Exhibit 10.4


 


 


SECOND AMENDED AND RESTATED GUARANTY


 


SECOND AMENDED AND RESTATED GUARANTY, dated as of April 6,
2005 (the “Guaranty”),
made by Affordable Residential Communities, LP (the “Guarantor”) in favor of Merrill Lynch Mortgage
Capital Inc. (the “MLMCI”),
party to the Master Repurchase Agreement dated February 18, 2004 (as
amended from time to time, the “Repurchase
Agreement”) by and between MLMCI and Enspire Finance LLC (the
“Seller”).


 


RECITALS


 


The Guarantor made that certain Guaranty in favor of MLMCI,
dated as of February 18, 2004 as amended by the Amended and Restated
Guaranty, dated as of August 11, 2004 (as amended through the date hereof,
the “Existing Guaranty”).


 


The parties hereto desire to amend, modify and restate
the Existing Guaranty in the form of this Guaranty to, among other things,
modify certain terms and contained in the Existing Guaranty.


 


Upon and subject to the terms and conditions of this
Guaranty, the parties hereto are willing to amend and restate the Existing
Guaranty, all as more particularly described below.


 


Reference is made to the Repurchase Agreement,
pursuant to which MLMCI agreed to enter into transactions with Seller upon the
terms and subject to the conditions set forth therein.  It is a condition precedent to the obligation
of MLMCI to enter into Transactions with the Seller under the Repurchase
Agreement that the Guarantor execute and deliver to MLMCI this Guaranty.


 


Now, therefore, in consideration of the premises and
to induce MLMCI to enter into the Repurchase Agreement and engage in
Transactions with the Seller and for other good and valuable consideration the payment,
receipt and sufficiency of which is hereby acknowledged, the Guarantor hereby
agrees to guarantee the Seller’s obligations under the Repurchase Agreement, as
may be amended from time to time, on the terms and conditions set forth herein.


 


1.                                       Defined
Terms.


 


(a)                                  Unless
otherwise defined herein, terms defined in the Repurchase Agreement and used
herein shall have the meanings given to them in the Repurchase Agreement.


 


“Capitalized Leases” shall mean all leases that have been or
should be, in accordance with GAAP, recorded as capitalized leases.


 


“Cash” shall mean the sum of (i) cash and cash
equivalents as reflected as current assets on the consolidated financial
statements (and whose use is for short-term obligations only and not restricted
by any agreement), (ii) treasuries, and (iii) cash and cash equivalents held on
behalf of any direct or indirect subsidiary (individually a “Real Property
Subsidiary” and


 





















 


collectively “Real
Property Subsidiaries”) of the REIT, that will be released to the Real Property
Subsidiaries within 15 days of the last day of each fiscal quarter, and the use
of such cash is not otherwise restricted by any agreement.


 


“Consolidated” shall mean the consolidation of
accounts in accordance with GAAP.


 


“Debt to Tangible Net Worth Ratio” shall mean
the consolidated book value of liabilities divided by Tangible Net Worth.


 


“Equity Interests”
shall mean, with respect to any Person, shares of capital stock of (or
other ownership or profit interests in) such Person, warrants, options or other
rights for the purchase or other acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such Person,
securities convertible into or exchangeable for shares of capital stock of (or
other ownership or profit interests in) such Person or warrants, rights or
options for the purchase or other acquisition from such Person of such shares
(or such other interests), and other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are authorized or otherwise
existing on any date of determination.


 


“GAAP” shall mean generally accepted accounting
principles consistently applied and maintained throughout the period indicated
and, when used with reference to the REIT, consistent with the prior financial
practices of the REIT.


 


“Hedge Agreement” shall mean interest rate
swap, cap or collar agreements, interest rate future or option contracts,
currency swap agreements, currency future or option contracts and other hedging
agreements.


 


“Intangibles” shall mean accounts receivable
and advances due from officers, directors, members, owners, employees,
stockholders and affiliates; goodwill; loan origination costs; and such other
similar items as MLMCI may from time to time determine in its reasonable
discretion.


