Exhibit
10.1


 


FIRST AMENDED AND
RESTATED CREDIT AGREEMENT


 


Dated as of May 16, 2006


 


among


 


MERITAGE HOMES CORPORATION,

as the Borrower,


 


GUARANTY BANK

as Administrative Agent and Swing Line Lender,


 


JPMORGAN CHASE BANK, N.A.,


as Syndication Agent,


 


WACHOVIA BANK, NATIONAL ASSOCIATION and BANK OF
AMERICA, N.A.,


as Co-Documentation Agents,


 


U. S.
BANK NATIONAL ASSOCIATION,


WELLS
FARGO BANK, NATIONAL ASSOCIATION,


CITICORP
NORTH AMERICA, INC.,


DEUTSCHE
BANK TRUST COMPANY AMERICAS and UBS SECURITIES LLC,


as Managing Agents,


 


PNC BANK, NATIONAL ASSOCIATION and SUNTRUST BANK,


as Co-Agents,


 


 


and


 


The Other Lenders Party Hereto


 


 


GUARANTY BANK,

as Joint Lead Arranger and Book Manager


 


and


 


J. P. MORGAN SECURITIES, INC.,


as Joint Lead Arranger


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE I.

  	
  DEFINITIONS
  AND ACCOUNTING TERMS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.01

  	
  Defined Terms

  	
  1

  
	
  1.02

  	
  Other Interpretive Provisions

  	
  31

  
	
  1.03

  	
  Accounting Terms

  	
  32

  
	
  1.04

  	
  Rounding

  	
  33

  
	
  1.05

  	
  References to Agreements and Laws

  	
  33

  
	
  1.06

  	
  Times of Day

  	
  33

  
	
  1.07

  	
  Letter of Credit Amounts

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE II.

  	
  THE
  COMMITMENTS AND CREDIT EXTENSIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.01

  	
  Revolving Loans

  	
  34

  
	
  2.02

  	
  Borrowings, Conversions and Continuations
  of Revolving Loans

  	
  34

  
	
  2.03

  	
  Letters of Credit

  	
  36

  
	
  2.04

  	
  Swing Line Loans

  	
  43

  
	
  2.05

  	
  Prepayments

  	
  46

  
	
  2.06

  	
  Termination or Reduction of
  Commitments

  	
  47

  
	
  2.07

  	
  Repayment of Loans

  	
  47

  
	
  2.08

  	
  Interest

  	
  47

  
	
  2.09

  	
  Fees

  	
  48

  
	
  2.10

  	
  Computation of Interest and Fees

  	
  48

  
	
  2.11

  	
  Evidence of Debt

  	
  49

  
	
  2.12

  	
  Payments Generally

  	
  49

  
	
  2.13

  	
  Sharing of Payments

  	
  51

  
	
  2.14

  	
  Extension of Scheduled Maturity Date

  	
  51

  
	
  2.15

  	
  Increase in Commitments

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE III.

  	
  TAXES,
  YIELD PROTECTION AND ILLEGALITY

  	
   

  
	
   

  	
   

  	
   

  
	
  3.01

  	
  Taxes

  	
  54

  
	
  3.02

  	
  Illegality

  	
  56

  
	
  3.03

  	
  Inability to Determine Rates

  	
  56

  
	
  3.04

  	
  Increased Cost and Reduced Return;
  Capital Adequacy; Reserves on Eurodollar Rate Loans

  	
  56

  
	
  3.05

  	
  Funding Losses

  	
  57

  
	
  3.06

  	
  Matters Applicable to all Requests
  for Compensation

  	
  58

  
	
  3.07

  	
  Survival

  	
  58

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV.

  	
  CONDITIONS
  PRECEDENT TO Credit Extensions

  	
   

  
	
   

  	
   

  	
   

  
	
  4.01

  	
  Conditions of Initial Credit
  Extension

  	
  58

  
	
  4.02

  	
  Conditions to all Credit Extensions

  	
  60

  
	
   

  	
   

  	
   

  
	
  ARTICLE V.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  5.01

  	
  Existence, Qualification and Power;
  Compliance with Laws

  	
  60

  
	
  5.02

  	
  Authorization; No Contravention

  	
  61

  
	
  5.03

  	
  Governmental Authorization; Other
  Consents

  	
  61

  
	
  5.04

  	
  Binding Effect

  	
  61

  
	
  5.05

  	
  Financial Statements; No Material
  Adverse Effect

  	
  61

  



 


i

















 


	
  5.06

  	
  Litigation

  	
  62

  
	
  5.07

  	
  No Default

  	
  62

  
	
  5.08

  	
  Ownership of Property; Liens

  	
  62

  
	
  5.09

  	
  Environmental Compliance

  	
  62

  
	
  5.10

  	
  Insurance

  	
  62

  
	
  5.11

  	
  Taxes

  	
  62

  
	
  5.12

  	
  ERISA Compliance

  	
  63

  
	
  5.13

  	
  Capitalization; Subsidiaries; Joint
  Ventures

  	
  63

  
	
  5.14

  	
  Margin Regulations; Investment
  Company Act; Public Utility Holding Company Act

  	
  64

  
	
  5.15

  	
  Disclosure

  	
  64

  
	
  5.16

  	
  Compliance with Laws

  	
  64

  
	
  5.17

  	
  Intellectual Property; Licenses,
  Etc

  	
  65

  
	
  5.18

  	
  Solvency

  	
  65

  
	
  5.19

  	
  Businesses

  	
  65

  
	
  5.20

  	
  Common Enterprise

  	
  65

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI.

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  6.01

  	
  Financial Statements

  	
  66

  
	
  6.02

  	
  Certificates; Other Information

  	
  66

  
	
  6.03

  	
  Notices

  	
  68

  
	
  6.04

  	
  Payment of Obligations

  	
  69

  
	
  6.05

  	
  Preservation of Existence, Etc

  	
  69

  
	
  6.06

  	
  Maintenance of Properties

  	
  69

  
	
  6.07

  	
  Maintenance of Insurance

  	
  69

  
	
  6.08

  	
  Compliance with Laws

  	
  69

  
	
  6.09

  	
  Books and Records

  	
  69

  
	
  6.10

  	
  Inspection Rights

  	
  70

  
	
  6.11

  	
  Use of Proceeds

  	
  70

  
	
  6.12

  	
  Additional Guarantors

  	
  70

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII.

  	
  NEGATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  7.01

  	
  Liens

  	
  71

  
	
  7.02

  	
  Investments

  	
  71

  
	
  7.03

  	
  Indebtedness

  	
  72

  
	
  7.04

  	
  Fundamental Changes

  	
  73

  
	
  7.05

  	
  Dispositions

  	
  73

  
	
  7.06

  	
  Restricted Payments

  	
  74

  
	
  7.07

  	
  Change in Nature of Business

  	
  75

  
	
  7.08

  	
  Transactions with Affiliates

  	
  75

  
	
  7.09

  	
  Burdensome Agreements

  	
  75

  
	
  7.10

  	
  Use of Proceeds

  	
  76

  
	
  7.11

  	
  Financial Covenants

  	
  76

  
	
  7.12

  	
  Fiscal Year and Accounting Methods

  	
  77

  
	
  7.13

  	
  Amendment and Waivers of Senior
  Notes

  	
  77

  
	
  7.14

  	
  Sale and Leaseback

  	
  77

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII.

  	
  EVENTS
  OF DEFAULT AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  8.01

  	
  Events of Default

  	
  77

  



 


ii

















 


	
  8.02

  	
  Remedies Upon Event of Default

  	
  79

  
	
  8.03

  	
  Application of Funds

  	
  80

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX.

  	
  ADMINISTRATIVE
  AGENT

  	
   

  
	
   

  	
   

  	
   

  
	
  9.01

  	
  Appointment and Authorization of
  Administrative Agent

  	
  81

  
	
  9.02

  	
  Delegation of Duties

  	
  82

  
	
  9.03

  	
  Liability of Administrative Agent

  	
  82

  
	
  9.04

  	
  Reliance by Administrative Agent

  	
  82

  
	
  9.05

  	
  Notice of Default

  	
  83

  
	
  9.06

  	
  Credit Decision; Disclosure of
  Information by Administrative Agent

  	
  83

  
	
  9.07

  	
  Indemnification of Administrative
  Agent

  	
  83

  
	
  9.08

  	
  Administrative Agent in its
  Individual Capacity

  	
  84

  
	
  9.09

  	
  Successor Administrative Agent

  	
  84

  
	
  9.10

  	
  Administrative Agent May File
  Proofs of Claim

  	
  85

  
	
  9.11

  	
  Guaranty Matters

  	
  86

  
	
  9.12

  	
  Other Agents; Arrangers and
  Managers

  	
  86

  
	
  9.13

  	
  Related Obligations

  	
  86

  
	
   

  	
   

  	
   

  
	
  ARTICLE X.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  10.01

  	
  Amendments, Etc

  	
  87

  
	
  10.02

  	
  Notices and Other Communications;
  Facsimile Copies

  	
  88

  
	
  10.03

  	
  No Waiver; Cumulative Remedies

  	
  90

  
	
  10.04

  	
  Attorney Costs, Expenses and Taxes

  	
  91

  
	
  10.05

  	
  Indemnification by the Borrower

  	
  91

  
	
  10.06

  	
  Payments Set Aside

  	
  92

  
	
  10.07

  	
  Successors and Assigns

  	
  93

  
	
  10.08

  	
  Confidentiality

  	
  96

  
	
  10.09

  	
  Set-Off

  	
  96

  
	
  10.10

  	
  Interest Rate Limitation

  	
  97

  
	
  10.11

  	
  Counterparts

  	
  97

  
	
  10.12

  	
  Integration

  	
  97

  
	
  10.13

  	
  Survival of Representations and
  Warranties

  	
  97

  
	
  10.14

  	
  Severability

  	
  98

  
	
  10.15

  	
  Tax Forms

  	
  98

  
	
  10.16

  	
  Replacement of Lenders

  	
  99

  
	
  10.17

  	
  Governing Law

  	
  100

  
	
  10.18

  	
  Waiver of Right to Trial by Jury

  	
  100

  
	
  10.19

  	
  ENTIRE AGREEMENT

  	
  101

  
	
  10.20

  	
  No Advisory or Fiduciary
  Responsibility

  	
  101

  
	
  10.21

  	
  USA PATRIOT Act Notice

  	
  102

  



 


iii

















 


	
  SCHEDULES

  
	
   

  
	
  2.01

  	
  Commitments and Pro Rata Shares

  
	
  2.03

  	
  Existing Letters of Credit

  
	
  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

  



 


iv

















 


FIRST AMENDED AND
RESTATED CREDIT AGREEMENT


 


This FIRST AMENDED AND
RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of May 16,
2006, among MERITAGE HOMES 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, JPMORGAN CHASE BANK, N.A., as Syndication Agent, and
WACHOVIA BANK, NATIONAL ASSOCIATION and BANK OF AMERICA, N.A., as
Co-Documentation Agents.


 


The Borrower, various financial institutions and the Administrative
Agent (as defined below) are parties to that certain Credit Agreement, dated as
of December 12, 2002, as heretofore amended, modified and supplemented
from time to time (the “Existing Credit Agreement”).


 


The parties hereto have agreed, subject to the terms hereof, to amend
and restate the Existing Credit Agreement for the purpose of, among other
things, (a) increasing the amount of the revolving credit facility to
$800,000,000, (b) amending the pricing, certain covenants and various
other provisions of the Existing Credit Agreement and (c) revising the
composition of the lender group.


 


The parties hereto intend that this Agreement and the other documents
executed in connection herewith not effect a novation of the obligations of the
Borrower under the Existing Credit Agreement, but merely effect a restatement
and, where applicable, an amendment of the terms governing such obligations.


 


In consideration of the mutual covenants and agreements herein
contained, the Existing Credit Agreement is hereby amended and restated in its
entirety, and 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


 


1

















 


(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, any other 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 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 of 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:


 


2

















 


	
  Pricing

  Level

  	
   

  	
  Leverage Ratio

  	
   

  	
  Commitment

  Fee

  	
   

  	
  Eurodollar Rate;

  all

  Letters of Credit

  	
   

  	
  Base

  Rate

  	
   

  
	
  1

  	
   

  	
  Greater than 1.75 to 1

  	
   

  	
  0.275

  	
  %

  	
  1.750

  	
  %

  	
  0.250

  	
  %

  
	
  2

  	
   

  	
  Greater than 1.50 to 1 but less than or equal to
  1.75 to 1

  	
   

  	
  0.275

  	
  %

  	
  1.550

  	
  %

  	
  0.250

  	
  %

  
	
  3

  	
   

  	
  Greater than 1.25 to 1 but less than or equal to
  1.50 to 1

  	
   

  	
  0.250

  	
  %

  	
  1.350

  	
  %

  	
  0.000

  	
  %

  
	
  4

  	
   

  	
  Greater than 1.00 to 1 but less than or equal to
  1.25 to 1

  	
   

  	
  0.250

  	
  %

  	
  1.250

  	
  %

  	
  0.000

  	
  %

  
	
  5

  	
   

  	
  Less than or equal to 1.00 to 1

  	
   

  	
  0.200

  	
  %

  	
  1.125

  	
  %

  	
  0.000

  	
  %

  
	
  6

  	
   

  	
  Less than or equal to 1.00 to 1 and maintenance of
  Required Debt Rating

  	
   

  	
  0.200

  	
  %

  	
  1.000

  	
  %

  	
  0.000

  	
  %

  



 


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 6, such decrease shall
occur only if the Borrower shall have and maintain a Debt Rating of at least (i) BBB-
by S&P or Fitch and (ii) Baa3 by Moody’s (the “Required Debt Rating”).  Thereafter, if Pricing Level 6 is in
effect and a publicly announced downgrade in any Debt Rating to a level below
the Required Debt Rating shall occur, the Applicable Rate shall be increased to
Pricing Level 5 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 through and including the date the Compliance
Certificate is delivered pursuant to Section 6.02(b) for the
second fiscal quarter of fiscal year 2006 shall be Pricing Level 5.


 


“Arranger” means
Guaranty Bank, in its capacity as joint lead arranger and joint book manager.


 


“Assignment and
Assumption” means an Assignment and Assumption substantially in the form of
Exhibit E or any other form approved by the Administrative Agent.


 


“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, (b) in
respect of any Synthetic Lease


 


3

















 


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 and (c) and
in respect of any other Off-Balance Sheet Liabilities, the amount thereof that
would appear on a balance sheet of such Person prepared as of such date in
accordance with GAAP if such liabilities were accounted for as a liability of
such Person.


