY
INDEMNITEE IS A PARTY THERETO (ALL THE FOREGOING, COLLECTIVELY, THE "INDEMNIFIED
LIABILITIES"), IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN
PART,  OUT OF THE  NEGLIGENCE OF THE  INDEMNITEE;  PROVIDED THAT SUCH  INDEMNITY
SHALL  NOT,  AS TO  ANY  INDEMNITEE,  BE  AVAILABLE  TO  THE  EXTENT  THAT  SUCH
LIABILITIES,  OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, DEMANDS, ACTIONS,
JUDGMENTS,  SUITS, COSTS, EXPENSES OR DISBURSEMENTS ARE DETERMINED BY A COURT OF
COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM
THE GROSS  NEGLIGENCE OR WILLFUL  MISCONDUCT OF SUCH  INDEMNITEE.  NO INDEMNITEE
SHALL  BE  LIABLE  FOR  ANY  DAMAGES  ARISING  FROM  THE  USE BY  OTHERS  OF ANY
INFORMATION  OR OTHER  MATERIALS  OBTAINED  THROUGH  INTRALINKS OR OTHER SIMILAR
INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT,  UNLESS SUCH
DAMAGES  ARE  DETERMINED  BY A COURT OF  COMPETENT  JURISDICTION  BY  FINAL  AND
NONAPPEALABLE  JUDGMENT TO HAVE  RESULTED  FROM THE GROSS  NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH  INDEMNITEE.  NO INDEMNITEE  SHALL HAVE ANY LIABILITY FOR ANY
INDIRECT OR  CONSEQUENTIAL  DAMAGES RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ARISING OUT OF ITS  ACTIVITIES IN  CONNECTION  HEREWITH OR THEREWITH
(WHETHER  BEFORE OR AFTER THE CLOSING DATE).  ALL AMOUNTS DUE UNDER THIS SECTION
10.05 SHALL BE PAYABLE  WITHIN TEN  BUSINESS  DAYS AFTER  DEMAND  THEREFOR.  THE
AGREEMENTS IN THIS SECTION SHALL SURVIVE THE  RESIGNATION OF THE  ADMINISTRATIVE
AGENT,  THE  REPLACEMENT  OF  ANY  LENDER,  THE  TERMINATION  OF  THE  AGGREGATE
COMMITMENTS  AND THE  REPAYMENT,  SATISFACTION  OR  DISCHARGE  OF ALL THE  OTHER
OBLIGATIONS.

     10.06 PAYMENTS SET ASIDE. To the extent that any payment by or on behalf of
the  Borrower  is  made  to  the  Administrative  Agent  or any  Lender,  or the
Administrative  Agent or any Lender  exercises  its right of  set-off,  and such
payment or the  proceeds  of such  set-off or any part  thereof is  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside or required
(including  pursuant to any settlement entered into by the Administrative  Agent
or such  Lender in its  discretion)  to be repaid to a trustee,  receiver or any
other party,  in connection  with any proceeding  under any Debtor Relief Law or
otherwise,  then (a) to the  extent of such  recovery,  the  obligation  or part
thereof  originally  intended to be satisfied  shall be revived and continued in
full force and effect as if such  payment had not been made or such  set-off had
not occurred,  and (b) each Lender severally agrees to pay to the Administrative
Agent upon demand its applicable share of any amount so recovered from or repaid
by the Administrative  Agent, plus interest thereon from the date of such demand
to the date such payment is made at a rate per annum equal to the Federal  Funds
Rate from time to time in effect.

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     10.07 SUCCESSORS AND ASSIGNS.

     (a) The provisions of this Agreement shall be binding upon and inure to the
benefit  of the  parties  hereto and their  respective  successors  and  assigns
permitted hereby,  except that the Borrower may not assign or otherwise transfer
any of its rights or obligations  hereunder without the prior written consent of
each Lender and no Lender may assign or otherwise  transfer any of its rights or
obligations  hereunder except (i) to an Eligible Assignee in accordance with the
provisions of subsection (b) of this Section,  (ii) by way of  participation  in
accordance  with the provisions of subsection  (d) of this Section,  or (iii) by
way of pledge or assignment of a security  interest  subject to the restrictions
of  subsection  (f) of this  Section  (and any  other  attempted  assignment  or
transfer by any party hereto shall be null and void). Nothing in this Agreement,
expressed or implied,  shall be construed to confer upon any Person  (other than
the parties hereto,  their respective  successors and assigns  permitted hereby,
Participants  to the extent  provided in subsection  (d) of this Section and, to
the  extent  expressly  contemplated  hereby,  the  Indemnitees)  any  legal  or
equitable right, remedy or claim under or by reason of this Agreement.