 


“Lien” shall mean any lien, security interest or other charge
or encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on title
to real property.


 


“Obligations”
shall mean all obligations and liabilities of the Seller to MLMCI, whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, or whether for payment or for performance
(including, without limitation, Price Differential accruing after the
Repurchase Date for the Transactions, and Price Differential or interest
accruing, as applicable, after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to the
Seller, whether or not a claim for post filing or post petition interest is
allowed in such proceeding), which may arise under, or out of or in connection
with the Repurchase Agreement, this Guaranty and any other document made,
delivered or given in connection therewith or herewith, whether


 


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on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees and disbursements of counsel to MLMCI
pursuant to the terms of such documents) or otherwise.


 


“Person” shall mean an individual, partnership, corporation
(including a business trust), limited liability company, joint stock company,
trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.


 


“Subsidiary” shall
mean, of any Person, any corporation, partnership, joint venture,
limited liability company, trust or estate of which (or in which) more than 50%
of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power upon the
occurrence of any contingency), (b) the interest in the capital or profits
of such partnership, joint venture or limited liability company or (c) the
beneficial interest in such trust or estate, in each case, is at the time
directly or indirectly owned or controlled by such Person, by such Person and
one or more of its other Subsidiaries or by one or more of such Person’s other
Subsidiaries.


 


“Tangible Net Worth” shall mean stockholders
equity plus minority interest minus Intangibles.


 


“Termination Date” shall have the meaning
specified in the Repurchase Agreement.


 


(b)                                 The
words “hereof,” “herein” and “hereunder” and words of similar import when used
in this Guaranty shall refer to this Guaranty as a whole and not to any
particular provision of this Guaranty, and section and paragraph
references are to this Guaranty unless otherwise specified.


 


(c)                                  The
meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.


 


2.                                       Guaranty.  (a) The Guarantor hereby, unconditionally and
irrevocably, guarantees to MLMCI and its successors, indorsees, transferees and
assigns, the prompt and complete payment and performance by the Seller when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations.


 


(b)                                 The
Guarantor further agrees to pay any and all expenses (including, without
limitation, all reasonable fees and disbursements of counsel) which may be paid
or incurred by MLMCI in enforcing, or obtaining advice of counsel in respect
of, any rights with respect to, or the collection of, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against,
the Guarantor under this Guaranty.


 


(c)                                  No
payment or payments made by the Seller, the Guarantor, any other guarantor or
any other Person or received or collected by MLMCI from the Seller, the
Guarantor, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Obligations shall be deemed
to release or otherwise affect the liability of the Guarantor


 


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hereunder, other than to reduce the amount of the Obligations by such
payment amount, which shall, notwithstanding any such payment or payments other
than payments made by the Guarantor in respect of the Obligations or payments
received or collected from the Guarantor in respect of the Obligations, remain
liable for the Obligations until the Obligations are paid in full and the
Repurchase Agreement is terminated.


 


(d)                                 The
Guarantor agrees that whenever, at any time, or from time to time, it shall
make any payment to MLMCI on account of its liability hereunder, it will notify
MLMCI in writing that such payment is made under this Guaranty for such
purpose.


 


3.             Right
of Set-off.  Upon the occurrence of
any Event of Default, the Guarantor hereby irrevocably authorizes MLMCI at any
time and from time to time without notice to the Guarantor, any such notice
being expressly waived by the Guarantor, to set-off and appropriate and apply
any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by MLMCI to or for the credit
or the account of the Guarantor, or any part thereof in such amounts as MLMCI
may elect, against and on account of the obligations and liabilities of the
Guarantor to MLMCI hereunder and claims of every nature and description of
MLMCI against the Guarantor, in any currency, whether arising hereunder, under
the Repurchase Agreement, any promissory note, or otherwise, as MLMCI may
elect, whether or not MLMCI has made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured. MLMCI shall
notify the Guarantor promptly of any such set-off and the application made by
MLMCI, provided that the failure to give such notice shall not affect
the validity of such set-off and application. 
The rights of MLMCI under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which
MLMCI may have.