 


“Audited Financial
Statements” means the audited consolidated balance sheet of the Borrower
and its Subsidiaries for the fiscal year ended December 31, 2005, 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.


 


“Auditors” means a
“Big 4” Registered Public Accounting Firm or another Registered Public
Accounting Firm acceptable to the Required Lenders.


 


“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.


 


“Bankruptcy Event”
means the commencement of any case under the Bankruptcy Code (Title 11 of
the United States Code) or the commencement of any other bankruptcy,
reorganization, receivership, or similar proceeding under any federal, state or
foreign law or by or against any Person for whom any Loan Party has executed a
Springing Guaranty for the benefit of such Person; provided,
however, that the filing of an involuntary case against such Person
shall only be a Bankruptcy Event if: (i) such involuntary case is filed in
whole or in part by a Loan Party, any member in such Person which is an affiliate
of a Loan Party, or any other affiliate of a Loan Party, or (ii) if a Loan
Party, any member in such Person
which is an affiliate of a Loan Party, or any other affiliate of a Loan Party
shall in any way induce or participate in the filing, whether directly or
indirectly, of an involuntary bankruptcy case against such Person or any other
Person, and such involuntary case or proceeding is not dismissed with prejudice
within 120 days of the filing thereof.


 


“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.


 


“Base Rate Loan”
means a Loan that bears interest based on the Base Rate.


 


“Borrower” means
Meritage Homes Corporation, a Maryland corporation.


 


“Borrower Materials”
has the meaning specified in Section 6.02.


 


4

















 


“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
subparagraphs (a) through (g) below are not subject to any Liens
other than Permitted Liens):


 


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


 


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


 


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


 


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


 


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


 


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


 


(g)           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 (e), (f) and
(g) above, (ii) at no time shall more than 25% of the Borrowing Base
be comprised of the items set forth in subparagraphs (f) and (g) 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 (a), (b), (c) and (d) in the aggregate.


 


“Borrowing Base Assets”
means 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.


 


“Borrowing Base Debt”
means as of any date of determination, the sum of (a) all Consolidated
Indebtedness as of such date of determination, including without limitation the
Obligations and the Senior Notes, but excluding (i) any portion of any
Subordinated Debt of any Loan Party which is due and payable more than one year
from such date of determination, (ii) 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 (x) secured by any Lien on such asset does
not exceed the Net Book Value of such asset as determined by GAAP and
(y) does not exceed in aggregate amount the amount set forth in Section 7.03(f) and
(iii) the face amount of all undrawn Performance Letters of Credit, in
each case issued for the account of, or guaranteed by the Loan


 


5

















 


Parties minus (b) Cash
and Cash Equivalents and Receivables of the Loan Parties not subject to any
Lien securing Indebtedness in an aggregate amount in excess of $5,000,000.


 


“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), 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


 


6

















 


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 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.


 


7

















 


“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 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.


 


8

















 


“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
$500; 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 Rating”
means, as of any date, the rating that has been announced and is in effect by
S&P, Fitch 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 (a) when used with respect to Obligations other than Letter of
Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the
Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 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, and (b) when used with respect to Letter of Credit Fees, a rate
equal to the Applicable Rate 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 unless such failure has been cured, (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 date when due, unless the subject of a good faith dispute or unless such
failure has been cured, or (c) has been deemed insolvent or become the
subject of a bankruptcy or insolvency proceeding.


 


9

















 


“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 Agents”
means Wachovia Bank, National Association and Bank of America, N.A., in
their capacity as documentation agents 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 and which does not qualify as Land/Lots Under
Development, a Presold Unit, an Unsold Unit Under Construction or a Finished
Lot.


 


“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.


 


“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


 


10

















 


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 Bloomberg Professional as the average British
Bankers Association LIBOR rate for deposits in Dollars (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest
Period (provided, with respect to Interest Periods of fourteen days, the
Eurodollar Rate for such Interest Period shall be equal to the Eurodollar Rate
for Interest Periods of one month), 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 LIBOR rate for deposits in Dollars (for
delivery on the first day of such Interest Period) with a term equivalent to
such Interest Period (provided, with respect to Interest Periods of
fourteen days, the Eurodollar Rate for such Interest Period shall be equal to
the Eurodollar Rate for Interest Periods of one month), determined as of
approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period, or


 


11

















 


(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 (provided, with respect
to Interest Periods of fourteen days, the Eurodollar Rate for such Interest
Period shall be equal to the Eurodollar Rate for Interest Periods of one month)
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.


 


“Exchange Act”
means the Securities Exchange Act of 1934.


 


“Existing Credit Agreement” has the meaning specified in the
introductory paragraph hereto.


 


“Existing Letters of Credit” means the Letters of Credit issued
under the Existing Credit Agreement and listed on Schedule 2.03.


 


“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 May 4, 2006, 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 platted for the construction of
Units with vested zoning for such use, with respect to which substantially all
utilities and major infrastructure has been substantially completed and stubbed
to site, such that 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 other
than the payment of customary fees; provided, however, that the term “Finished Lots” shall not include any
real property upon which the construction of a Unit has commenced.


 


12

















 


“Fitch” means
Fitch, Inc., or any successor rating agency.


 


“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.


 


“Fronting Fee” has
the meaning specified in Section 2.03(j).


 


“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 the government of the United States or any other nation,
or of any political subdivision thereof, whether state or local, and 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 (including any supra national bodies such as the
European Union or the European Central Bank).


 


“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; provided, however, that a Springing
Guarantee shall not be deemed to be a Guarantee until the earlier to occur of (i) the
demand by a lender for payment under such Springing Guaranty, (ii) the
occurrence or failure to occur of any event, act or circumstance that, with or
without the giving of notice and/or passage of time, entitles a lender to make
a demand for payment thereunder or (iii) a Bankruptcy Event.  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.


 


13

















 


“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 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).


 


“Increase Closing Date”
has the meaning specified in Section 2.15(b).


 


“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;


 


14

















 


(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, (ii) accrued
expenses incurred by such Person in the ordinary course of business, (iii) marketing
fees payable to developers of master planned communities incurred by such
Person in the ordinary course of business, (iv) reimbursement obligations
for impact or development fee credits to be received by such Person incurred in
the ordinary course of business, (v) deferred lot premium or profit
participation obligations payable to developers of master planned communities
incurred in the ordinary course of business and (vi) obligations to
developers or owners of master planned communities in the form of a performance
encumbrance of such Person incurred 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;


 


(g)           Synthetic
Lease Obligations and other 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 items (a) through
(j) of another Person (for clarification, any Guarantees by such Person of any
obligations of another Person other than those set forth in items (a) through
(j) shall not be Indebtedness.  By way of
example, a guaranty of performance and other obligations of a joint venture
(other than a Payment Guaranty), including any agreement to provide funds by
means of a loan, capital contribution or otherwise for the purpose of funding
the obligations of the joint venture incurred in its ordinary course of
business, and in connection with an established or agreed upon budget shall not
be Indebtedness).


 


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


 


15

















 


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, the following shall not be considered Indebtedness to the extent
such items are not required to be capitalized in accordance with GAAP: (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.


 


“Indemnified
Liabilities” has the meaning specified in Section 10.05.


 


“Indemnitees” has
the meaning specified in Section 10.05.


 


“Information” has
the meaning specified in Section 10.08.


 


“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.


 


“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 fourteen days or 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


 


16

















 


(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, a payment pursuant to a Guarantee of debt of, 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 net amount of any Investment
shall be calculated as (a) the initial amount of such Investment, plus (b) any
additional capital contributions or other similar amounts with respect to such
Investments, less (c) all returns of capital with respect to such
Investment.


 


“IP Rights” has
the meaning specified in Section 5.17.


 


“IRS” means the
United States Internal Revenue Service.


 


“ISP” means, with
respect to any Letter of Credit, the “International Standby Practices 1998”
published by the Institute of International Banking Law and Practice (or such
later version thereof as may be in effect at the time of issuance).


 


“Issuer Document”
means with respect to any Letter of Credit, the Letter of Credit Application,
and any other document, agreement and instrument entered into by the L/C Issuer
and the Borrower (or any Restricted Subsidiary) or in favor of the L/C Issuer
and relating to such Letter of Credit.


 


“Joint Lead Arranger”
means J.P. Morgan Securities, Inc., in its capacity as joint lead
arranger and joint book manager.


 


“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, authorizations and


 


17

















 


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 and shall include the Existing
Letters of Credit.  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 Fee”
has the meaning specified in Section 2.03(i).


 


“Letter of Credit
Sublimit” means an amount equal to 40% of the Aggregate Commitments.  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 exclude (i) the face amount of all undrawn Performance
Letters of Credit issued for the account of, or guaranteed by the Loan Parties
and (ii) Attributable Indebtedness in respect of Synthetic


 


18

















 


Lease Obligations
and other Off-Balance Sheet Liabilities and Guarantees with respect thereto) 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 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, each Issuer Document, 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:


 


19

















 


(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);


 


(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).


 


“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).


 


20

















 


“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 (B) liabilities arising under model home leases in the ordinary
course of business and (C) liabilities arising under Guarantees 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.


 


21

















 


“Participant” has
the meaning specified in Section 10.07(d).


 


“Payment Guaranty”
means, with respect to any Person, such Person’s guaranty of obligations of a
joint venture to make payments of its Indebtedness, whether regularly scheduled
or payable upon maturity by acceleration or otherwise.


 


“PBGC” means the
Pension Benefit Guaranty Corporation.


 


“PCAOB” means the
Public Company Accounting Oversight Board.


 


“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.


 


“Performance Letters
of Credit” means any letter of credit issued (a) on behalf of a Person
in favor of a Governmental Authority, including, without limitation, any
utility, water or sewer authority, or other similar entity, for the purpose of
assuring such Governmental Authority that such Person or any Affiliate of such
Person will properly and timely complete work it has agreed to perform for the
benefit of such Governmental Authority; (b) in lieu of cash deposits to
obtain a license, in place of a utility deposit, or for land option contracts; (c) in
lieu of other contract performance, to secure performance warranties payable
upon breach, and to secure the performance of labor and materials, including,
without limitation, construction, bid and performance bonds; (d) to secure
refund or advance payments on contractual obligations where default of a
performance-related contract has occurred; or (e) to secure a Person’s
obligations under joint development agreements with third parties to perform
and/or pay for or reimburse the costs of construction and/or development
related to or benefiting such Persons’ property and property belonging to such
third parties (so long as such Person’s obligations under such joint
development agreement are not past due), entered into in the ordinary course of
such Person’s business.


 


“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


 


22

















 


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 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;


 


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


 


(k)           any
agreement, contract or Lien to pay or reimburse any third party for any
municipal and other fees of any Governmental Authority payable in the ordinary
course of business; and


 


23



















 


(l)            any
performance encumbrance or related Lien which evidences the obligation of a
Loan Party to contribute to the cost of infrastructure improvements which is
granted in the ordinary course of business.


 


“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.


 


“Platform” has the meaning specified in Section 6.02.


 


“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 Unit” means a Unit owned by any Loan
Party that is subject to a Contract 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 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 outstanding
on or issued after the Closing Date pursuant to either (a) a


 


24

















 


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.


 


“Public Lender” has the meaning specified in Section 6.02.


 


“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 one month
after the Scheduled Maturity Date 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 specified in Section 10.07(c).


 


“Registered Public Accounting Firm” means an
accounting firm that (a) has registered with the PCAOB pursuant to the
provisions of Section 102 of Sarbanes-Oxley and whose registration has not
been withdrawn, terminated, revoked or suspended and (b) meets the “independence”
requirements of Section 10A of the Exchange Act.


 


“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.


 


“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 Debt Rating” has the meaning
specified in the definition of “Applicable Rate” referenced in this Section 1.01  .


 


25

















 


“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, general counsel, 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 related 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.


 


“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.


 


26

















 


“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” or “Revolving Loan Note”
means a promissory note made by the Borrower in favor of a Lender and
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.


 


“Sarbanes-Oxley” means the Sarbanes-Oxley Act
of 2002.


 


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


 


“Scheduled Maturity Date” means May 16, 2010,
as the same may be extended pursuant to Section 2.14.


 


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


 


“Securities Act” means the Securities Act of
1933.


 


“Securities Laws” means the Securities Act, the
Exchange Act, Sarbanes-Oxley and the applicable accounting and auditing
principles, rules, standards and practices promulgated, approved or
incorporated by the SEC or the PCAOB.


 


“Senior Note Indenture” means, collectively, (a) that
certain Indenture, dated as of May 30, 2001, among the Borrower, the
guarantors named therein, and Wells Fargo Bank, National Association, as
Trustee, (b) that certain Indenture, dated as of April 21, 2004,
among the Borrower, the guarantors named therein and Wells Fargo Bank, National
Association, as Trustee, and (c) that certain Indenture, dated as of
March 10, 2005, among the Borrower, the guarantors named therein, and
Wells Fargo Bank, National Association, as Trustee, in each case entered into with
respect to the Senior Notes.


 


“Senior Notes” means, collectively,
(a) the 9-3/4% Senior Notes of the Borrower due 2011 in the original
principal amount of $165,000,000, (b) the 7% Senior Notes of the Borrower
due 2014 in the original principal amount of $130,000,000, and (c) the
6-1/4% Senior Notes of the Borrower due 2015 in the original principal amount
of $350,000,000, in each case 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.


 


27

















 


“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 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.


 


“Springing Guarantee” means a Guarantee by a
Person which by its express terms does not become effective until the
occurrence of a Bankruptcy Event.


 


“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.


 


28

















 


“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).


 


“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) $60,000,000 and (b) the Aggregate Commitments. The
Swing Line Sublimit is part of, and not in addition to, the Aggregate
Commitments.


 


“Syndication Agent” means JPMorgan Chase
Bank, N.A., 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.


 


29

















 


“Unentitled Land” means any Land which is not
zoned to permit single family dwellings, whether detached or attached
(including condominiums, but excluding mobile homes) 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.


 


“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 specified
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


 


30

















 


(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 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.


 


“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.


 


31

















 


(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.


 


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,


 


32

















 


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.


 


(d)           In order
to adhere to the intent of this Section 1.03, the financial ratios,
calculations and covenants (including the computation of the components
thereof) shall be calculated without giving effect to FASB Interpretation
No. 46 enacted by the Financing Accounting Standards Board after the
Closing Date, and all references to GAAP herein shall refer to GAAP as so
calculated.