     (b) Any Lender may at any time assign to one or more Eligible Assignees all
or a portion of its rights and obligations  under this Agreement  (including all
or a portion of its  Commitment  and the Loans  (including  for purposes of this
subsection  (b),  participations  in L/C Obligations and in Swing Line Loans) at
the time owing to it);  PROVIDED that (i) except in the case of an assignment of
the entire remaining amount of the assigning  Lender's  Commitment and the Loans
at the  time  owing  to it or in the case of an  assignment  to a  Lender  or an
Affiliate of a Lender or an Approved Fund (as defined in subsection  (g) of this
Section) with respect to a Lender, the aggregate amount of the Commitment (which
for this purpose  includes Loans  outstanding  thereunder)  subject to each such
assignment, determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative  Agent or, if "Trade Date"
is specified in the Assignment and Assumption,  as of the Trade Date,  shall not
be less than $5,000,000 unless each of the Administrative  Agent and, so long as
no Event of Default has  occurred  and is  continuing,  the  Borrower  otherwise
consents (each such consent not to be  unreasonably  withheld or delayed);  (ii)
each partial  assignment shall be made as an assignment of a proportionate  part
of all the assigning  Lender's rights and obligations  under this Agreement with
respect to the Loans or the  Commitment  assigned,  except that this clause (ii)
shall not apply to rights in respect of Swing Line Loans;  (iii) any  assignment
of a Commitment must be approved by the  Administrative  Agent,  each L/C Issuer
and the Swing Line Lender (each such consent not to be unreasonably  withheld or
delayed)  unless the Person  that is the  proposed  assignee  is itself a Lender
(whether or not the proposed  assignee  would  otherwise  qualify as an Eligible
Assignee);  and (iv) the parties to each assignment shall execute and deliver to
the  Administrative  Agent  an  Assignment  and  Assumption,   together  with  a
processing and  recordation  fee of $3,500.  Subject to acceptance and recording
thereof by the Administrative  Agent pursuant to subsection (c) of this Section,
from and after the effective date specified in each  Assignment and  Assumption,
the Eligible Assignee  thereunder shall be a party to this Agreement and, to the
extent of the interest  assigned by such  Assignment  and  Assumption,  have the
rights and  obligations  of a Lender  under this  Agreement,  and the  assigning
Lender  thereunder  shall,  to the  extent  of the  interest  assigned  by  such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption  covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall  continue to be entitled to the benefits of SECTIONS

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3.01,  3.04,  3.05,  10.04 and 10.05  with  respect  to facts and  circumstances
occurring  prior to the effective date of such  assignment).  Upon request,  the
Borrower  (at its  expense)  shall  execute and  deliver a Note to the  assignee
Lender.  Any assignment or transfer by a Lender of rights or  obligations  under
this  Agreement that does not comply with this  subsection  shall be treated for
purposes of this Agreement as a sale by such Lender of a  participation  in such
rights and obligations in accordance with subsection (d) of this Section.

     (c) The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at the Administrative Agent's Office a copy of each
Assignment and Assumption  delivered to it and a register for the recordation of
the names and addresses of the Lenders,  and the  Commitments  of, and principal
amounts of the Loans and L/C  Obligations  owing to, each Lender pursuant to the
terms  hereof from time to time (the  "REGISTER").  The entries in the  Register
shall be conclusive,  and the Borrower, the Administrative Agent and the Lenders
may treat each Person  whose name is recorded  in the  Register  pursuant to the
terms  hereof  as a  Lender  hereunder  for  all  purposes  of  this  Agreement,
notwithstanding  notice to the  contrary.  The Register  shall be available  for
inspection by the Borrower and any Lender,  at any reasonable time and from time
to time upon reasonable prior notice.