 


4.                                       No
Subrogation.  Notwithstanding any
payment or payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by MLMCI, the Guarantor shall not be
entitled to be subrogated to any of the rights of MLMCI against the Seller or
any other guarantor or any collateral security or guarantee or right of offset
held by MLMCI for the payment of the Obligations, nor shall the Guarantor seek
or be entitled to seek any contribution or reimbursement from the Seller or any
other guarantor in respect of payments made by the Guarantor hereunder, until
all amounts owing to MLMCI by the Seller, on account of the Obligations (other
than contingent Obligations that are intended to survive the termination of the
Repurchase Agreement) are paid in full. The Guarantor hereby subordinates all
of its subrogation rights against the Seller and any other guarantor to the
full payment of Obligations due MLMCI under the Repurchase Agreement, for a
period of 91 days following the final payment of the last of all of the
Obligations.  If any amount shall be paid
to the Guarantor on account of such subrogation rights at any time when all of
the Obligations (other than contingent Obligations that are intended to survive
the termination of the Repurchase Agreement) shall not have been paid in full,
such amount shall be held by the Guarantor in trust for MLMCI, segregated from
other funds of the Guarantor, and shall, forthwith upon receipt by the
Guarantor, be turned over to MLMCI in the exact form received by the Guarantor
(duly indorsed by the Guarantor to MLMCI, if required), to be applied against
the Obligations, whether matured or unmatured, in such order as MLMCI may
determine.


 


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5.                                       Amendments,
Etc. with Respect to the Obligations; Waiver of Rights.  The Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against the
Guarantor and without notice to or further assent by the Guarantor, any demand
for payment of any of the Obligations made by MLMCI may be rescinded by MLMCI
and any of the Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by MLMCI, and the
Repurchase Agreement and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as MLMCI may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by MLMCI for
the payment of the Obligations may be sold, exchanged, waived, surrendered or
released.  MLMCI shall not have any
obligation to protect, secure, perfect or insure any lien at any time held by
it as security for the Obligations or for this Guaranty or any property subject
thereto.  When making any demand
hereunder against the Guarantor, MLMCI may, but shall be under no obligation
to, make a similar demand on the Seller or any other guarantor, and any failure
by MLMCI to make any such demand or to collect any payments from the Seller or
any such other guarantor or any release of the Seller or such other guarantor
shall not relieve the Guarantor of its obligations or liabilities hereunder,
and shall not impair or affect the rights and remedies, express or implied, or
as a matter of law, of MLMCI against the Guarantor.  For the purposes hereof “demand” shall
include the commencement and continuance of any legal proceedings.


 


6.                                       Guaranty
Absolute and Unconditional.


 


(a)                                  The
Guarantor waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by MLMCI
upon this Guaranty or acceptance of this Guaranty, the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon this
Guaranty; and all dealings between the Seller, any other guarantor and the
Guarantor, on the one hand, and MLMCI, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon this
Guaranty.


 


(b)                                 The
Guarantor hereby expressly waives all set-offs and counterclaims and all
diligence, presentments, demands for payment, demands for performance, notices
of nonperformance, protests, notices of protest, notices of dishonor, notices
of acceptance of this Guaranty, notices of sale, notice of default or
nonpayment to or upon the Seller or any other guarantor or the Guarantor,
surrender or other handling or disposition of assets subject to the Repurchase
Agreement, any requirement that MLMCI exhaust any right, power or remedy or
take any action against the Seller or any other guarantor or against any assets
subject to the Repurchase Agreement and other formalities of any kind.


 


(c)                                  The
Guarantor understands and agrees that this Guaranty shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Repurchase
Agreement, any of the Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any


 


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time or from time to time held by MLMCI, (b) any defense, set-off
or counterclaim (other than a defense of payment or performance) which may at
any time be available to or be asserted by the Seller or any other guarantor
against MLMCI, or (c) any other circumstance whatsoever (with or without
notice to or knowledge of the Seller or any other guarantor or the Guarantor)
which constitutes, or might be construed to constitute, an equitable or legal
discharge of the Seller or any other guarantor from the Obligations, or of the
Guarantor from this Guaranty, in bankruptcy or in any other instance.