 


(e)           Notwithstanding
anything in this Section 1.03 or elsewhere in this Agreement, the
other Loan Documents, Issue No. 97-10 of the Emerging Issues Task Force of
the Financial Accounting Standards Board, or FASB Interpretation No. 66 or
98 to the contrary, for purposes of calculating the financial ratios and
covenants herein, the obligations of the Borrower and its Subsidiaries under
the GMAC model home lease program as in effect as of December 31, 2004
shall not be (i) required to be accounted for as a sale-leaseback,
(ii) treated as if it is a financing transaction, or (iii) otherwise
reflected as a liability or credit on the Borrower’s balance sheet.


 


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 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 terms of any Issuer
Document related thereto, whether or not such maximum face amount is in effect
at such time.


 


33

















 


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 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(a)
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


 


34

















 


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 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


 


35

















 


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 amount of all Borrowing Base Debt would exceed the
Borrowing Base determined as of the most recent Inventory Valuation Date. Each
request by the Borrower for the issuance or amendment of a Letter of Credit
shall be deemed to be a representation by the Borrower that the L/C Credit
Extension so requested complies with the conditions set forth in the proviso to
the preceding sentence. 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. The Existing Letters of Credit
shall be deemed to have been issued pursuant hereto, and from and after the
Closing Date shall be subject to and governed by the terms and conditions
hereof.


 


(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


 


36

















 


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 thirty-six
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 applicable to letters of credit generally;


 


(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.


 


(iv)          The 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 the L/C Issuer shall
have all of the benefits and immunities (A) provided to the Administrative
Agent in Article IX with respect to any acts taken or omissions
suffered by the L/C Issuer in connection with Letters of Credit issued by it or
proposed to be issued by it and Issuer Documents pertaining to such Letters of
Credit as fully as if the term “Administrative Agent” as used in Article IX
included the L/C Issuer with respect to such acts or omissions and (B) as
additionally provided herein with respect to the L/C Issuer.


 


(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 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


 


37

















 


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. Additionally, the Borrower shall furnish to the L/C Issuer and the
Administrative Agent such other documents and information pertaining to such
requested Letter of Credit issuance or amendment, including any Issuer
Documents, as the L/C Issuer or the Administrative Agent may reasonably 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 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


 


38

















 


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; provided, however,
that each Lender’s obligation to make Revolving Loans pursuant to Section 2.03(c)
is subject to the conditions set forth in Section 4.02 (other than
delivery by the Borrower of a Revolving Loan Notice). 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


 


39

















 


the 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. The obligations of the Lenders under this clause shall survive the
payment in full of the Obligations and the termination of this Agreement.


 


(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


 


40

















 


Letter of Credit
(or any Person for whom any such beneficiary or any such transferee may be
acting), any L/C Issuer or any 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
Issuer Document. 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


 


41

















 


notwithstanding, the Borrower may have a claim against
a L/C Issuer, and such L/C Issuer may be 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 ISP and UCP.  Unless
otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of
Credit is issued (including any such agreement applicable to an Existing Letter
of Credit), (i) the rules of the ISP 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 (the “Letter of Credit Fee”) for
each Letter of Credit equal to (i) 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) minus (ii) the Fronting Fee. 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


 


42

















 


October, commencing with the first such date to occur
after the issuance of such Letter of Credit, 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 (the “Fronting Fee”) with respect to each Letter of Credit issued by
such 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 Fronting
Fees shall be computed on a quarterly basis in arrears. Such Fronting 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 Issuer Documents. In the event of any conflict between the terms
hereof and the terms of any Issuer Document, 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.


 


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 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


 


43

















 


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 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 and the conditions set forth in Section 4.02.
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


 


44

















 


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; provided, however,
that each Lender’s obligation to make Revolving Loans pursuant to Section 2.04(c)
is subject to the conditions set forth in Section 4.02. 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 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


 


45

















 


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. The obligations of the Lenders under this clause shall survive payment
in full of the Obligations and the termination of this Agreement.


 


(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 and, if Eurodollar Rate Loans are to be prepaid, the
Interest Period(s) of such Loans. 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 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.


 


46

















 


(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 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


 


47

















 


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 last day of the Availability
Period. 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 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


 


48

















 


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. Each determination
by the Administrative Agent of an interest rate or fee hereunder shall be
conclusive and binding for all purposes, absent demonstrable error.


 


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 2:00 p.m.
shall be deemed received on the next succeeding Business Day and any applicable
interest or fee shall continue to accrue.


 


(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


 


49

















 


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 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.


 


50

















 


(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.


 


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


 


51

















 


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.


 


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


 


2.15        Increase in
Commitments.


 


(a)           Provided
there exists no Default, upon notice to the Administrative Agent (which shall
promptly notify the Lenders), the Borrower may from time to time request an
increase in


 


52

















 


the Aggregate Commitments, provided that after giving
effect to all such increases, the Aggregate Commitments shall not exceed $1,050,000,000.
At the time of sending such notice, the Borrower (in consultation with the
Administrative Agent) shall specify the time period within which each Lender is
requested to respond (which shall in no event be less than ten Business Days
from the date of delivery of such notice to the Lenders). Each Lender shall
notify the Administrative Agent within such time period whether or not it
agrees to increase its Commitment and, if so, whether by an amount equal to,
greater than, or less than its Pro Rata Share of such requested increase. Any
Lender not responding within such time period shall be deemed to have declined
to increase its Commitment. The Administrative Agent shall notify the Borrower
and each Lender of the Lenders’ responses to each request made hereunder. To
achieve the full amount of a requested increase, the Borrower may also invite
additional Eligible Assignees to become Lenders pursuant to a joinder agreement
in form and substance satisfactory to the Administrative Agent and its counsel.


 


(b)           If the
Aggregate Commitments are increased in accordance with this Section 2.15,
the Administrative Agent and the Borrower shall determine the Closing Date (the
“Increase Closing Date”) and the final allocation of such increase. The
Administrative Agent shall promptly notify the Borrower and the Lenders of the
final allocation of such increase and the Increase Closing Date. As a condition
precedent to such increase, the Borrower shall deliver to the Administrative
Agent a certificate of each Loan Party dated as of the Increase Closing 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 increase, and (ii) in the case
of the Borrower, certifying that, before and after giving effect to such
increase, (A) the representations and warranties contained in Article V
and the other Loan Documents are true and correct on and as of such Increase
Closing 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 2.15,
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. On the Increase Closing Date, each Lender
shall, to the extent necessary, make a payment to the Administrative Agent in
an amount sufficient, upon the application of such payments by all Lenders to
the reduction of outstanding Revolving Loans held by the Lenders, to cause the
principal amount of Revolving Loans outstanding made by each Lender to be in
the amount of its Pro Rate Share (after giving effect to the increase in the
Aggregate Commitments in accordance with this Section 2.15) of all
outstanding Revolving Loans. The Borrower hereby irrevocably authorizes each
Lender to fund to the Administrative Agent the payment required to be made
pursuant to the immediately preceding sentence for application to the reduction
of the outstanding Revolving Loans held by the other Lenders. If, as a result
of the repayment of Revolving Loans provided for in this Section 2.15,
any payment of Eurodollar Rate Loans occurs on a day which is not the last day
of the applicable Interest Period, the Borrower will pay to the Administrative
Agent for the benefit of any Lender holding a Eurodollar Rate Loan any loss or
cost incurred by such Lender resulting therefrom in accordance with Section 3.05
to the extent a Eurodollar Rate Loan is paid on other than the last day of an
Interest Period as a result thereof.


 


(c)           Upon the
Increase Closing Date and the making of the payments described in Section 2.15(b),
each new Lender and/or increasing Lender shall be deemed to have irrevocably


 


53

















 


and unconditionally purchased and received, without
recourse or warranty, an undivided participation in all outstanding Swing Line
Loans and L/C Obligations in accordance with its Pro Rata Share.


 


(d)           This
Section shall supersede any provisions in Sections 2.13 or 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.


 


54

















 


(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”).


 


(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.


 


55

















 


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 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.


 


56

















 


(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 (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.


 


57

















 


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.


 


(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 


 


58

















 


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;


 


(vii)                           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;


 


(viii)                        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;


 


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


 


(x)                                   evidence
satisfactory to the Administrative Agent of payment in full (which payment may be
made with the initial Revolving Loan hereunder) of all amounts owing under the
Existing Credit Agreement;


 


(xi)                                an
executed Borrowing Base Certificate as of March 31, 2006;


 


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


 


(xiii)                          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 


 


59

















 


such estimate shall not thereafter preclude a final
settling of accounts between the Borrower and the Administrative Agent).


 


(d)                                 The
Closing Date shall have occurred on or before May 16, 2006.


 


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 or
from the application of the proceeds thereof.


 


(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 


 


60

















 


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.


 


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 March 31,
2006, consisting of a balance sheet, statements of income or operations, 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 


 


61

















 


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).


 


(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)                                  As
of the Closing Date, 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.


 


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 


 


62

















 


them or their properties, income or assets otherwise
due and payable, except those which are being contested in good faith by
appropriate proceedings diligently conducted or 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 2002, 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 


 


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Borrower or another Restricted Subsidiary as specified
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 7.02, (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 or under any other Loan Document (in each case, 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 


 


64

















 


individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect.


 


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, and consolidated statements of stockholders’ 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 (i) a report with respect
to the consolidated balance sheet of the Borrower and its Subsidiaries and
related consolidated statements of income or operations, stockholders’ equity
and cash flows and opinion of Auditors, which report and opinion shall be
prepared in accordance with generally accepted auditing standards and
applicable Securities Laws 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 (ii) an attestation report of such Auditors as to
the Borrower’s internal controls pursuant to Section 404 of
Sarbanes-Oxley; 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
balance sheet of the Borrower and its Subsidiaries, a consolidated balance
sheet of the Borrower and its Restricted Subsidiaries as at the end of such
fiscal quarter, and the related consolidated statements of income or
operations, 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 one of the chief executive officer, chief financial officer,
treasurer or controller 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 Auditors 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 until 


 


67

















 


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(b) 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.


 


The Borrower hereby
acknowledges that (a) the Administrative Agent and/or the Arranger will
make available to the Lenders and the L/C Issuer materials and/or information
provided by or on behalf of the Borrower hereunder (collectively, “Borrower
Materials”) by posting the Borrower Materials on IntraLinks or another
similar electronic system (the “Platform”) and (b) certain of the
Lenders may be “public side” Lenders (i.e., Lenders
that do not wish to receive material non-public information with respect to the
Borrower or its securities) (each, a “Public Lender”). The Borrower
hereby agrees that (w) all Borrower Materials that are to be made
available to Public Lenders shall be clearly and conspicuously marked “PUBLIC”
which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently
on the first page thereof; (x) by marking Borrower Materials “PUBLIC,”
the Borrower shall be deemed to have authorized the Administrative Agent, the
Arranger, the L/C Issuer and the Lenders to treat such Borrower Materials as
not containing any material non-public information with respect to the Borrower
or its securities for purposes of United States Federal and state securities
laws (provided, however, that to the extent such Borrower
Materials constitute Information, they shall be treated as set forth in Section 10.08);
(y) all Borrower Materials marked “PUBLIC” are permitted to be made
available through a portion of the Platform designated “Public Investor;”
and (z) the Administrative Agent and the Arranger shall be entitled to
treat any Borrower Materials that are not marked “PUBLIC” as being suitable
only for posting on a portion of the Platform not designated “Public
Investor.”  Notwithstanding the
foregoing, the Borrower shall be under no obligation to mark any Borrower
Materials “PUBLIC.”


 


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, S&P or Fitch of any lowering or possible
lowering or withdrawal of a Debt Rating; and


 


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


 


68

















 


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
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, writ, 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 


 


69

















 


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 Agreement or any other existing
Indebtedness of the Loan Parties and (b) for general corporate purposes,
including Acquisitions, not in contravention of any Law or of any Loan
Document.


 


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 25 Business 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 25 Business Day period, such Subsidiary is
designated an Unrestricted Subsidiary in accordance with the provisions of this
Agreement.


 


(c)                                  Notwithstanding
anything in this Section 6.12 or elsewhere in any Loan Document to
the contrary, if any Subsidiary that is not a Guarantor shall be required to
Guarantee any Public Indebtedness, then such Subsidiary, no later than 5 days
after executing such Guarantee of Public Indebtedness, shall become a Guarantor
by executing and delivering to the Administrative Agent a counterpart of
the Guaranty and otherwise complying with the requirements of Section 6.12(a),
whether or not such Subsidiary is a Restricted Subsidiary.


 


70

















 


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 to the extent permitted under Section 7.03(f).


 


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;


 


71

















 


(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) 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, (iv) the
assets, property or business acquired shall be in the business described in Section 5.19,
and (v) 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;


 


(i)                                     Guarantees
of performance obligations in the ordinary course of business; and


 


(j)                                     Investments
other than those permitted by subsections (a) through (i) 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 30% of Consolidated
Tangible Net Worth.


 


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;


 


(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 


 


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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)                                    secured
Indebtedness, provided that (i) such Liens 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.


 


Notwithstanding anything
in this Section 7.03 to the contrary, in no event shall the
aggregate amount of Indebtedness guarantied by the Borrower and its
Subsidiaries pursuant to Springing Guarantees exceed 50% of Consolidated
Tangible Net Worth.


 


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 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;


 


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(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;


 


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;


 


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(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, redeem or acquire any outstanding Public
Indebtedness securities;


 


(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:


 


(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)                                 sales
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 


 


75

















 


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 (a) $500,000,000 plus (b) an amount equal to 50% of
Consolidated Net Income earned in each full fiscal quarter ending after December 31,
2005 (with no deduction for a net loss in any such fiscal quarter), plus (c) an
amount equal to 50% of the aggregate increases in Consolidated Tangible Net
Worth of the Borrower and its Restricted Subsidiaries after December 31,
2005 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 December 31, 2005.


 


(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 100% 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.


 


76

















 


(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 (other
than customary market consent fees), (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 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.


 


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 the earlier of (x) one Business Day after notice and
(y) 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


 


77

















 


(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 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 committed or available
amounts and including amounts owing to all creditors under any combined or
syndicated credit arrangement) of more than $10,000,000 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
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 $10,000,000; 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 


 


78

















 


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 $10,000,000 (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 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 


 


79

















 


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, the Lenders, and the L/C Issuer all rights and remedies
available to it, the Lenders and the L/C Issuer 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:


 


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 


 


80

















 


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.


 


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.


 


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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 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 


 


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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.


 


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 


 


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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 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 


 


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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
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;


 


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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.


 


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 9.11.


 


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-documentation agent,” “managing agent,” “co-agent,”
“book manager,” “lead manager,” “arranger,” “joint 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


 


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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 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)           extend or
increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 8.02) without the written consent of such
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


 


87

















 


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;


 


(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


 


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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 Reply Form 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.