     (d) Any Lender may at any time,  without  the consent of, or notice to, the
Borrower,  the Administrative Agent, or any other Person, sell participations to
any Person (other than a natural person or the Borrower or any of the Borrower's
Affiliates or Subsidiaries)  (each, a "PARTICIPANT") in all or a portion of such
Lender's  rights and/or  obligations  under this  Agreement  (including all or a
portion  of  its   Commitment   and/or  the  Loans   (including   such  Lender's
participations  in L/C  Obligations  and/or  Swing  Line  Loans)  owing  to it);
PROVIDED that (i) such Lender's  obligations  under this Agreement  shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the  performance  of such  obligations  and (iii) the  Borrower,  the
Administrative  Agent and the other  Lenders  shall  continue to deal solely and
directly  with  such  Lender  in  connection   with  such  Lender's  rights  and
obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation  shall provide that such Lender shall retain
the  sole  right  to  enforce  this  Agreement  and to  approve  any  amendment,
modification  or waiver of any provision of this  Agreement;  PROVIDED that such
agreement  or  instrument  may provide  that such  Lender will not,  without the
consent of the Participant, agree to any amendment, waiver or other modification
described  in the first  proviso to SECTION  10.01 that  directly  affects  such
Participant. Subject to subsection (e) of this Section, the Borrower agrees that
each  Participant  shall be entitled to the benefits of SECTIONS 3.01,  3.04 and
3.05 to the same extent as if it were a Lender and had  acquired its interest by
assignment  pursuant to subsection (b) of this Section.  To the extent permitted
by law, each Participant also shall be entitled to the benefits of SECTION 10.09
as though it were a Lender,  PROVIDED such  Participant  agrees to be subject to
SECTION 2.13 as though it were a Lender.

     (e) A  Participant  shall not be entitled  to receive  any greater  payment
under SECTION 3.01 or 3.04 than the  applicable  Lender would have been entitled
to receive with respect to the participation  sold to such  Participant,  unless
the sale of the  participation  to such  Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of SECTION 3.01 unless the Borrower
is notified of the  participation  sold to such Participant and such Participant
agrees, for the benefit of the Borrower,  to comply with SECTION 10.15 as though
it were a Lender.

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     (f) Any Lender may at any time pledge or assign a security  interest in all
or any portion of its rights under this Agreement  (including under its Note, if
any) to secure obligations of such Lender, including any pledge or assignment to
secure  obligations to a Federal  Reserve Bank;  PROVIDED that no such pledge or
assignment  shall release such Lender from any of its  obligations  hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

     (g) As used herein, the following terms have the following meanings:

          "ELIGIBLE  ASSIGNEE" means (a) a Lender; (b) an Affiliate of a Lender;
     (c) an  Approved  Fund;  and (d) any  other  Person  (other  than a natural
     person)  approved by (i) the  Administrative  Agent, the L/C Issuer and the
     Swing Line Lender,  and (ii) unless an Event of Default has occurred and is
     continuing,  the  Borrower  (each  such  approval  not  to be  unreasonably
     withheld  or  delayed);   PROVIDED  that   notwithstanding  the  foregoing,
     "Eligible Assignee" shall not include the Borrower or any of the Borrower's
     Affiliates or Subsidiaries.

          "FUND" means any Person (other than a natural person) that is (or will
     be)  engaged  in making,  purchasing,  holding or  otherwise  investing  in
     commercial loans and similar extensions of credit in the ordinary course of
     its business.

          "APPROVED  FUND" means any Fund that is administered or managed by (a)
     a Lender,  (b) an Affiliate of a Lender or (c) an entity or an Affiliate of
     an entity that administers or manages a Lender.