 


(d)                                 When
pursuing its rights and remedies hereunder against the Guarantor, MLMCI may,
but shall be under no obligation to, pursue such rights and remedies as it may
have against the Seller or any other Person or against any collateral security
or guarantee for the Obligations or any right of offset with respect thereto,
and any failure by MLMCI to pursue such other rights or remedies or to collect
any payments from the Seller or any such other Person or to realize upon any
such collateral security or guarantee or to exercise any such right of offset,
or any release of the Seller or any such other Person or any such collateral
security, guarantee or right of offset, shall not relieve the Guarantor of any
liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of MLMCI against the
Guarantor.


 


(e)                                  This
Guaranty shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Guarantor and the successors and
assigns thereof, and shall inure to the benefit of MLMCI, and its successors,
indorsees, transferees and assigns, until all the Obligations and the obligations
of the Guarantor under this Guaranty shall have been satisfied by payment in
full and the Repurchase Agreement, shall be terminated, notwithstanding that
from time to time prior thereto the Seller may be free from any Obligations.


 


(f)                                    The
Guarantor waives, to the fullest extent permitted by applicable law, all
defenses of surety to which it may be entitled by statute or otherwise.


 


7.                                       Reinstatement.  The Obligations of the Guarantor under this
Guaranty, and this Guaranty shall continue to be effective, or be reinstated,
as the case may be, and be continued in full force and effect, if at any time
any payment, or any part thereof, of any of the Obligations is rescinded,
invalidated, declared fraudulent or preferentially set aside or must otherwise
be restored, returned or repaid by MLMCI upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Seller or any other guarantor
or the Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, the Seller or any
other guarantor or the Guarantor or any substantial part of its or their
property, or for any other reason, all as though such payments had not been
made.


 


8.                                       Payments.  The Guarantor hereby guarantees that payments
hereunder will be paid to MLMCI without set-off or counterclaim in U.S.
Dollars.


 


9.                                       Event
of Default.  If an Event of Default
under the Repurchase Agreement shall have occurred and be continuing, the
Guarantor agrees that, as between the Guarantor and MLMCI, the Obligations may
be declared to be due for purposes of this Guaranty notwithstanding any stay,
injunction or other prohibition which may prevent, delay or vitiate any such
declaration as against the Seller or any other guarantor and that, in the event
of any such


 


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declaration (or attempted
declaration), such Obligations shall forthwith become due by the Guarantor for
purposes of this Guaranty.


 


10.                                 Representations
and Warranties.


 


(a)                                  The
Guarantor represents and warrants that (i) it is duly authorized to
execute and deliver this Guaranty, to perform its obligations hereunder and has
taken all necessary action to authorize such execution, delivery and
performance; (ii) the person signing this Guaranty on its behalf is duly
authorized to do so on its behalf; (iii) this Guaranty is a legal, valid
and binding obligation of it, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, or similar debtor/creditor
laws and general principles of equity and public policy, (iv) no approval,
consent or authorization of this Guaranty from any federal, state, or local
regulatory authority having jurisdiction over it is required or, if required,
such approval, consent or authorization has been or will be obtained, prior to
the initial Transaction; (v) the execution, delivery, and performance of
this Guaranty will not violate any law, regulation, order, judgment, decree,
ordinance, charter, by law, or rule applicable to it or its property or
constitute a default (or an event which, with notice or lapse of time, or both
would constitute a default) under or result in a breach of any material
agreement or other material instrument by which it is bound or by which any of
its assets are affected; (vi) it has received approval and authorization
to enter into this Guaranty pursuant to its internal policies and procedures;
(vii) this Guaranty is not entered into in contemplation of insolvency or
with intent to hinder, delay or defraud any creditor and (viii) it has
examined and comprehends the Repurchase Agreement in its entirety.