 


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)           Electronic
Communications. Notices and other communications to the Lenders and the L/C
Issuer hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to procedures
approved by the Administrative Agent, provided that the foregoing shall
not apply to notices to any Lender or the L/C Issuer pursuant to Article II
if such Lender or the L/C Issuer, as applicable, has notified the
Administrative Agent that it is incapable of receiving notices under such
Article by electronic communication. The Administrative Agent or the Borrower
may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it, provided
that approval of such procedures may be limited to particular notices or
communications.


 


Unless the Administrative Agent otherwise prescribes,
(i) notices and other communication sent to an e-mail address shall be
deemed received upon the sender’s receipt of


 


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an acknowledgement from the intended recipient (such
as by the “return receipt requested” function, as available, return e-mail or
other written acknowledgement), provided that if such notice or other
communication is not sent during the normal business hours of the recipient,
such notice or communication shall be deemed to have been sent at the opening
of business on the next Business Day for the recipient, and (ii) except as
provided in Section 6.02, notices or communications posted to an
Internet or intranet website shall be deemed received upon the deemed receipt
by the intended recipient at its e-mail address as described in the foregoing
clause (i) of notification that such notice or communication is available
and identifying the website address therefor.


 


(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.


 


(e)           The
Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”  THE AGENT-RELATED PERSONS DO NOT WARRANT THE
ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE
PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE
BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE
DEFECTS IS MADE BY ANY AGENT-RELATED PERSON IN CONNECTION WITH THE BORROWER
MATERIALS OR THE PLATFORM. In no event shall Agent-Related Persons have any
liability to the Borrower, any Lender, the L/C Issuer or any other Person for
losses, claims, damages, liabilities or expenses of any kind (whether in tort,
contract or otherwise) arising out of the Borrower’s or the Administrative
Agent’s transmission of Borrower Materials through the Internet, except to the
extent that such losses, claims, damages, liabilities or expenses are
determined by a court of competent jurisdiction by a final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Agent-Related Person; provided, however, that in no event
shall any Agent-Related Person have any liability to the Borrower, any Lender,
the L/C Issuer or any other Person for indirect, special, incidental,
consequential or punitive damages (as opposed to direct or actual damages).


 


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,


 


90

















 


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,
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


 


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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 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, the L/C Issuer or any Lender, or the
Administrative Agent, the L/C Issuer 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, the L/C Issuer 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 and the L/C Issuer severally agrees to pay to the Administrative Agent
upon demand its applicable


 


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share (without
duplication) 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. The obligations of the Lenders and the L/C Issuer under clause (b)
of the preceding sentence shall survive the payment in full of the Obligations
and the termination of this Agreement.


 


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 neither the Borrower nor any other Loan Party may assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of the Administrative Agent and 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; provided that no such fee
shall be required in connection with an assignment from Lender to an Affiliate
of such Lender. Subject to acceptance and recording


 


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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 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.


 


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(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.


 


(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


 


95

















 


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(c).


 


10.08      Confidentiality.
Each of the Administrative Agent, the Lenders and the L/C Issuer 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, partners, employees and agents, including accountants, legal counsel
and other advisors and representatives (it being understood that the Persons to
whom such disclosure 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. 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.


 


Each of the Administrative Agent, the Lenders and the
L/C Issuer acknowledges that (a) the Information may include material
non-public information concerning the Borrower or a Subsidiary, as the case may
be, (b) it has developed compliance procedures regarding the use of
material non-public information and (c) it will handle such material
non-public information in accordance with applicable Law, including Federal and
state securities Laws.


 


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


 


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(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.


 


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


 


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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.


 


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


 


98

















 


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 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


 


99

















 


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.


 


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


 


100

















 


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.


 


10.20      No Advisory or
Fiduciary Responsibility. In connection with all aspects of each
transaction contemplated hereby, the Borrower and each other Loan Party acknowledges and agrees, and acknowledges its Affiliates’
understanding, that: (i) the credit facility provided for hereunder and any related arranging or other
services in connection therewith (including in connection with any amendment,
waiver or other modification hereof or of any other Loan Document) are an arm’s-length
commercial transaction between the Borrower, each other Loan Party and their respective Affiliates, on the one hand, and the
Administrative Agent, the
Arranger, and the Joint Lead Arranger,
on the other hand, and the Borrower and
each other Loan Party is capable of evaluating and understanding and
understands and accepts the terms, risks and conditions of the transactions
contemplated hereby and by the other Loan Documents (including any amendment,
waiver or other modification hereof or thereof); (ii) in connection with
the process leading to such transaction, each of the Administrative Agent, the Arranger, and the Joint Lead Arranger is, and has been acting solely as, a
principal and is not the financial advisor, agent or fiduciary for the Borrower, any other Loan Party or any of their respective Affiliates, stockholders,
creditors or employees or any other Person; (iii) neither the
Administrative Agent, the Arranger, nor
the Joint Lead Arranger has assumed or will assume an advisory, agency
or fiduciary responsibility in favor of the Borrower or any other Loan Party with respect to any of the transactions
contemplated hereby or the process leading thereto, including with respect to
any amendment, waiver or other modification hereof or of any other Loan
Document (irrespective of whether the Administrative Agent, the Arranger or the Joint Lead Arranger has advised or is currently advising
the Borrower, any other Loan Party
or any of their respective
Affiliates on other matters) and neither the Administrative Agent, the Arranger nor the Joint Lead Arranger has any obligation to the Borrower, any other Loan Party or any of their respective Affiliates with
respect to the transactions contemplated hereby except those obligations
expressly set forth herein and in the other Loan Documents; (iv) the
Administrative Agent, the
Arranger and the Joint Lead Arranger
and their respective Affiliates may be engaged in a broad range of transactions
that involve interests that differ from those of the Borrower, the other Loan Parties and their respective Affiliates, and
neither the Administrative Agent,
the Arranger nor the Joint Lead
Arranger has any obligation to disclose any of such interests by virtue
of any advisory, agency or fiduciary relationship; and (v) the
Administrative Agent, the
Arranger and the Joint Lead Arranger
have not provided and will not provide any legal, accounting, regulatory or tax
advice with respect to any of the transactions contemplated hereby (including
any amendment, waiver or other modification hereof or of any other Loan
Document) and each of the Borrower
and the other Loan Parties has
consulted its own legal, accounting, regulatory and tax advisors to the extent
it has deemed appropriate. Each of the
Borrower and the other Loan Parties
hereby waives and releases, to the fullest extent permitted by law, any claims
that it may have against the Administrative Agent, the Arranger and the
Joint Lead Arranger with respect to any breach or alleged breach of
agency or fiduciary duty.


 


101

















 


10.21      USA PATRIOT
Act Notice. Each Lender and the Administrative Agent (for itself and not on
behalf of any Lender) hereby notifies the Borrower that pursuant to the
requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the “Act”), it is required to
obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender or the Administrative Agent, as applicable, to
identify the Borrower in accordance with the Act. 


 


	
  REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

  



 


102

















 


IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first set forth above.


 


	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard T. Morgan

  	
   

  
	
   

  	
   

  	
  Richard T. Morgan

  
	
   

  	
   

  	
  Vice President - Treasurer

  



 


103

















 


	
   

  	
  GUARANTY BANK, as
  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sam A. Meade

  	
   

  
	
   

  	
   

  	
  Sam A. Meade

  
	
   

  	
   

  	
  Senior Vice President

  



 


 


	
   

  	
  GUARANTY BANK,  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sam A. Meade

  	
   

  
	
   

  	
   

  	
  Sam A. Meade

  
	
   

  	
   

  	
  Senior Vice President

  



 


104

















 


	
   

  	
  JPMORGAN CHASE BANK, N.A., as 

  
	
   

  	
  Syndication Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kent A. Kaiser

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Kent A. Kaiser

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  



 


105

















 


	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
  as Co-Documentation Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eyal Namordi

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Eyal Namordi

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


106

















 


	
   

  	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as Co-Documentation Agent and 

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William Slangle

  	
   

  
	
   

  	
   

  	
  Name:

  	
  William Slangle

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


107

















 


	
   

  	
  U. S. BANK NATIONAL ASSOCIATION,
  as 

  
	
   

  	
  Managing Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Adrian Montero

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Adrian Montero

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


108

















 


	
   

  	
  WELLS FARGO BANK, NATIONAL 

  
	
   

  	
  ASSOCIATION, as Managing Agent
  and as a 

  
	
   

  	
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rick Williams

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Rick Williams

  	
   

  
	
   

  	
   

  	
  Title:

  	
  V.P.

  	
   

  



 


109

















 


	
   

  	
  CITICORP NORTH AMERICA, INC.,
  as 

  
	
   

  	
  Managing Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Malav Kakad

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Malav Kakad

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


110

















 


	
   

  	
  DEUTSCHE BANK TRUST COMPANY 

  
	
   

  	
  AMERICAS, as Managing Agent
  and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scottye Lindsey

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Scottye Lindsey

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director

  	
   

  



 


	
   

  	
   

  	
  /s/ Evelyn Thierry

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Evelyn Thierry

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


111

















 


	
   

  	
  UBS LOAN FINANCE LLC, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Irja R. Otsa

  
	
   

  	
   

  	
  Name:

  	
  Irja R. Otsa

  
	
   

  	
   

  	
  Title:

  	
  Associate Director Banking Products Services, US

  



 


 


	
   

  	
  By:

  	
  /s/ Richard L. Taurow

  
	
   

  	
   

  	
  Name:

  	
  Richard L. Taurow

  
	
   

  	
   

  	
  Title:

  	
  Director Banking Products Services, US

  



 


112

















 


	
   

  	
  PNC BANK, NATIONAL ASSOCIATION,
  as 

  
	
   

  	
  Co-Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Douglas G. Paul

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Douglas G. Paul

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  



 


113

















 


	
   

  	
  SUNTRUST BANK, as Co-Agent and
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ W. John Wendler

  	
   

  
	
   

  	
   

  	
  Name:

  	
  W. John Wendler

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  



 


 


114

















 


	
   

  	
  COMERICA BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Casey L. Ostrander

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Casey L. Ostrander

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


115

















 


	
   

  	
  COMPASS BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven J. Heslep

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Steven J. Heslep

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  



 


116

















 


	
   

  	
  AMSOUTH BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronny Hudspeth

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Ronny Hudspeth

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Sr. Vice President

  	
   

  



 


117

















 


	
   

  	
  BANK OF OKLAHOMA, N.A., as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia A. Richards

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Patricia A. Richards

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


118

















 


	
   

  	
  LASALLE BANK, N.A., as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nathaniel L. Dever

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Nathaniel L. Dever

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


119

















 


	
   

  	
  KEYBANK NATIONAL ASSOCIATION,
  as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel L. Silbert

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Daniel L. Silbert

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


120

















 


	
   

  	
  NORTHERN TRUST COMPANY, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Morgan A. Lyons

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Morgan A. Lyons

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


121

















 


	
   

  	
  CALIFORNIA BANK & TRUST COMPANY,

  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephanie Lanz

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stephanie Lanz

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  



 


122



















 


SCHEDULE 2.01


 


COMMITMENTS


AND PRO RATA SHARES


 


	
  Lender

  	
   

  	
  Commitment

  	
   

  	
  Pro Rata Share

  	
   

  
	
  Guaranty Bank

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
  12.500000000

  	
  %

  
	
  JPMorgan Chase Bank, N.A., a national banking
  association

  	
   

  	
  $

  	
  80,000,000

  	
   

  	
  10.000000000

  	
  %

  
	
  Wachovia Bank, National Association

  	
   

  	
  $

  	
  70,000,000

  	
   

  	
  8.750000000

  	
  %

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  60,000,000

  	
   

  	
  7.500000000

  	
  %

  
	
  U. S. Bank National Association

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  6.250000000

  	
  %

  
	
  Wells Fargo Bank, National Association

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  6.250000000

  	
  %

  
	
  Citicorp North America, Inc.

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  6.250000000

  	
  %

  
	
  Deutsche Bank Trust Company Americas

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  6.250000000

  	
  %

  
	
  UBS Loan Finance, LLC

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  6.250000000

  	
  %

  
	
  PNC Bank, National Association

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  4.375000000

  	
  %

  
	
  SunTrust Bank

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  4.375000000

  	
  %

  
	
  Comerica Bank

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.125000000

  	
  %

  
	
  Compass Bank

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.125000000

  	
  %

  
	
  AmSouth Bank

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.125000000

  	
  %

  
	
  Bank of Oklahoma, N.A.

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.125000000

  	
  %

  
	
  LaSalle Bank, N.A.

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.125000000

  	
  %

  
	
  KeyBank, National Association

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  2.500000000

  	
  %

  
	
  Northern Trust Company

  	
   

  	
  $

  	
  15,000,000

  	
   

  	
  1.875000000

  	
  %

  
	
  California Bank & Trust Company

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  1.250000000

  	
  %

  
	
  Total

  	
   

  	
  $

  	
  800,000,000.00

  	
   

  	
  100.000000000

  	
  %

  



 

















 


SCHEDULE 2.03


 


EXISTING LETTERS OF CREDIT (as of 5/15/06)


 


	
  LOC Number

  	
   

  	
  Beneficiary

  	
   

  	
  LOC Amount

  	
   

  	
  Start Date

  	
   

  	
  Mat/Can.

  Date

  	
   

  
	
  GUARANTY LOC’S

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-0875

  	
   

  	
  Avery Ranch

  	
   

  	
  $

  	
  16,231.50

  	
   

  	
  8/22/05

  	
   

  	
  10/18/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-0997

  	
   

  	
  Acacia Credit Fund 9-A LLC

  	
   

  	
  687,933.00

  	
   

  	
  10/20/05

  	
   

  	
  11/16/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1004

  	
   

  	
  Lancelot Tropical or FNB, AZ

  	
   

  	
  395,100.00

  	
   

  	
  11/9/05

  	
   

  	
  12/10/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1005

  	
   

  	
  Lancelot Tropical or FNB, AZ

  	
   

  	
  395,100.00

  	
   

  	
  11/9/05

  	
   

  	
  10/10/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1006

  	
   

  	
  Lancelot Tropical or FNB, AZ

  	
   

  	
  395,100.00

  	
   

  	
  1/24/06

  	
   

  	
  1/24/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1007

  	
   

  	
  Lancelot Tropical or FNB, AZ

  	
   

  	
  230,568.00

  	
   

  	
  1/24/06

  	
   

  	
  2/25/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1008

  	
   

  	
  Lancelot Tropical or FNB, AZ

  	
   

  	
  222,300.00

  	
   

  	
  1/24/06

  	
   

  	
  2/25/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1032

  	
   

  	
  Hearthstone Multi-Asset

  	
   

  	
  155,900.00

  	
   

  	
  12/16/05

  	
   

  	
  1/13/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1033

  	
   

  	
  Hearthstone Multi-Asset Entity A

  	
   

  	
  28,930.00

  	
   

  	
  12/16/05

  	
   

  	
  1/13/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1038

  	
   

  	
  Taro Properties Arizona I, LLC

  	
   

  	
  238,340.00

  	
   

  	
  12/21/05

  	
   

  	
  1/13/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1043

  	
   

  	
  Tucson Electric Co.