     (h)  Notwithstanding  anything to the contrary  contained herein, if at any
time  Guaranty  Bank  assigns  all of  its  Commitment  and  Loans  pursuant  to
subsection  (b)  above,  Guaranty  Bank  may,  (i) upon 30 days'  notice  to the
Borrower and the Lenders,  resign as L/C Issuer and/or (ii) upon 30 days' notice
to the  Borrower,  resign  as  Swing  Line  Lender.  In the  event  of any  such
resignation  as L/C Issuer or Swing Line Lender,  the Borrower shall be entitled
to appoint  from among the Lenders a  successor  L/C Issuer or Swing Line Lender
hereunder;  PROVIDED,  HOWEVER,  that no failure by the  Borrower to appoint any
such  successor  shall affect the  resignation of Guaranty Bank as L/C Issuer or
Swing Line Lender, as the case may be. If Guaranty Bank resigns as a L/C Issuer,
it shall retain all the rights and  obligations  of a L/C Issuer  hereunder with
respect  to  all  Letters  of  Credit  issued  by it and  outstanding  as of the
effective date of its resignation as a L/C Issuer and all L/C  Obligations  with
respect  thereto  (including  the right to require the Lenders to make Base Rate
Revolving Loans or fund risk participations in Unreimbursed  Amounts pursuant to
SECTION 2.03(c)). If Guaranty Bank resigns as Swing Line Lender, it shall retain
all the rights of the Swing Line Lender  provided for hereunder  with respect to
Swing Line Loans made by it and  outstanding  as of the  effective  date of such
resignation,  including  the  right to  require  the  Lenders  to make Base Rate
Revolving  Loans or fund risk  participations  in  outstanding  Swing Line Loans
pursuant to SECTION 2.04(cC).

     10.08  CONFIDENTIALITY.  Each of the  Administrative  Agent and the Lenders
agrees to maintain the  confidentiality  of the  Information (as defined below),
except  that  Information  may  be  disclosed  (a) to its  and  its  Affiliates'
directors,  officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure

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is made will be  informed of the  confidential  nature of such  Information  and
instructed to keep such Information  confidential);  (b) to the extent requested
by any regulatory  authority;  (c) to the extent  required by applicable laws or
regulations or by any subpoena or similar legal process;  (d) to any other party
to this Agreement; (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding  relating to this Agreement or the enforcement
of  rights  hereunder;   (f)  subject  to  an  agreement  containing  provisions
substantially the same as those of this Section, to (i) any Eligible Assignee of
or Participant  in, or any prospective  Eligible  Assignee of or Participant in,
any of its  rights or  obligations  under this  Agreement  or (ii) any direct or
indirect   contractual   counterparty  or  prospective   counterparty  (or  such
contractual counterparty's or prospective  counterparty's  professional advisor)
to any  credit  derivative  transaction  relating  to  obligations  of the  Loan
Parties;  (g)  with  the  consent  of  the  Borrower;  (h) to  the  extent  such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Administrative Agent or any Lender
on a nonconfidential  basis from a source other than the Borrower; or (i) to the
National   Association   of  Insurance   Commissioners   or  any  other  similar
organization. In addition, the Administrative Agent and the Lenders may disclose
the existence of this Agreement and  information  about this Agreement to market
data collectors,  similar service providers to the lending industry, and service
providers to the  Administrative  Agent and the Lenders in  connection  with the
administration and management of this Agreement,  the other Loan Documents,  the
Commitments,  and the  Credit  Extensions.  For the  purposes  of this  Section,
"INFORMATION" means all information received from any Loan Party relating to any
Loan Party or its business, other than any such information that is available to
the  Administrative  Agent or any  Lender on a  nonconfidential  basis  prior to
disclosure by any Loan Party; PROVIDED that, in the case of information received
from a Loan Party after the date hereof,  such information is clearly identified
in writing at the time of  delivery  as  confidential.  Any Person  required  to
maintain the confidentiality of Information as provided in this Section shall be
considered  to have  complied  with its  obligation  to do so if such Person has
exercised  the same  degree  of care to  maintain  the  confidentiality  of such
Information as such Person would accord to its own confidential information.