 


(b)                                 Guarantor
represents, warrants and covenants to MLMCI that as of the date of this
Guaranty, as of the date of any Transaction under the Repurchase Agreement and
at all times while this Guaranty and any Transaction under the Repurchase
Agreement are in effect or there are Obligations outstanding:


 


(i)                                     Performance
of Guaranty.  Guarantor does not
believe, nor does it have any reason or cause to believe, that it cannot
perform each and every covenant contained in this Guaranty on its part to be performed.


 


(ii)                                  Guarantor
Not Insolvent.  Guarantor is not, and
with the passage of time does not expect to become, insolvent.


 


(iii)                               Ownership of Seller.  Guarantor is now, and will remain, the direct
or indirect owner of 100% of the membership interests of the Seller.


 


(iv)                              Ownership
of Affiliate Guarantor.  Guarantor is
now, and will remain, the direct or indirect owner of 100% of the common stock
of the Affiliate Guarantor.


 


11.                                 Covenants.  Guarantor covenants and agrees as follows:


 


(a)                                  Consolidations,
Mergers and Sales of Assets.  The
Guarantor shall not (i) consolidate with or merge with or into any other Person
or (ii) sell, lease or otherwise transfer all or substantially all of its
assets to any other Person; provided, the Guarantor may merge or
consolidate with another Person if the Guarantor is the Person surviving such
merger.


 


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(b)                                 Guarantees.  The Guarantor shall not create, incur, assume
or suffer to exist any Guarantees other than this Guaranty except (i) to the
extent reflected in the Guarantor’s financial statements or notes thereto; (ii)
to the extent the aggregate Guarantees of the Guarantor (other than those made
pursuant to clauses (iii), (iv) and (v) below) do not exceed $5,000,000; (iii)
of obligations of the Affiliate Guarantor to Textron Financial Corporation (“Textron”)
arising in connection with loans to the Affiliate Guarantor from Textron in an
aggregate amount of $ 50,000,000 at any time, (iv) the Guaranty to Textron with
respect to that certain $25,000,000 Agreement for Wholesale Financing from
Textron to ARC Housing LLC and ARC HousingTX LP dated February 18, 2005;
and (v) the Guaranty to the Buyer under that certain Lease Receivables Facility
provided, however, that for the purposes of this clause (b) only the term “Guarantees”
shall exclude Guarantees arising pursuant to customary carve-outs to limited
recourse debt such as, for example, personal recourse to the Guarantor or any
Subsidiary of the Guarantor for fraud, willful misrepresentation,
misapplication or misappropriation of cash, waste, environmental claims, damage
to properties, non-payment of taxes or other liens despite the existence of
sufficient cash flow, interference with the enforcement of loan documents upon
maturity or acceleration, violation of loan document prohibitions against
voluntary or involuntary bankruptcy filings, transfer of properties or
ownership interests therein and liabilities and other circumstances customarily
excluded by lenders from exculpation provisions and/or included in separate
indemnification agreements in non-recourse financings of real estate.


 


(c)                                  Minimum
Tangible Net Worth.  As of the last
day of each fiscal quarter, the REIT will have Tangible Net Worth of no less
than $500,000,000.


 


(d)                                 Ratio
of Indebtedness to Tangible Net to Worth. As of the last day of each quarter,
the REIT will have a Debt to Tangible Net Worth Ratio of no more than 3.0 to
1.0.


 


(e)                                  Liquidity.  As of the last day of each fiscal quarter,
the REIT will have no less than $15,000,000.00 of Cash.


 


(f)                                    Financial
Reporting.  The Guarantor shall
maintain a system of accounting established and administered in accordance with
GAAP.


 


(g)                                 Reporting
Requirements.  The Guarantor shall
provide all information, and take all actions necessary, to enable the Seller
to comply with its obligations under the Repurchase Agreement, including,
without limitation, Financial Statements of the Guarantor.


 


(h)                                 No
Material Change in Business.  The
Guarantor shall not make any material change in the nature of its business as
carried on at the date hereof.