  	
   

  	
  5,587.00

  	
   

  	
  1/6/05

  	
   

  	
  2/10/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1045

  	
   

  	
  APEXCapital Fund 1, LLC

  	
   

  	
  385,202.00

  	
   

  	
  1/24/06

  	
   

  	
  2/8/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1046

  	
   

  	
  APEXCapital Fund 1, LLC

  	
   

  	
  341,500.00

  	
   

  	
  1/24/06

  	
   

  	
  2/8/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1047A

  	
   

  	
  LM Cliff’s Edge, LLC

  	
   

  	
  4,857,000.00

  	
   

  	
  3/13/06

  	
   

  	
  3/29/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1063

  	
   

  	
  SCC-Canyon II, LLC

  	
   

  	
  189,642.00

  	
   

  	
  3/3/06

  	
   

  	
  3/17/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1079

  	
   

  	
  SCC-Canyon II, LLC

  	
   

  	
  1,780,290.00

  	
   

  	
  3/3/06

  	
   

  	
  3/15/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1092

  	
   

  	
  APEXCapital Fund 1, LLC

  	
   

  	
  1,286,078.00

  	
   

  	
  5/5/05

  	
   

  	
  5/13/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1094

  	
   

  	
  SCC-Canyon II, LLC

  	
   

  	
  710,151.00

  	
   

  	
  4/21/06

  	
   

  	
  5/14/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1097

  	
   

  	
  SCC-Canyon II, LLC

  	
   

  	
  500,496.00

  	
   

  	
  3/3/06

  	
   

  	
  3/17/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1098

  	
   

  	
  Trico Electric Cooperative, Inc.

  	
   

  	
  17,143.10

  	
   

  	
  7/8/05

  	
   

  	
  5/24/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1108

  	
   

  	
  INCA Capital Fund 29, LLC

  	
   

  	
  184,729.00

  	
   

  	
  12/27/05

  	
   

  	
  1/13/07

  	
   

  
											



 

















 


	
  673-1111

  	
   

  	
  INCA Texas 25, LLP

  	
   

  	
  500,610.00

  	
   

  	
  11/29/05

  	
   

  	
  12/17/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1112

  	
   

  	
  INCA Texas 25, LLP

  	
   

  	
  678,000.00

  	
   

  	
  1/24/06

  	
   

  	
  2/25/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1116

  	
   

  	
  Town of Parker

  	
   

  	
  65,000.00

  	
   

  	
  5/27/05

  	
   

  	
  7/6/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1117

  	
   

  	
  Colorado State Bank & Trust

  	
   

  	
  317,970.21

  	
   

  	
  12/21/05

  	
   

  	
  12/1/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1121

  	
   

  	
  Liberty Mutual Insurance Co.

  	
   

  	
  209,371.00

  	
   

  	
  8/9/05

  	
   

  	
  7/1/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1122

  	
   

  	
  Sears Paseo Del Rio, LLC

  	
   

  	
  434,230.00

  	
   

  	
  6/10/05

  	
   

  	
  7/9/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1148

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  121,624.00

  	
   

  	
  8/24/05

  	
   

  	
  9/8/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1156

  	
   

  	
  Indivisa Corporation

  	
   

  	
  408,000.00

  	
   

  	
  9/21/05

  	
   

  	
  9/21/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1159

  	
   

  	
  City of Austin

  	
   

  	
  95,262.94

  	
   

  	
  8/22/05

  	
   

  	
  9/27/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1167

  	
   

  	
  PPLC/SH-2004, L.P.

  	
   

  	
  428,200.00

  	
   

  	
  10/27/05

  	
   

  	
  10/15/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1177

  	
   

  	
  Randy Morine Heritage Prop.

  	
   

  	
  552,100.00

  	
   

  	
  2/14/06

  	
   

  	
  2/15/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1178

  	
   

  	
  Acacia Credit Fund 9-A LLC

  	
   

  	
  3,917,470.00

  	
   

  	
  5/9/06

  	
   

  	
  11/24/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1194

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  126,491.00

  	
   

  	
  12/14/05

  	
   

  	
  12/12/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1215

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  75,000.00

  	
   

  	
  3/10/05

  	
   

  	
  3/10/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1223

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  59,262.00

  	
   

  	
  3/24/05

  	
   

  	
  3/24/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1227

  	
   

  	
  Lancelot Summers, LLC

  	
   

  	
  515,000.00

  	
   

  	
  11/21/05

  	
   

  	
  12/31/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1229

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  151,270.00

  	
   

  	
  4/1/05

  	
   

  	
  3/30/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1230

  	
   

  	
  Mood Development Corp.

  	
   

  	
  1,100,000.00

  	
   

  	
  4/5/06

  	
   

  	
  4/5/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1232

  	
   

  	
  Strategic Capital Resources

  	
   

  	
  525,162.00

  	
   

  	
  12/30/05

  	
   

  	
  12/30/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1241

  	
   

  	
  First American Title Insurance Co.

  	
   

  	
  2,232,375.35

  	
   

  	
  11/8/05

  	
   

  	
  5/31/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1248

  	
   

  	
  Trico Electric Cooperative, Inc.

  	
   

  	
  68,473.06

  	
   

  	
  6/15/05

  	
   

  	
  6/15/08

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1254

  	
   

  	
  Stonebridge Capital Cosima, LLC

  	
   

  	
  4,688,695.00

  	
   

  	
  6/30/05

  	
   

  	
  3/30/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1258

  	
   

  	
  DMB White Tank, LLC

  	
   

  	
  1,436,800.00

  	
   

  	
  8/15/05

  	
   

  	
  9/15/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1259

  	
   

  	
  DMB White Tank, LLC

  	
   

  	
  1,442,103.00

  	
   

  	
  8/15/05

  	
   

  	
  9/15/06

  	
   

  



 

















 


	
  673-1265

  	
   

  	
  Hearthstone Multi-Asset Entity B

  	
   

  	
  3,836,529.00

  	
   

  	
  10/21/05

  	
   

  	
  8/3/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1266

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  66,692.00

  	
   

  	
  8/1/05

  	
   

  	
  7/27/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1267

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  55,378.00

  	
   

  	
  8/1/05

  	
   

  	
  7/27/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1281

  	
   

  	
  Wachovia Bank, NA

  	
   

  	
  3,451,424.00

  	
   

  	
  1/11/06

  	
   

  	
  1/11/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1282

  	
   

  	
  CH Estero Land Lmtd Ptnshp

  	
   

  	
  2,811,186.78

  	
   

  	
  1/24/06

  	
   

  	
  8/26/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1298

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  78,774.00

  	
   

  	
  9/19/05

  	
   

  	
  9/12/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1299

  	
   

  	
  Sears Rancho Marana II, LLC

  	
   

  	
  295,879.00

  	
   

  	
  9/21/05

  	
   

  	
  9/21/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1303

  	
   

  	
  City of Austin

  	
   

  	
  83,753.87

  	
   

  	
  10/5/05

  	
   

  	
  10/5/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1314

  	
   

  	
  Sears Canoa Ranch Block 22/27, LLC

  	
   

  	
  414,369.00

  	
   

  	
  11/21/05

  	
   

  	
  11/30/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1323

  	
   

  	
  Strategic Capital Resources

  	
   

  	
  898,359.00

  	
   

  	
  11/29/05

  	
   

  	
  11/29/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1324

  	
   

  	
  Strategic Capital Resources

  	
   

  	
  792,670.00

  	
   

  	
  11/29/05

  	
   

  	
  11/29/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1328

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  23,491.00

  	
   

  	
  12/8/05

  	
   

  	
  12/1/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  672-1329

  	
   

  	
  Tex Development Corp

  	
   

  	
  1,500,000.00

  	
   

  	
  3/28/06

  	
   

  	
  3/28/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1337

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  95,769.00

  	
   

  	
  12/27/05

  	
   

  	
  12/21/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1338

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  67,382.00

  	
   

  	
  12/27/05

  	
   

  	
  12/21/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1347

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  117,570.00

  	
   

  	
  2/2/06

  	
   

  	
  1/30/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1350

  	
   

  	
  Strategic Capital Resources

  	
   

  	
  2,306,055.00

  	
   

  	
  2/23/06

  	
   

  	
  2/23/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1354

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  45,613.00

  	
   

  	
  3/1/06

  	
   

  	
  2/20/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1371

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  108,075.00

  	
   

  	
  4/18/06

  	
   

  	
  4/10/08

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1372

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  110,577.00

  	
   

  	
  4/18/06

  	
   

  	
  4/10/08

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1375

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  65,174.00

  	
   

  	
  4/20/06

  	
   

  	
  4/12/08

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  673-1376

  	
   

  	
  Tucson Electric Power Co.

  	
   

  	
  147,756.00

  	
   

  	
  4/20/06

  	
   

  	
  4/12/2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  50,544,266.81

  	
   

  	
   

  	
   

  	
   

  	
   

  
											



 

















 


	
  LOC

  	
   

  	
   

  	
   

  	
  Letter of Credit

  	
   

  	
  LOC

  	
   

  	
  Maturity

  	
   

  
	
  Number

  	
   

  	
  Beneficiary

  	
   

  	
  Amount

  	
   

  	
  Start Date

  	
   

  	
  Date

  	
   

  
	
  WF LOC’S

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS521803

  	
   

  	
  SCC Canyon II, LLC

  	
   

  	
  $

  	
  288,625.00

  	
   

  	
  10/06/05

  	
   

  	
  7/1/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS553447

  	
   

  	
  LO Land Assets, LP

  	
   

  	
  5,310,000.00

  	
   

  	
  09/15/05

  	
   

  	
  9/16/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS553439

  	
   

  	
  LO Land Assets, LP

  	
   

  	
  1,508,000.00

  	
   

  	
  09/15/05

  	
   

  	
  9/16/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS555388

  	
   

  	
  LO Land Assets, LP

  	
   

  	
  4,169,000.00

  	
   

  	
  10/14/05

  	
   

  	
  10/14/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS555795

  	
   

  	
  GMAC Model Home Finance, Inc.

  	
   

  	
  5,388,660.00

  	
   

  	
  10/27/05

  	
   

  	
  10/19/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS555137 AUTO

  	
   

  	
  Kaufman Capital Valley Vista LLC

  	
   

  	
  3,425,647.00

  	
   

  	
  02/13/06

  	
   

  	
  10/7/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS554668

  	
   

  	
  SCC Canyon II, LLC

  	
   

  	
  7,435,518.00

  	
   

  	
  10/05/05

  	
   

  	
  10/5/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS560565

  	
   

  	
  GMAC Model Home Finance, Inc.

  	
   

  	
  4,202,564.00

  	
   

  	
  02/02/06

  	
   

  	
  12/22/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS561178 AUTO

  	
   

  	
  Kaufman Capital Sundance LLC

  	
   

  	
  1,980,810.00

  	
   

  	
  01/06/06

  	
   

  	
  12/30/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS564896

  	
   

  	
  LO Land Assets, LP

  	
   

  	
  1,417,000.00

  	
   

  	
  02/17/06

  	
   

  	
  2/21/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS566000

  	
   

  	
  LO Land Assets, LP

  	
   

  	
  1,340,000.00

  	
   

  	
  03/02/06

  	
   

  	
  3/2/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS566001

  	
   

  	
  LO Land Assets, LP

  	
   

  	
  1,198,000.00

  	
   

  	
  03/02/06

  	
   

  	
  3/2/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS566572

  	
   

  	
  LO Land Assets, LP

  	
   

  	
  2,751,000.00

  	
   

  	
  03/09/06

  	
   

  	
  12/21/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS566574

  	
   

  	
  LM Enclave @ Westover

  	
   

  	
  765,500.00

  	
   

  	
  03/09/06

  	
   

  	
  4/1/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NZS562611

  	
   

  	
  LO Land Assets, LP & Comerica

  	
   

  	
  1,335,000.00

  	
   

  	
  01/18/06

  	
   

  	
  2/1/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  42,515,324.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  US BANK

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SLCPPDX03001

  	
   

  	
  U.S. Bank National Association

  	
   

  	
  $

  	
  336,415.00

  	
   

  	
  6/30/2005

  	
   

  	
  6/30/2006

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SLCPPDX03083

  	
   

  	
  U.S. Bank National Association

  	
   

  	
  346,592.00

  	
   

  	
  8/19/2005

  	
   

  	
  8/19/2006

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SLCPPDX03126

  	
   

  	
  National Union Fire Ins. Co.(Multi)

  	
   

  	
  3,000,000.00

  	
   

  	
  9/30/2005

  	
   

  	
  10/1/2006

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  3,683,007.00

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


	
  WACHOVIA BANK

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM213731W

  	
   

  	
  Seminole Cnty Bd of Cnty Comm.

  	
   

  	
  $

  	
  871,427.00

  	
   

  	
  9/1/05

  	
   

  	
  7/1/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM204602W

  	
   

  	
  Lowndes, Drosdick, Doster, Kanotr

  	
   

  	
  242,000.00

  	
   

  	
  9/1/05

  	
   

  	
  7/21/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM205274W

  	
   

  	
  Lowndes, Drosdick, Doster, Kanotr

  	
   

  	
  242,000.00

  	
   

  	
  9/1/05

  	
   

  	
  7/21/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM208078W

  	
   

  	
  City of Cloud

  	
   

  	
  72,278.00

  	
   

  	
  9/1/05

  	
   

  	
  5/15/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM215187W

  	
   

  	
  City of Cloud

  	
   

  	
  94,050.00

  	
   

  	
  9/1/05

  	
   

  	
  8/17/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM208535W

  	
   

  	
  Lake County Manager

  	
   

  	
  93,234.00

  	
   

  	
  9/1/05

  	
   

  	
  6/14/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM213730W

  	
   

  	
  Seminole Cnty Bd of Cnty Comm.

  	
   

  	
  211,259.00

  	
   

  	
  9/1/05

  	
   

  	
  7/1/06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM218854W

  	
   

  	
  County Manager, Lake County

  	
   

  	
  878,925.30

  	
   

  	
  3/15/06

  	
   

  	
  3/15/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM219050W

  	
   

  	
  Director of Development Svs.