     10.09  SET-OFF.  In  addition  to any rights and  remedies  of the  Lenders
provided by law, upon the occurrence and during the  continuance of any Event of
Default,  each Lender is authorized  at any time and from time to time,  without
prior  notice to the  Borrower  or any other Loan Party,  any such notice  being
waived by the  Borrower  (on its own behalf and on behalf of each Loan Party) to
the fullest  extent  permitted by law, to set off and apply any and all deposits
(general or special, time or demand,  provisional or final) at any time held by,
and other indebtedness at any time owing by, such Lender to or for the credit or
the account of the respective Loan Parties against any and all Obligations owing
to such Lender  hereunder  or under any other Loan  Document,  now or  hereafter
existing, irrespective of whether or not the Administrative Agent or such Lender
shall have made  demand  under this  Agreement  or any other Loan  Document  and
although such  Obligations  may be contingent or unmatured or  denominated  in a
currency  different from that of the applicable  deposit or  indebtedness.  Each
Lender agrees promptly to notify the Borrower and the Administrative Agent after
any such set-off and application made by such Lender;  PROVIDED,  HOWEVER,  that
the failure to give such notice  shall not affect the  validity of such  set-off
and application.

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     10.10 INTEREST RATE  LIMITATION.  Notwithstanding  anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under the
Loan Documents  shall not exceed the Highest Lawful Rate. If the  Administrative
Agent or any Lender shall receive interest in an amount that exceeds the Highest
Lawful Rate, the excess  interest shall be applied to the principal of the Loans
or,  if  it  exceeds  such  unpaid  principal,  refunded  to  the  Borrower.  In
determining  whether the interest  contracted for,  charged,  or received by the
Administrative  Agent or a Lender exceeds the Highest  Lawful Rate,  such Person
may, to the extent  permitted by applicable  Law, (a)  characterize  any payment
that is not principal as an expense,  fee, or premium rather than interest,  (b)
exclude  voluntary  prepayments  and the  effects  thereof,  and  (c)  amortize,
prorate,  allocate,  and  spread in equal or unequal  parts the total  amount of
interest throughout the contemplated term of the Obligations hereunder.

     10.11  COUNTERPARTS.  This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

     10.12 INTEGRATION.  This Agreement, together with the other Loan Documents,
comprises  the complete and  integrated  agreement of the parties on the subject
matter hereof and thereof and supersedes all prior agreements,  written or oral,
on such subject matter.  In the event of any conflict  between the provisions of
this  Agreement  and those of any other Loan  Document,  the  provisions of this
Agreement shall control;  PROVIDED that the inclusion of supplemental  rights or
remedies in favor of the  Administrative  Agent or the Lenders in any other Loan
Document shall not be deemed a conflict with this Agreement.  Each Loan Document
was drafted with the joint  participation of the respective  parties thereto and
shall be  construed  neither  against  nor in favor of any party,  but rather in
accordance with the fair meaning thereof.

     10.13 SURVIVAL OF REPRESENTATIONS  AND WARRANTIES.  All representations and
warranties  made  hereunder  and in any other Loan  Document  or other  document
delivered  pursuant  hereto or thereto or in  connection  herewith or  therewith
shall   survive  the   execution   and  delivery   hereof  and   thereof.   Such
representations  and  warranties  have  been  or  will  be  relied  upon  by the
Administrative  Agent and each Lender,  regardless of any investigation  made by
the  Administrative  Agent or any Lender or on their behalf and  notwithstanding
that the Administrative  Agent or any Lender may have had notice or knowledge of
any Default at the time of any Credit  Extension other than pursuant to a notice
in  writing  to the  Administrative  Agent  from a  Responsible  Officer  of the
Borrower  stating that a Default has occurred,  and shall continue in full force
and effect until all Loans and other  Obligation  hereunder  are paid in full or
any Letters of Credit are either cancelled or fully collateralized in accordance
with SECTION 2.03(g).