 


(i)                                     Limitation
on Dividends and Distributions. The Guarantor shall not make any payment on
account of, or set apart assets for, a sinking or other analogous fund for the
purchase, redemption, defeasance, retirement or other acquisition of any equity
interest of the Guarantor, whether now or hereafter outstanding, or make any
other distribution in respect of any of the foregoing or to any shareholder or
equity owner of the Guarantor, either directly or indirectly, whether in cash
or property or in obligations of the Guarantor or any of the Guarantor’s
consolidated Subsidiaries at any time following the occurrence and during the
continuation of an Event of Default,
except that, following the occurrence and during the


 


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continuation of an Event of Default, the
Guarantor may make distributions in cash or other property but only to the
extent of the REIT’s distributable share of the Guarantor ‘s net taxable income and gain (as
determined for federal income tax purposes) with respect to such taxable year,
and only to the extent reasonably necessary for the REIT to satisfy its REIT
Distribution Requirement with respect to such taxable year.


 


(j)                                     Preservation
of Existence; Compliance with Law.  The
Guarantor shall:


 


(i)                                     Preserve
and maintain its legal existence and all of its material rights, privileges,
licenses and franchises necessary for the operation of its business;


 


(ii)                                  Comply
in all material respects with the requirements of all applicable laws, rules,
regulations and orders, whether now in effect or hereafter enacted or
promulgated by any applicable Governmental Authority (including, without limitation,
all environmental laws);


 


(iii)                               Maintain all licenses,
permits or other approvals necessary for the Guarantor to conduct its business
and to perform its obligations under Repurchase Documents, and shall conduct
its business in all material respects in accordance with applicable law;


 


(iv)                              Keep
adequate records and books of account, in which complete entries will be made
in accordance with GAAP consistently applied; and


 


(v)                                 Permit
representatives of MLMCI, upon reasonable notice (unless an Event of Default
shall have occurred and is continuing, in which case, no prior notice shall be
required), during normal business hours, to examine, copy and make extracts
from its books and records, to inspect any of its Properties, and to discuss
its business and affairs with its officers, all to the extent reasonably
requested by the Lender, subject to the provisions set forth in Section 27
of the Repurchase Agreement.


 


(k)                                  Taxes,
Etc.


 


(i)                                     The
Guarantor shall pay and discharge or cause to be paid and discharged, when due,
or adequately reserve for the payment of, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income and profits
or upon any of its property, real, personal or mixed (including without
limitation, the Repurchase Assets and the Collateral) or upon any part thereof,
as well as any other lawful claims which, if unpaid, might become a Lien upon
such properties or any part thereof; except for any such taxes as are
appropriately contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are provided.


 


(ii)                                  The
Guarantor shall file on a timely basis all federal, state and local tax and
information returns, reports and any other information statements or schedules
required to be filed by or in respect of it and pay all taxes due pursuant to
such returns, reports and other information statements or schedules or pursuant
to any assessment received by it.


 


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(l)                                     Transactions
with Affiliates.  The Guarantor shall
not, and shall ensure that none of its direct or indirect Subsidiaries shall,
enter into any transaction, including, without limitation, the purchase, sale,
lease or exchange of property or assets or the rendering or accepting of any
service, but excluding indemnifications of officers and directors, equity
awards or grants, benefit plans and issuances of capital stock, with any
Affiliate (other than a direct or indirect Subsidiary of the Guarantor), unless
such transaction is (a) not otherwise prohibited in the Repurchase
Agreement or this Guaranty, (b) in the ordinary course of the Guarantor’s
business and (c) upon fair and reasonable terms no less favorable to the
Guarantor or such Subsidiary, as the case may be, than it would obtain in a
comparable arm’s length transaction with a Person which is not an Affiliate.