  	
   

  	
  1,473,308.53

  	
   

  	
  3/27/06

  	
   

  	
  2/28/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM218216W

  	
   

  	
  City of St. Cloud

  	
   

  	
  204,545.00

  	
   

  	
  2/15/06

  	
   

  	
  2/7/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM218261W

  	
   

  	
  City of St. Cloud

  	
   

  	
  60,500.00

  	
   

  	
  2/8/06

  	
   

  	
  2/7/08

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SM219342W

  	
   

  	
  Osceola County Bd of County Comm.

  	
   

  	
  946,126.56

  	
   

  	
  4/14/06

  	
   

  	
  7/14/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  04.0D.06266

  	
   

  	
  Orange County

  	
   

  	
  101,417.00

  	
   

  	
  3/24/05

  	
   

  	
  7/15/05

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  5,491,070.39

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JP MORGAN CHASE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TPTS-232640

  	
   

  	
  SFT I, INC. (Auto Renewal)

  	
   

  	
  $

  	
  9,812,497.35

  	
   

  	
  4/5/2006

  	
   

  	
  1/27/2007

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TOTAL LOCS THRU CREDIT FACILITY

  	
   

  	
  $

  	
  112,046,165.55

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


SCHEDULE 5.05


 


SUPPLEMENT TO
INTERIM FINANCIAL STATEMENTS


 


None, other than
borrowings under the existing Credit Agreement, all of which are in the
ordinary course of business. 


 

















 


SCHEDULE 5.05(e)


 


OFF-BALANCE SHEET LIABILITIES


 


None.


 

















 


SCHEDULE 5.06


 


EXISTING LITIGATION


 


None.


 

















 


SCHEDULE 5.13


 


SUBSIDIARIES AND OTHER EQUITY INVESTMENTS


 


The attached listing sets
forth (a) a list of all Subsidiaries of Borrower, and (b) each entity
investment in any corporation or other entity which is not a Subsidiary.


 





 


SUBSIDIARIES


 


	
  Name of Entity

  	
   

  	
  State of

  Incorporation/

  Organization

  	
   

  	
  Meritage Ownership

  	
   

  	
  Other Jurisdictions

  Qualified to do

  Business

  	
   

  
	
  Meritage Homes
  of Arizona, Inc.

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  Corporation (100%)

  	
   

  	
  N/A

  	
   

  
	
  Meritage Homes
  Construction, Inc.

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  Corporation (100%)

  	
   

  	
  N/A

  	
   

  
	
  Meritage Paseo
  Crossing, LLC

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  of Arizona, Inc. (100%)

  	
   

  	
  N/A

  	
   

  
	
  Meritage Paseo
  Construction, LLC

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  Construction, Inc. (100%)

  	
   

  	
  N/A

  	
   

  
	
  MTH Golf, LLC

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  Construction, Inc. (100%)

  	
   

  	
  N/A

  	
   

  
	
  MTH-Cavalier,
  LLC

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  Construction, Inc. (100%)

  	
   

  	
  N/A

  	
   

  
	
  Meritage Homes
  of Texas GP, Inc.

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  Corporation (100%)

  	
   

  	
  Texas

  	
   

  
	
  Meritage Homes
  of Texas LP Holding, Inc.

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  Corporation (100%)

  	
   

  	
  N/A

  	
   

  
	
  Meritage Homes
  of Texas L.P.

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  of Texas GP, Inc. (1% GP)

  Meritage Homes of Texas LP Holding, Inc.

  (99% LP)

  	
   

  	
  Texas

  	
   

  
	
  Meritage Homes
  Operating Company, L.P.

  	
   

  	
  Texas

  	
   

  	
  Meritage
  Holdings, L.L.C (1% GP)

  Meritage Homes of Texas L.P. (99% LP)

  	
   

  	
  N/A

  	
   

  
	
  Meritage
  Holdings, L.L.C.

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  of Texas L.P. (100%)

  	
   

  	
  N/A

  	
   

  
	
  Hulen Park
  Venture, LLC

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  of Texas L.P. (100%)

  	
   

  	
  N/A

  	
   

  
	
  Meritage Homes of
  California, Inc.

  	
   

  	
  California

  	
   

  	
  Meritage Homes
  Corporation (100%)

  	
   

  	
  N/A

  	
   

  
	
  California Urban
  Builders, Inc.

  	
   

  	
  California

  	
   

  	
  Meritage Homes
  of California, Inc. (100%)

  	
   

  	
  N/A

  	
   

  
	
  California Urban
  Homes, LLC

  	
   

  	
  California

  	
   

  	
  Meritage Homes
  of California, Inc. (100%)

  	
   

  	
  N/A

  	
   

  
	
  Meritage Homes
  of Nevada, Inc.

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  Corporation (100%)

  	
   

  	
  Nevada

  	
   

  
	
  Meritage Homes
  of Colorado

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  Corporation (100%)

  	
   

  	
  Colorado

  	
   

  
	
  Meritage Homes
  of Florida, Inc.

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  Corporation (100%)

  	
   

  	
  Florida

  	
   

  
	
  Greater
  Homes, Inc.

  	
   

  	
  Florida

  	
   

  	
  Meritage Homes
  of Florida, Inc. (100%)

  	
   

  	
  N/A

  	
   

  



 


1

















 


JOINT VENTURES


 


	
  Name of Entity

  	
   

  	
  State of

  Organization

  	
   

  	
  Owner(s)/ Joint

  Venture Partner(s)

  	
   

  
	
  MTH Mortgage,
  LLC

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  of Arizona, Inc. (55%)

  imortgage.com, Inc. (45%)

  	
   

  
	
  DM Marana Land
  Investors, LLC

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  of Arizona, Inc. (30%)

  Trico Marana Investors, LLC (70%)

  	
   

  
	
  Maricopa Lakes,
  LLC

  	
   

  	
  Arizona

  	
   

  	
  Meritage Homes
  of Arizona, Inc. (50%)

  Hacienda Builders, Inc. (50%)

  	
   

  
	
  PR4E, LLC

  	
   

  	
  Delaware

  	
   

  	
  Meritage Homes
  of Arizona, Inc. (50%)

  GDC Partners L.L.C. (50%)

  	
   

  
	
  250 South LLC

  	
   

  	
  Delaware

  	
   

  	
  Meritage Homes
  of Arizona, Inc. (50%)

  KB Home Tucson Inc. (50%)

  	
   

  
	
  EP—The King,
  L.L.C.

  	
   

  	
  Arizona

  	
   

  	
  MTH-Cavalier,
  LLC (48.5%)

  Taro Properties Arizona I, L.L.C. (48.5%)

  Cavalier Properties, L.L.C. (3%)

  	
   

  
	
  MBC—Heartland,
  L.L.C.

  	
   

  	
  Arizona

  	
   

  	
  MTH-Cavalier,
  LLC (48.5%)

  BRCP Realty, LP (48.5%)

  Cavalier Properties, L.L.C. (3%)

  	
   

  
	
  Riata West,
  L.L.C.

  	
   

  	
  Arizona

  	
   

  	
  MTH-Cavalier,
  LLC (48.5%)

  Taro Properties Arizona I, L.L.C. (48.5%)

  Cavalier Properties, L.L.C. (3%)

  	
   

  
	
  Westwind
  Properties, L.L.C.

  	
   

  	
  Arizona

  	
   

  	
  MTH-Cavalier,
  LLC (48.5%)

  Taro Properties Arizona I, LLC (45.83%)

  Chamberlin Family Trust (2.67%)

  Cavalier Properties, L.L.C. (3%)

  	
   

  
	
  Surprise Grand
  Vista JV I, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  MTH-Cavalier,
  LLC (20%)

  Simon GV Investments, LLC (40%)

  Toll Brothers AZ Construction Company (40%)

  	
   

  



 


2

















 


	
  Name of Entity

  	
   

  	
  State of

  Organization

  	
   

  	
  Owner(s)/ Joint

  Venture Partner(s)

  	
   

  
	
  MBS-Lakin,
  L.L.C.

  	
   

  	
  Arizona

  	
   

  	
  MTH-Cavalier,
  LLC (48.5%)

  BRCP Realty, L.P. I (48.5%)

  Sonterra Partners, L.L.C. (3%)

  	
   

  
	
  New Rodeo 288,
  Ltd.

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  of Texas L.P. (33%)

  New RP, Inc. (1%) (GP)

  Camcorp Interests, Ltd. (33%)

  CFW Family Limited Partnership (33%)

  	
   

  
	
  MTH Lending
  Group, L.P.

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  of Texas L.P. (65%)

  Market Street Partners, LLC (35%) (GP)

  	
   

  
	
  Land Tejas
  Development

  Legends Ranch, Ltd.

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  of Texas L.P. (50%)

  Land Tejas Companies, L.L.C. (0.5%) (GP)

  L.T. Partnership, Ltd. (24.875%)

  Courtney P. Grover (24.875%)

  	
   

  
	
  MTH Funding,
  L.P.

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  of Texas L.P. (75%)

  MTH Funding GP, Inc. (1%) (GP)

  Network Funding, L.P. (24%)

  	
   

  
	
  Keller 107, Ltd.

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  of Texas L.P. (48%)

  Lumberman’s Investment Corporation (52%) (GP)

  	
   

  
	
  Cornerstone
  Mortgage

  Partners X, LP

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  of Texas L.P. (65%)

  Cornerstone Mortgage Partners V, LLC (1%) (GP)

  Cornerstone Mortgage Company (34%)

  	
   

  
	
  Silverleaf—2005,
  LP

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  of Texas L.P. (31.974%)

  Palo Pinto Land Company (1%) (GP)

  Arthur C. & Sherri W. Harrold (11.655%)

  Randall B. Whilhite (2.485%)

  McIntosh Revocable Trust (1.943%)

  David W. Russell (1.943%)

  	
   

  
	
  Prestige Lending
  Services, Ltd.

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  of Texas L.P. (65%)

  First Continental Mortgage, Ltd. (34%)

  ABC Lending Services, Inc. (1%) (GP)

  	
   

  



 


3

















 


	
  Name of Entity

  	
   

  	
  State of

  Organization

  	
   

  	
  Owner(s)/ Joint

  Venture Partner(s)

  	
   

  
	
  WKMM, LLC

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  Corporation (49.50%)

  Weekley Homes, L.P. (27%)

  Kimball Hill Homes Texas, Inc. (13%)

  MHI Partnership, Ltd. (10.5%)

  	
   

  
	
  MTH Title
  Company, L.C.

  	
   

  	
  Texas

  	
   

  	
  Meritage Homes
  Corporation (49%)

  Stewart Title Company (51%)

  	
   

  
	
  15th
  Street & Jefferson-Oakland, LLC

  	
   

  	
  Delaware

  	
   

  	
  California Urban
  Homes, LLC (45%)

  Ora Residential Investments I, L.P. (55%)

  	
   

  
	
  Hayward Funding,
  Ltd.

  	
   

  	
  California

  	
   

  	
  Meritage Homes
  of California, Inc. (50%)

  Hayward Capital, Inc. (50%) (GP)

  	
   

  
	
  Avalon GDCI
  Yorba Linda, LP

  	
   

  	
  Delaware

  	
   

  	
  Meritage Homes
  of California, Inc. (25%) (GP)

  Brykrist Development, Inc. (25%) (GP)

  GDC Investments 2, LP (50%)

  	
   

  
	
  Bridgeway Lakes
  Lot

  Development, LLC

  	
   

  	
  California

  	
   

  	
  Meritage Homes
  of California, Inc. (50%)

  Shea Homes Limited Partnership (50%)

  	
   

  
	
  Town Square
  Title MH, LLC

  	
   

  	
  Florida

  	
   

  	
  Meritage Homes
  of Florida, Inc. (49%)

  Town Square Title Company (51%)

  	
   

  
	
  MTH Title of
  Florida, LLC

  	
   

  	
  Florida

  	
   

  	
  Meritage Homes
  of Florida, Inc. (49%)

  Executive Title Services, Inc. (51%)

  	
   

  



 


4

















 


	
  Name of Entity

  	
   

  	
  State of

  Organization

  	
   

  	
  Owner(s)/ Joint

  Venture Partner(s)

  	
   

  
	
  NMC Builders,
  LLC

  	
   

  	
  California

  	
   

  	
  Meritage Homes
  of California, Inc. (3.6%)

  SC Ontario Development Corporation (11.70%)

  SL Ontario Development Corporation (11.78%)

  Stratham Corporation (2.04%)

  Richland Communities, Inc. (31.65%)

  Warm Springs Investments, Ltd. (3.06%)

  Richland Roseville, Ltd. (1.25%)

  Oakville Reserve Ltd. (3.22%)

  Richland Ontario, LLC (2.52%)

  Centex Homes (2.93%)

  Armada Ontario Associates, LLC (2.32%)

  Regent-Ontario, LLC (3.50%)

  Brookfield Homes Southland, Inc. (7.32%)

  Brookfield Ontario LLC (1.74%)

  DH Ontario I, LLC (2.81%)

  Standard Pacific Corp. (1.58%)

  WCE/Genton Associates Ltd. Partnership (3.34%)

  Hillcrest Homes, Inc. (2.57%)

  Ontario Land Company, LLC (1.04%)

  	
   

  
	
  South Edge, LLC

  	
   

  	
  Nevada

  	
   

  	
  Meritage Homes
  of Nevada, Inc. (3.56%)

  Focus South Group, LLC (16.90%)

  Alameda Investments, LLC (8.14%)

  Stanpark Const. Co., Inc. (2.89%)

  Coleman-Toll Lim. Part. (10.52%)

  Beazer Homes Hold. Corp. (2.58%)

  KB HOME Nevada, Inc. (40.31%)

  Kimball Hill Homes Nev. Inc. (8.71%)

  Pardee Homes of Nevada (3.35%)

  Ryland Homes (3.04%)

  	
   

  



 


5

















 


	
  Name of Entity

  	
   

  	
  State of

  Organization

  	
   

  	
  Owner(s)/ Joint

  Venture Partner(s)

  	
   

  
	
  Kyle Acquisition
  Group, LLC

  	
   

  	
  Nevada

  	
   

  	
  Meritage Homes
  of Nevada, Inc. (4.09%)

  Focus Kyle Group (22.98%)

  Toll Brothers (15%)

  Lennar (13.19%)

  Pulte (12%)

  KB Home (10.24%)

  Kimball Hill (9.59%)

  Woodside (9.59%)

  Ryland (56.85%)

  	
   

  
	
  Fallbrook
  Partners, LLC

  	
   

  	
  Colorado

  	
   

  	
  Meritage Homes
  of Colorado, Inc. (50%)

  Beazer Homes Holdings Corp. (50%)

  	
   

  
	
  Greater Homes
  Funding, LLC

  	
   

  	
  Florida

  	
   

  	
  Greater
  Homes, Inc. (67%)

  Mortgage Direct Ventures, LLC (33%)

  	
   

  
	
  Moss Park
  Investments, LLC

  	
   

  	
  Florida

  	
   

  	
  Greater
  Homes, Inc. (50%)

  Lake Hart Partners II, Ltd. (50%)

  	
   

  



 


6

















 


SCHEDULE 7.01


 


EXISTING LIENS


 


Meritage has pledged its
50% membership interest in Maricopa Lakes, LLC to secure Maricopa Lakes’
obligations to the lender providing mezzanine financing for the project.  The amount of the Lien (app. $8.4 million at March 31,
2006) is included as Indebtedness in Section I.A.1.(e) of the March 31,
2006 Compliance Certificate.