     10.14  SEVERABILITY.  If any provision of this  Agreement or the other Loan
Documents is held to be illegal,  invalid or  unenforceable,  (a) the  legality,
validity and  enforceability  of the remaining  provisions of this Agreement and
the other Loan Documents  shall not be affected or impaired  thereby and (b) the
parties  shall  endeavor  in good faith  negotiations  to replace  the  illegal,
invalid or unenforceable provisions with valid provisions the economic effect of
which  comes  as  close  as  possible  to  that  of  the  illegal,   invalid  or
unenforceable  provisions.  The  invalidity  of  a  provision  in  a  particular
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

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     10.15 TAX FORMS.  (a) (i) Each Lender that is not a "United  States person"
within the meaning of Section 7701(a)(30) of the Code (a "FOREIGN LENDER") shall
deliver to the Administrative  Agent, prior to receipt of any payment subject to
withholding  under the Code (or upon  accepting  an  assignment  of an  interest
herein),  two duly  signed  completed  copies of either  IRS Form  W-8BEN or any
successor  thereto  (relating  to such  Foreign  Lender and  entitling  it to an
exemption  from, or reduction of,  withholding tax on all payments to be made to
such Foreign  Lender by the  Borrower  pursuant to this  Agreement)  or IRS Form
W-8ECI or any  successor  thereto  (relating  to all payments to be made to such
Foreign  Lender  by the  Borrower  pursuant  to this  Agreement)  or such  other
evidence  satisfactory  to the Borrower and the  Administrative  Agent that such
Foreign  Lender  is  entitled  to an  exemption  from,  or  reduction  of,  U.S.
withholding tax, including any exemption pursuant to Section 881(c) of the Code.
Thereafter  and from time to time,  each such Foreign  Lender shall (A) promptly
submit to the  Administrative  Agent such  additional  duly completed and signed
copies of one of such forms (or such  successor  forms as shall be adopted  from
time to time by the relevant  United States taxing  authorities)  as may then be
available  under then current United States laws and  regulations  to avoid,  or
such evidence as is satisfactory to the Borrower and the Administrative Agent of
any available exemption from or reduction of, United States withholding taxes in
respect  of all  payments  to be made to such  Foreign  Lender  by the  Borrower
pursuant to this Agreement,  (B) promptly notify the Administrative Agent of any
change  in  circumstances  which  would  modify or render  invalid  any  claimed
exemption  or  reduction,  and (C) take such  steps as shall  not be  materially
disadvantageous to it, in the reasonable  judgment of such Lender, and as may be
reasonably  necessary  (including the  re-designation  of its Lending Office) to
avoid any requirement of applicable Laws that the Borrower make any deduction or
withholding for taxes from amounts payable to such Foreign Lender.

     (ii) Each  Foreign  Lender,  to the extent it does not act or ceases to act
for its own account  with  respect to any portion of any sums paid or payable to
such  Lender  under any of the Loan  Documents  (for  example,  in the case of a
typical participation by such Lender), shall deliver to the Administrative Agent
on the date when such  Foreign  Lender  ceases to act for its own  account  with
respect to any portion of any such sums paid or payable, and at such other times
as may be necessary in the  determination  of the  Administrative  Agent (in the
reasonable exercise of its discretion),  (A) two duly signed completed copies of
the forms or  statements  required  to be  provided  by such Lender as set forth
above, to establish the portion of any such sums paid or payable with respect to
which  such  Lender  acts  for  its own  account  that  is not  subject  to U.S.
withholding tax, and (B) two duly signed completed copies of IRS Form W-8IMY (or
any successor  thereto),  together with any  information  such Lender chooses to
transmit  with such form,  and any other  certificate  or statement of exemption
required under the Code, to establish that such Lender is not acting for its own
account with respect to a portion of any such sums payable to such Lender.

     (iii) The Borrower  shall not be required to pay any  additional  amount to
any Foreign  Lender under SECTION 3.01 (A) with respect to any Taxes required to
be  deducted  or  withheld  on the  basis of the  information,  certificates  or
statements of exemption such Lender  transmits with an IRS Form W-8IMY  pursuant
to this SECTION  10.15(a) or (B) if such Lender shall have failed to satisfy the
foregoing  provisions  of this SECTION  10.15(a);  PROVIDED  that if such Lender
shall have satisfied the  requirement of this SECTION  10.15(a) on the date such
Lender  became a Lender or ceased to act for its own account with respect to any
payment under any of the Loan Documents,  nothing in this SECTION 10.15(a) shall

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relieve the Borrower of its  obligation  to pay any amounts  pursuant to SECTION
3.01 in the event that, as a result of any change in any applicable  law, treaty
or governmental rule,  regulation or order, or any change in the interpretation,
administration  or  application  thereof,  such  Lender  is no  longer  properly
entitled to deliver forms,  certificates  or other evidence at a subsequent date
establishing  the fact that such Lender or other Person for the account of which
such Lender  receives  any sums payable  under any of the Loan  Documents is not
subject to withholding or is subject to withholding at a reduced rate.