 


12.                                 Notices.  All notices, requests and other
communications provided for herein (including without limitation any
modifications of, or waivers, requests or consents under, this Guaranty) shall
be given or made via e-mail or telecopier delivered to the intended recipient
at the e-mail or telecopier address specified below its name on the signature
pages of the Repurchase Agreement or, with respect to Guarantor, at the email
or telecopier address specified below its name on the signature page hereof);
or, as to any party, at such other address as shall be designated by such party
in an e-mail or telecopier notice to each other party.  All such communications shall be deemed to
have been duly given when affirmatively confirmed by the Buyer in an e-mail or
telecopier notice to the Seller.


 


13.                                 Severability.  Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.


 


14.                                 Integration.  This Guaranty represents the agreement of the
Guarantor with respect to the subject matter hereof and thereof and there are
no promises or representations by MLMCI relative to the subject matter hereof
or thereof not reflected herein or therein.


 


15.           Amendments
in Writing; No Waiver; Cumulative Remedies. 
(a) None of the terms or provisions of this Guaranty may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Guarantor and MLMCI, provided that any provision of this
Guaranty may be waived by MLMCI.


 


(b)                                 MLMCI
shall not by any act (except by a written instrument pursuant to Section 15(a) hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof.  No failure to exercise, nor any delay in
exercising, on the part of MLMCI, any right, power or privilege hereunder shall
operate as a waiver thereof.  No single
or partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege.  A waiver by MLMCI of any
right or remedy hereunder on any one occasion shall not be construed as a bar
to any right or remedy which MLMCI would otherwise have on any future occasion.


 


10





















 


(c)                                  The
rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights or remedies provided by
law.


 


16.                                 Section Headings.  The section headings used in this
Guaranty are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.


 


17.                                 Successors
and Assigns.  This Guaranty shall be
binding upon the successors and assigns of the Guarantor and shall inure to the
benefit of MLMCI and its successors and assigns.  This Guaranty may not be assigned by the
Guarantor without the express written consent of MLMCI.


 


18.                                 Governing
Law.  This Guaranty shall be governed
by New York law without reference to its choice of law doctrine.


 


19.                                 Condition
to Effectiveness.  This Guaranty
shall not become effective until the execution of the Lease Receivables
Facility and until such time the Existing Guaranty shall remain in full force
and effect.


 


20.                               SUBMISSION
TO JURISDICTION; WAIVERS.  THE
GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:


 


(A)                               SUBMITS
FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
GUARANTY, THE OTHER REPURCHASE DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF
ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY
THEREOF;


 


(B)                               CONSENTS
THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE
EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH
ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO
PLEAD OR CLAIM THE SAME;


 


(C)                               AGREES
THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY
MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY
SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS
SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH MLMCI SHALL HAVE BEEN
NOTIFIED; AND


 


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(D)                               AGREES
THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION.


 


21.                               WAIVER
OF JURY TRIAL.  EACH OF THE GUARANTOR
AND MLMCI HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY OTHER REPURCHASE DOCUMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.


 


[SIGNATURE PAGE FOLLOWS]


 


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IN WITNESS WHEREOF, the undersigned has caused this
Guaranty to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.


 


 


	
   

  	
  AFFORDABLE
  RESIDENTIAL

  
	
   

  	
  COMMUNITIES, LP, as
  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John G. Sprengle

  	
   

  
	
   

  	
   

  	
  Name: John G. Sprengle

  
	
   

  	
   

  	
  Title:   President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
   

  
	
   

  	
   

  	
  Scott L. Gesell

  
	
   

  	
   

  	
  Executive Vice
  President and General Counsel

  
	
   

  	
   

  	
  Scottg@arc-hs.com

  
	
   

  	
   

  	
  600 Grant Street, Suite
  900

  
	
   

  	
   

  	
  Denver, CO 80203

  
	
   

  	
   

  	
  Telecopier No.: (303)
  749-2073

  
	
   

  	
   

  	
  Telephone No: (303)
  383-7506

  



 





















 


ACKNOWLEDGED AND AGREED:


 


MERRILL LYNCH MORTGAGE
CAPITAL INC., as MLMCI


 


 


	
  By:

  	
  /s/ James B. Cason

  	
   

  
	
  Name: James B. Cason

  
	
  Title:   Vice
  President