 

















 


SCHEDULE 7.02


 


EXISTING INVESTMENTS


 


The following lists
Meritage’s existing Investments, including the amount of the Investment, as of March 31,
2006:


 


	
  MTH Mortgage,
  LLC

  	
   

  	
  $

  	
  1,349

  	
   

  
	
  Maricopa Lakes, LLC

  	
   

  	
  8,467

  	
   

  
	
  250 South LLC

  	
   

  	
  1,042

  	
   

  
	
  DM Marana Land Investors, L.L.C.

  	
   

  	
  2,657

  	
   

  
	
  PR4E, LLC

  	
   

  	
  2,531

  	
   

  
	
  EP The King, L.L.C.

  	
   

  	
  5,096

  	
   

  
	
  Riata West, L.L.C.

  	
   

  	
  46

  	
   

  
	
  Westwind Properties, L.L.C.

  	
   

  	
  351

  	
   

  
	
  MBC Heartland L.L.C.

  	
   

  	
  49

  	
   

  
	
  MBS—Lakin L.L.C.

  	
   

  	
  290

  	
   

  
	
  Surprise Grand Vista JV I, L.L.C.

  	
   

  	
  15,188

  	
   

  
	
  MTH Title Co Company, L.L.C.

  	
   

  	
  190

  	
   

  
	
  Land Tejas Development Legends Ranch, Ltd.

  	
   

  	
  3,004

  	
   

  
	
  Prestige Lending Services, Ltd.

  	
   

  	
  104

  	
   

  
	
  New Rodeo 228, Ltd.

  	
   

  	
  4,695

  	
   

  
	
  Keller 107, Ltd.

  	
   

  	
  1,147

  	
   

  
	
  Cornerstone Mortgage Partners X, L.P.

  	
   

  	
  72

  	
   

  
	
  MTH Funding, L.P.

  	
   

  	
  108

  	
   

  
	
  MTH Lending Group, L.P.

  	
   

  	
  252

  	
   

  
	
  WKMM, L.L.C.

  	
   

  	
  67

  	
   

  
	
  Bridgeway Lakes Lot Development, LLC

  	
   

  	
  8,164

  	
   

  
	
  15th Street & Jefferson – Oakland, LLC

  	
   

  	
  3,624

  	
   

  
	
  Hayward Funding, Ltd.

  	
   

  	
  77

  	
   

  
	
  South Edge, LLC

  	
   

  	
  8,144

  	
   

  
	
  Kyle Acquisition Group, LLC

  	
   

  	
  7,298

  	
   

  
	
  Fallbrook Partners, LLC

  	
   

  	
  4,799

  	
   

  
	
  Town Square Title MH, LLC

  	
   

  	
  5

  	
   

  
	
  MTH Title of Florida, LLC

  	
   

  	
  10

  	
   

  
	
  Greater Homes Funding, LLC

  	
   

  	
  131

  	
   

  
	
  Avalon GDCI Yorba Linda, LP

  	
   

  	
   

  	
  *

  
	
  Silverleaf – 2005, LP

  	
   

  	
  13

  	
   

  
	
  NMC Builders, LLC

  	
   

  	
   

  	
  *

  
	
   

  	
   

  	
  $

  	
  78,970

  	
   

  



 






*      Immaterial or
closed out


 

















 


SCHEDULE 7.03


 


EXISTING INDEBTEDNESS


 


Although specifically permitted by Sections 7.03(b)-(g), Meritage
discloses the following existing indebtedness:


 


LOANS PAYABLE AND OTHER BORROWINGS


 


Loans
payable at April 30, 2006 consist of the following (in thousands):


 


	
  $600 million
  unsecured revolving credit facility maturing May 2009 with extension
  provisions, with interest payable monthly approximating LIBOR (approximately
  5.04% at April 30, 2006) plus 1.6% or Prime

  	
   

  	
  $

  	
  183,100

  	
  *

  



 


SENIOR NOTES


 


Senior
notes at April 30, 2006 consist of the following (in thousands):


 


	
  6.25% senior
  notes due 2015. At April 30, 2006, there was approximately $1.5 million
  in unamortized discount.

  	
   

  	
  $

  	
  348,454

  	
   

  
	
  7.0% senior
  notes due 2014. At April 30, 2006, there was approximately $0.1 million
  in unamortized premium.

  	
   

  	
  130,071

  	
   

  
	
  9.75% senior
  notes due 2011. At April 30, 2006, there was approximately $0.1 million
  in unamortized premium.

  	
   

  	
  1,255

  	
   

  
	
  Total senior
  notes

  	
   

  	
  $

  	
  479,780

  	
   

  



 






*      To be paid upon closing of the
First Amended and Restated Credit Agreement


 


[Continued on Next Page]


 

















 


GUARANTEES


 


Meritage
discloses the following guarantees and liens that are treated as Indebtedness
under the Credit Facility (in thousands):


 


	
  Pro rata
  guarantee (Meritage portion 3.56%) of South Edge, LLC’s $535 million Senior
  Secured Credit Facilities (acquisition and development), consisting of
  (i) a $110 million multi-draw term loan, (ii) a $175 million term
  loan, (iii) a $225 million term loan and (iv) a $25 million
  revolving credit facility; at March 31, 2006, the total outstanding
  balance under the facilities was approximately $431.1 million.

  	
   

  	
  $

  	
  15,347

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Pro rata
  guarantee (Meritage portion 4.09%) of Kyle Acquisition Group, LLC’s $490
  million secured Credit Agreement (acquisition and development), consisting of
  (i) a $125 million revolving credit facility, (ii) a $200 million
  term loan and (iii) a $165 million term loan; at March 31, 2006,
  the total outstanding balance under the facilities was approximately $378.9
  million.

  	
   

  	
  15,497

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Pro rata
  guarantee (Meritage portion 33.33%) of New Rodeo 288 Ltd.’s $5.4 million
  secured loan (acquisition and development); at March 31, 2006, the total
  outstanding balance under the loan was approximately $2.5 million.

  	
   

  	
  849

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  As disclosed on
  Schedule 7.01, Meritage has pledged its 50% membership interest in
  Maricopa Lakes, LLC to secure Maricopa Lakes’ obligations to the lender
  providing mezzanine financing for the project. The amount of the Lien at
  March 31, 2006 is approximately $8.4 million, which represents the value
  of Meritage’s interest in Maricopa Lakes, LLC.

  	
   

  	
  8,399

  	
   

  



 


Meritage
also discloses that reflected in its consolidated financial statements is debt
attributed to (i) its Model home lease program in the amount of $37.1
million at March 31, 2006, with interest in the form of lease payments and
(ii) a joint venture which is consolidated pursuant to FIN 46 in the
amount of $453,000.  These
classifications are for GAAP purposes only and Meritage does not believe such
amounts are considered “Indebtedness” as defined in the Amended and Restated
Credit Agreement.


 

















 


SCHEDULE 7.08


 


TRANSACTIONS WITH AFFILIATES


 


We
have transacted business with related or affiliated companies and with certain
officers and directors of the Company. 
We believe that the terms and fees negotiated for all transactions
listed below are no less favorable than those that could be negotiated in arm’s
length transactions.


 


Since 1997, we have
leased office space in Plano, Texas from Home Financial Services, a Texas
partnership owned by John Landon, our co-chief executive officer, and his
wife.  The lease expires in 2009 and
currently provides for an annual rent in 2006 of $254,557 and an annual
escalator of 5% thereafter.  Rents paid
to the partnership were approximately $268,000, $255,000 and $242,000 in 2005,
2004 and 2003, respectively.  The office
rent is included within general and administrative expenses on our consolidated
statements of earnings.


 


We paid legal fees of
approximately $1,643,000, $783,000 and $1,032,000 to law firms in 2005, 2004
and 2003, respectively, of which C. Timothy White was a partner.  Mr. White served on our board of
directors until October 1, 2005, at which time he joined the Company as
our General Counsel.  Of these fees,
approximately $1,136,000, $722,000 and $892,000 were real estate project
related and capitalized to real estate on our balance sheet in 2005, 2004 and
2003, respectively.  The remaining
amounts are recorded within general and administrative expenses on our
consolidated statements of earnings.


 


During 2004, we
contracted with a landbanker to acquire property in the Tucson, Arizona area
for $4.6 million.  Robert Sarver, one of
our directors, has a 3.8% ownership interest in the entity that sold this
property to the landbanker.  During 2005,
we had purchases totaling approximately $1.2 million from the landbanker
related to this property.  In addition,
we made purchases of approximately $64,800 directly from the entity in which Mr. Sarver
has the ownership interest.  We expect to
complete the full acquisition of this property during fiscal 2007.


 


In connection with the
Company’s acquisition of Hancock Homes in 2001, the Company assumed an existing
advertising/sponsorship agreement with the National Basketball Association’s
Phoenix Suns organization.  In 2004, one
of our directors, Robert Sarver became the managing partner of the Phoenix
Suns, and our Co-CEO’s, Steven Hilton and John Landon, became minority owners
of the team.  In 2005 and 2004 we paid
approximately $392,000 and $250,000, respectively, in advertising/sponsorship
costs related to the agreement.  These
amounts are recorded as general and administrative expenses on our consolidated
statement of earnings.


 

















 


EXHIBIT A


 


FORM OF
REVOLVING LOAN NOTICE


 


Date:                        ,
          


 


To:          Guaranty
Bank, as Administrative Agent


 


Ladies and Gentlemen:


 


Reference is made to that
certain First Amended and Restated Credit Agreement, dated as of May 16,
2006 (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the “Agreement;” the terms defined therein
being used herein as therein defined), among Meritage Homes Corporation (the “Borrower”),
the Lenders from time to time party thereto, and Guaranty Bank, as
Administrative Agent, L/C Issuer and Swing Line Lender.


 


The undersigned hereby
requests (select one):


 


	
  o  A
  Borrowing of Revolving Loans

  	
  o  A
  conversion or continuation of Revolving Loans

  



 


1.     On      (a
Business Day).


 


2.     In
the amount of $       .


 


3.     Comprised
of               .




[Type
of Revolving Loan requested]


 


4.     For
Eurodollar Rate Loans:  with an Interest
Period of [14 days/        month(s)].


 


[The Revolving Borrowing
requested herein complies with the proviso to the first sentence of Section 2.01
of the Agreement.]


 


	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 


1

















 


EXHIBIT B


 


FORM OF
SWING LINE LOAN NOTICE


 


Date:                        ,
          


 


To:          Guaranty
Bank, as Swing Line Lender

Guaranty Bank, as Administrative Agent


 


Ladies and Gentlemen:


 


Reference is made to that
certain First Amended and Restated Credit Agreement, dated as of May 16,
2006 (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the “Agreement;” the terms defined therein
being used herein as therein defined), among Meritage Homes Corporation (the “Borrower”),
the Lenders from time to time party thereto, and Guaranty Bank, as
Administrative Agent, L/C Issuer and Swing Line Lender.


 


The undersigned hereby
requests a Swing Line Loan:


 


1.     On       (a
Business Day).


 


2.     In
the amount of $       .


 


The Swing Line Borrowing
requested herein complies with the requirements of the first proviso to the
first sentence of Section 2.04(a) of the Agreement.


 


	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 


1

















 


EXHIBIT C


 


FORM OF
REVOLVING LOAN NOTE


 


	
  $

  	
   

  	
   

  	
   

  



 


FOR VALUE RECEIVED,
MERITAGE HOMES CORPORATION, a Maryland corporation (the “Borrower”),
hereby promises to pay to the order of                                                       
(the “Lender”), on the Maturity Date (as defined in the Credit Agreement
referred to below) the principal amount of                                     Dollars
($                        ),
or such lesser principal amount of Revolving Loans (as defined in such Credit
Agreement) due and payable by the Borrower to the Lender on the Maturity Date
under that certain First Amended and Restated Credit Agreement, dated as of May 16,
2006 (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the “Agreement;” the terms defined therein being
used herein as therein defined), among the Borrower, the Lenders from time to
time party thereto, and Guaranty Bank, as Administrative Agent, L/C Issuer and
Swing Line Lender.


 


The Borrower promises to
pay interest on the unpaid principal amount of each Revolving Loan from the
date of such Revolving Loan until such principal amount is paid in full, at
such interest rates, and at such times as are specified in the Agreement. All
payments of principal and interest shall be made to the Administrative Agent
for the account of the Lender in Dollars in immediately available funds at the
Administrative Agent’s Office. If any amount is not paid in full when due
hereunder, such unpaid amount shall bear interest, to be paid upon demand, from
the due date thereof until the date of actual payment (and before as well as
after judgment) computed at the per annum rate set forth in the Agreement.


 


This Note is one of the
Revolving Loan Notes referred to in the Agreement, is entitled to the benefits
thereof and is subject to optional and mandatory prepayment in whole or in part as
provided therein. This Note is also entitled to the benefits of the Guaranty. Upon
the occurrence of one or more of the Events of Default specified in the
Agreement, all amounts then remaining unpaid on this Note shall become, or may be
declared to be, immediately due and payable all as provided in the Agreement. Revolving
Loans made by the Lender shall be evidenced by one or more loan accounts or
records maintained by the Lender in the ordinary course of business. The Lender
may also attach schedules to this Note and endorse thereon the date,
amount and maturity of its Revolving Loans and payments with respect thereto.


 


The Borrower, for itself,
its successors and assigns, hereby waives diligence, presentment, protest and
demand and notice of protest, demand, intent to accelerate, acceleration,
dishonor and non-payment of this Note.


 


1

















 


THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.