     (iv) The Administrative  Agent may, without  reduction,  withhold any Taxes
required  to be deducted  and  withheld  from any payment  under any of the Loan
Documents  with respect to which the Borrower is not required to pay  additional
amounts under this SECTION 10.15(A).

     (b) Upon the  request of the  Administrative  Agent,  each Lender that is a
"United  States  person"  within the meaning of Section  7701(a)(30) of the Code
shall deliver to the  Administrative  Agent two duly signed  completed copies of
IRS  Form  W-9.  If  such  Lender  fails  to  deliver   such  forms,   then  the
Administrative  Agent may withhold  from any interest  payment to such Lender an
amount equivalent to the applicable back-up withholding tax imposed by the Code,
without reduction.

     (c) If any Governmental Authority asserts that the Administrative Agent did
not properly  withhold or backup withhold,  as the case may be, any tax or other
amount from payments made to or for the account of any Lender, such Lender shall
indemnify  the  Administrative  Agent  therefor,  including  all  penalties  and
interest,  any taxes imposed by any  jurisdiction  on the amounts payable to the
Administrative  Agent  under this  Section,  and costs and  expenses  (including
Attorney Costs) of the Administrative Agent. The obligation of the Lenders under
this  Section  shall  survive  the  termination  of the  Aggregate  Commitments,
repayment  of  all  other  Obligations  hereunder  and  the  resignation  of the
Administrative Agent.

     10.16  REPLACEMENT  OF LENDERS.  Under any  circumstances  set forth herein
providing  that the Borrower shall have the right to replace a Lender as a party
to this  Agreement,  the  Borrower  may,  upon  notice  to such  Lender  and the
Administrative  Agent,  replace such Lender by causing such Lender to assign its
Commitment (with the assignment fee to be paid by the Borrower in such instance)
pursuant to SECTION 10.07(b) to one or more other Lenders or Eligible  Assignees
procured by the  Borrower;  PROVIDED,  HOWEVER,  that if the Borrower  elects to
exercise such right with respect to any Lender pursuant to SECTION  3.06(b),  it
shall be obligated  to replace all Lenders  that have made similar  requests for
compensation  pursuant to SECTION 3.01 or 3.04.  The  Borrower  shall (x) pay in
full all  principal,  interest,  fees and  other  amounts  owing to such  Lender
through  the date of  replacement  (including  any amounts  payable  pursuant to
SECTION 3.05),  (y) provide  appropriate  assurances and indemnities  (which may
include  letters of credit) to the L/C Issuer and the Swing Line  Lender as each
may  reasonably  require  with  respect  to any  continuing  obligation  to fund
participation  interests  in any L/C  Obligations  or any Swing  Line Loans then
outstanding,  and (z) release  such Lender from its  obligations  under the Loan
Documents. Any Lender being replaced shall execute and deliver an Assignment and
Assumption with respect to such Lender's  Commitment and  outstanding  Loans and
participations in L/C Obligations and Swing Line Loans.

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     10.17 GOVERNING LAW.

     (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,
the LAW OF THE STATE OF TEXAS  applicable to agreements made and to be performed
entirely  within such State;  PROVIDED  THAT THE  ADMINISTRATIVE  Agent AND EACH
LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

     (b) ANY LEGAL ACTION OR  PROCEEDING  WITH RESPECT TO THIS  AGREEMENT OR ANY
OTHER LOAN  DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS  SITTING
IN DALLAS  COUNTY OR OF THE UNITED  STATES FOR THE  NORTHERN  DISTRICT  OF TEXAS
(DALLAS  DIVISION),  AND BY  EXECUTION  AND  DELIVERY  OF  THIS  AGREEMENT,  THE
BORROWER,  THE ADMINISTRATIVE Agent AND EACH LENDER CONSENTS,  FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE  JURISDICTION OF THOSE COURTS. THE
BORROWER,  THE  ADMINISTRATIVE  Agent AND EACH  LENDER  IRREVOCABLY  WAIVES  ANY
OBJECTION,  INCLUDING  ANY  OBJECTION  TO THE  LAYING  OF  VENUE OR BASED ON THE
GROUNDS  OF FORUM  NON  CONVENIENS,  WHICH IT MAY NOW OR  HEREAFTER  HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN
DOCUMENT OR OTHER DOCUMENT RELATED  THERETO.  THE BORROWER,  THE  ADMINISTRATIVE
Agent AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS,  WHICH  MAY BE MADE BY ANY  OTHER  MEANS  PERMITTED  BY THE LAW OF SUCH
STATE.

     10.18 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY  WAIVES  ANY RIGHT TO TRIAL BY JURY OF ANY  CLAIM,  DEMAND,  ACTION OR
CAUSE OF ACTION  ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES  HERETO OR ANY OF THEM WITH
RESPECT TO ANY LOAN DOCUMENT,  OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER  ARISING,  AND WHETHER  FOUNDED IN CONTRACT OR
TORT OR  OTHERWISE;  AND EACH PARTY  HEREBY  AGREES AND  CONSENTS  THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN  EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

     10.19  ENTIRE  AGREEMENT.  THIS  AGREEMENT  AND THE  OTHER  LOAN  DOCUMENTS
REPRESENT THE FINAL  AGREEMENT  AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE  OF  PRIOR,  CONTEMPORANEOUS,  OR  SUBSEQUENT  ORAL  AGREEMENTS  OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

                   REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

                                       94
<PAGE>
     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed as of the date first above written.


                                        MERITAGE CORPORATION


                                        By: /s/ Larry W. Seay
                                            ------------------------------------
                                        Name: Larry W. Seay
                                        Title: Chief Financial Officer

                                       95
<PAGE>
                                        GUARANTY BANK, AS ADMINISTRATIVE AGENT


                                        By: /s/ Sam A. Meade
                                            ------------------------------------
                                        Name: Sam A. Meade
                                        Title: Senior Vice President

                                       96
<PAGE>
                                        GUARANTY BANK, AS A LENDER AND SWING
                                        LINE LENDER


                                        By: /s/ Sam A. Meade
                                            ------------------------------------
                                        Name: Sam A. Meade
                                        Title: Senior Vice President

                                       97
<PAGE>

                                        FLEET NATIONAL BANK, AS A LENDER


                                        By: /s/ Bill Lamb
                                            ------------------------------------
                                        Name: Bill Lamb
                                        Title: Vice President

                                       98
<PAGE>
                                        BANK ONE, NA, A NATIONAL ASSOCIATION,
                                        AS A LENDER


                                        By: /s/ Paul Engler
                                            ------------------------------------
                                        Name: Paul Engler
                                        Title: Vice President

                                       99
<PAGE>
                                        WELLS FARGO BANK ARIZONA NATIONAL
                                        ASSOCIATION, AS A LENDER


                                        By: /s/ Victoria Benedict
                                            ------------------------------------
                                        Name: Victoria Benedict
                                        Title: Senior Vice President

                                      100
<PAGE>
                                        U.S. BANK NATIONAL ASSOCIATION,
                                        A NATIONAL BANKING ASSOCIATION,
                                        AS A LENDER


                                        By: /s/ Adrian B. Montero
                                            ------------------------------------
                                        Name: Adrian B. Montero
                                        Title: Relationship Manager

                                      101
<PAGE>
                                        CALIFORNIA BANK AND TRUST, A CALIFORNIA
                                        BANKING CORPORATION, AS A LENDER


                                        By: /s/ Stephanie Lark
                                            ------------------------------------
                                        Name: Stephanie Lark
                                              ----------------------------------
                                        Title: Vice President
                                               ---------------------------------

                                      102
<PAGE>
                                        COMPASS BANK, AN ALABAMA BANKING
                                        CORPORATION, AS A LENDER


                                        By: /s/ Clint Anderson
                                            ------------------------------------
                                        Name: Clint Anderson
                                        Title: Vice President

                                      103