 


	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 


2

















 


REVOLVING LOANS AND PAYMENTS WITH RESPECT THERETO


 


	
  Date

  	
   

  	
  Type of 

  Loan Made

  	
   

  	
  Amount of 

  Loan Made

  	
   

  	
  End of 

  Interest 

  Period

  	
   

  	
  Amount of 

  Principal or 

  Interest 

  Paid This 

  Date

  	
   

  	
  Outstanding 

  Principal 

  Balance 

  This Date

  	
   

  	
  Notation 

  Made By

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


3

















 


EXHIBIT D


 


FORM OF COMPLIANCE CERTIFICATE


 


Financial Statement Date:                          


 


To:          Guaranty
Bank, as Administrative Agent, L/C Issuer and Swing Line Lender


 


Ladies and Gentlemen:


 


Reference is made to that
certain First Amended and Restated Credit Agreement, dated as of May 16,
2006 (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the “Agreement;” the terms defined therein
being used herein as therein defined), among Meritage Homes Corporation (the “Borrower”),
the Lenders from time to time party thereto, and Guaranty Bank, as
Administrative Agent, L/C Issuer and Swing Line Lender.


 


The undersigned
Responsible Officer hereby certifies as of the date hereof that he/she is the                                                   of
the Borrower, and that, as such, he/she is authorized to execute and deliver
this Certificate to the Administrative Agent on the behalf of the Borrower, and
that:


 


[Use following for fiscal year-end financial statements]


 


Attached hereto as Schedule 1
are the year-end audited financial statements required by Section 6.01(a) of
the Agreement for the fiscal year of the Borrower ended as of the above date,
together with the report and opinion of an independent certified public
accountant required by such section.


 


[Use following for fiscal quarter-end financial statements]


 


1.             Attached
hereto as Schedule 1 are the unaudited financial statements
required by Section 6.01(b) of the Agreement for the fiscal
quarter of the Borrower ended as of the above date. Such financial statements
fairly present the financial condition, results of operations and cash flows of
the Borrower and its Subsidiaries in accordance with GAAP as at such date and
for such period, subject only to normal year-end audit adjustments and the
absence of footnotes.


 


2.             The
undersigned has reviewed and is familiar with the terms of the Agreement and
has made, or has caused to be made under his/her supervision, a detailed review
of the transactions and condition (financial or otherwise) of the Borrower
during the accounting period covered by the attached financial statements.


 


3.             A
review of the activities of the Borrower during such fiscal period has been
made under the supervision of the undersigned with a view to determining
whether during such fiscal period the Borrower performed and observed all its
Obligations under the Loan Documents, and


 


1

















 


[select
one:]


 


[to the best knowledge of the
undersigned as of the date hereof no Default or Event of Default under the
Agreement has occurred and its continuing.]


 


—or—


 


[the following is a list of each
such Default or Event of Default and its nature and status:]


 


4.             The
financial covenant analyses and information set forth on Schedule 2
attached hereto are true and accurate on and as of the date of this
Certificate.


 


IN WITNESS WHEREOF,
the undersigned has executed this Certificate as of                                     ,                 .


 


	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 


2

















 


For the Month/Quarter/Year ended                                     (“Statement
Date”)


 


SCHEDULE 2

to the Compliance Certificate

($ in 000’s)


 


	
  I.

  	
  Leverage Ratio – For Determination of Applicable
  Rate.

  
	
   

  	
  A.

  	
  Consolidated Indebtedness:

  
	
   

  	
   

  	
  1.

  	
  Indebtedness of the Loan Parties:

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Without duplication, all obligations for borrowed
  money and all obligations evidenced by bonds, debentures, notes, loan
  agreements or other similar instruments:

  	
  $

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Without duplication, all direct or contingent
  obligations arising under letters of credit (including standby and
  commercial), banker’s acceptances, bank guaranties, surety bonds and similar
  instruments:

  	
  $

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Without duplication, all net obligations under any
  Swap Contract:

  	
  $

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Without duplication, all obligations to pay the
  deferred purchase price of property or services (except (i) Trade
  accounts payable that are not more 30 days past the date the invoice was
  approved and entered into the computer system by such Loan Party, (ii) accrued
  expenses incurred by such Person in the ordinary course of business, (iii) marketing
  fees payable to developers of master planned communities incurred by such
  Person in the ordinary course of business, (iv) reimbursement
  obligations for impact or development fee credits to be received by such
  Person incurred in the ordinary course of business, (v) deferred lot
  premium or profit participation obligations payable to developers of master planned
  communities incurred in the ordinary course of business and (vi) obligations
  to developers or owners of master planned communities in form of a
  performance encumbrance of such Person incurred in the ordinary course of
  business):

  	
  $

  
	
   

  	
   

  	
   

  	
  (e)

  	
  Without duplication, indebtedness (excluding prepaid
  interest thereon) secured by a Lien on property owned or being purchased
  (including indebtedness arising under conditional sales or other title
  retention agreements), whether or not such indebtedness shall have been
  assumed or is limited in recourse:

  	
  $

  



 


3

















 


	
   

  	
   

  	
   

  	
  (f)

  	
  Without duplication, obligations under Capital
  Leases:

  	
  $

  
	
   

  	
   

  	
   

  	
  (g)

  	
  Without duplication, obligations in respect of
  Redeemable Stock:

  	
  $

  
	
   

  	
   

  	
   

  	
  (h)

  	
  Without duplication, any Receivables Facility
  Attributed Indebtedness:

  	
  $

  
	
   

  	
   

  	
   

  	
  (i)

  	
  Without duplication, any “withdrawal liability” as
  such term is defined under Part I of Subtitle E of Title IV of ERISA:

  	
  $

  
	
   

  	
   

  	
   

  	
  (j)

  	
  Without duplication, all Guarantees in respect of
  any of the foregoing:

  	
  $

  
	
   

  	
   

  	
   

  	
  (k)

  	
  Indebtedness (Lines I.A.1(a) + (b) + (c) +
  (d) + (e) + (f) + (g) + (h) + (i) + (j)):

  	
  $

  
	
   

  	
   

  	
  2.

  	
  Indebtedness of one Loan Party to another Loan
  Party:

  	
  $

  
	
   

  	
   

  	
  3.

  	
  Consolidated Indebtedness (Line I.A.1(k) - Line
  I.A.2):

  	
  $

  
	
   

  	
  B.

  	
  Consolidated Tangible Net Worth:

  	
   

  
	
   

  	
   

  	
  1.

  	
  Shareholders’ Equity of the Loan Parties:

  	
  $

  
	
   

  	
   

  	
  2.

  	
  Intangible Assets of the Loan Parties:

  	
  $

  
	
   

  	
   

  	
  3.

  	
  Consolidated Tangible Net Worth: (Line I.B.1 - Line
  I.B.2):

  	
  $

  
	
   

  	
  C.

  	
  Leverage Ratio:

  	
   

  
	
   

  	
   

  	
  1.

  	
  Consolidated Indebtedness:

  	
  $

  
	
   

  	
   

  	
  2.

  	
  The face amount of all undrawn Performance Letters
  of Credit issued for the account of, or guaranteed by, the Loan Parties:

  	
  $

  
	
   

  	
   

  	
  3.

  	
  Total ((Lines I.C.1 - I.C.2)  ̧
  Line I.B.3):

  	
  to 1

  
	
  II.

  	
  Section 7.02(j) –
  Limitation on other Investments.

  	
   

  
	
   

  	
  A.

  	
  Actual amount of Investments other than those
  permitted by subsections (a) through (i) of Section 7.02:

  	
  $

  
	
   

  	
  B.

  	
  Maximum in aggregate amount at any one time
  outstanding (Line I.B.3. x 30%):

  	
  $

  
	
  III.

  	
  Section 7.03 – Limitation
  on Indebtedness.

  	
   

  
	
   

  	
  A.

  	
  Aggregate amount of secured Indebtedness, provided
  that such Liens are on assets other than Borrowing Base Assets:

  	
  $

  
	
   

  	
  B.

  	
  Maximum amount at any time outstanding (Line I.B.3.
  x 10%):

  	
  $

  
	
   

  	
  C.

  	
  Aggregate amount of Indebtedness guarantied pursuant
  to Springing Guarantees:

  	
  $

  
	
   

  	
  D.

  	
  Maximum amount permitted (50% of Line I.B.3):

  	
  $

  



 


4

















 


	
  IV.

  	
  Section 7.11(a) –
  Minimum Net Worth.

  	
   

  
	
   

  	
  A.

  	
  Actual Consolidated Tangible Net Worth (Line I.B.3):

  	
  $

  
	
   

  	
  B.

  	
  Minimum Net Worth:

  	
   

  
	
   

  	
   

  	
  1.

  	
  50% of Consolidated Net Income earned in each full
  fiscal quarter ending after December 31, 2005 (with no deduction for a
  net loss during any such period):

  	
  $

  
	
   

  	
   

  	
  2.

  	
  50% of aggregate increases in Consolidated Tangible
  Net Worth of the Borrower and its Subsidiaries after December 31, 2005
  by reason of the issuance and sale of Equity Interests or other equity
  interests of the Borrower or any Subsidiary (other than issuances to the
  Borrower or a wholly-owned Subsidiary), including any conversion of debt
  securities of the Borrower into such Equity Interests or other equity
  interests:

  	
  $

  
	
   

  	
   

  	
  3.

  	
  An amount equal to the net worth of any Person that
  becomes a Subsidiary or is merged into or consolidated with the Borrower or
  any Subsidiary or substantially all of the assets of which are acquired by
  the Borrower or any Subsidiary, in each case after December 31, 2005:

  	
  $

  
	
   

  	
   

  	
  4.

  	
  Required Minimum Net Worth ($500,000,000 + Line
  IV.B.1. + 2. + 3.):

  	
  $

  
	
  V.

  	
  Section 7.11(b) –
  Maximum Leverage Ratio.

  	
   

  
	
   

  	
  A.

  	
  Leverage Ratio (Line I.C.3.):

  	
  to 1

  
	
   

  	
  B.

  	
  Maximum Leverage Ratio:

  	
  2.25 to 1

  
	
  VI.

  	
  Section 7.11(c) —
  Minimum Interest Coverage Ratio.

  	
   

  
	
   

  	
  A.

  	
  Consolidated EBITDA for the period of four fiscal
  quarters ending on the date of date of determination (the “Subject Period”):

  	
   

  
	
   

  	
   

  	
  1.

  	
  Consolidated Net Income of the Loan Parties for the Subject
  Period:

  	
  $

  
	
   

  	
   

  	
  2.

  	
  To the extent deducted from revenues in determining
  Consolidated Net Income, Consolidated Interest Expense for the Subject
  Period:

  	
  $

  
	
   

  	
   

  	
  3.

  	
  To the extent deducted from revenues in determining
  Consolidated Net Income, expense for income taxes paid or accrued for the
  Subject Period:

  	
  $

  
	
   

  	
   

  	
  4.

  	
  To the extent deducted from revenues in determining
  Consolidated Net Income, depreciation for the Subject Period:

  	
  $

  
	
   

  	
   

  	
  5.

  	
  To the extent deducted from revenues in determining
  Consolidated Net Income, amortization for the Subject Period:

  	
  $

  



 


5

















 


	
   

  	
   

  	
  6.

  	
  To the extent deducted from revenues in determining
  Consolidated Net Income, 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) for the Subject Period:

  	
  $

  
	
   

  	
   

  	
  7.

  	
  To the extent deducted from revenues in determining
  Consolidated Net Income, 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 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:

  	
  $

  
	
   

  	
   

  	
  8.

  	
  To the extent included in Consolidated Net Income,
  extraordinary gains realized other than in the ordinary course of business
  for the Subject Period:

  	
  $

  
	
   

  	
   

  	
  9.

  	
  Consolidated EBITDA (Lines VI.A.1. + 2. + 3. + 4. +
  5. + 6. + 7. + 8.):

  	
  $

  
	
   

  	
  B.

  	
  Consolidated Interest Incurred for the Subject Period:

  	
  $

  
	
   

  	
  C.

  	
  Interest Coverage Ratio (Line VI.A.9.  ̧
  VI.B.):

  	
  to 1

  
	
   

  	
  D.

  	
  Minimum Interest Coverage Ratio

  	
  2.00 to 1

  
	
  VII.

  	
  Section 7.11(d) –
  Borrowing Base Debt.

  	
   

  
	
   

  	
  A.

  	
  Borrowing Base as of date of determination (from
  Borrowing Base Report):

  	
  $

  
	
   

  	
  B.

  	
  Consolidated Indebtedness as of such date of
  determination (Line I.A.3):

  	
  $

  
	
   

  	
  C.

  	
  Any portion of any Subordinated Debt of any Loan
  Party which is due and payable more than one year from such date of
  determination:

  	
  $

  
	
   

  	
  D.

  	
  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 secured by Liens on such assets (x) does not exceed the Net
  Book Value of such asset as determined by GAAP and (y) does not exceed in
  aggregate amount the amount set forth in Section 7.03(f):

  	
  $

  
	
   

  	
  E.

  	
  The face amount of all undrawn Performance Letters
  of Credit, in each case issued for the account of, or guaranteed by the
  Borrower

  	
  $

  



 


6

















 


	
   

  	
   

  	
  or any of its Subsidiaries (other than Unrestricted
  Subsidiaries):

  	
   

  
	
   

  	
  F.

  	
  Cash and Cash Equivalents and Receivables of the
  Loan Parties not subject to any Lien securing Indebtedness in an aggregate
  amount in excess of $5,000,000:

  	
  $

  
	
   

  	
  G.

  	
  Borrowing Base Debt (Lines VII.B. - C. - D. - E. - F.):

  	
  $

  
	
  VIII.

  	
  Section 7.11(e) –
  Total Land Restrictions.

  	
   

  
	
   

  	
  A.

  	
  Net Book Value of Unentitled Land:

  	
  $

  
	
   

  	
  B.

  	
  Net Book Value of Unimproved Entitled Land:

  	
  $

  
	
   

  	
  C.

  	
  Net Book Value of Land/Lots Under Development:

  	
  $

  
	
   

  	
  D.

  	
  Net Book Value of Finished Lots:

  	
  $

  
	
   

  	
  E.

  	
  Actual (Lines VIII.A. + B. + C. + D.):

  	
  $

  
	
   

  	
  F.

  	
  Maximum Total Land Restrictions (Line I.B.3 x 100%):

  	
  $

  
	
  IX.

  	
  Section 7.11(f) –
  Raw Land Restrictions.

  	
   

  
	
   

  	
  A.

  	
  Net Book Value of Unentitled Land:

  	
  $

  
	
   

  	
  B.

  	
  Net Book Value of Unimproved Entitled Land:

  	
  $

  
	
   

  	
  C.

  	
  Actual (Lines IX.A. + B.):

  	
  $

  
	
   

  	
  D.

  	
  Maximum Raw Land Restrictions (Line I.B.3 x 20%):

  	
  $

  
	
  X.

  	
  Section 7.11(g) –
  Unsold Units.

  	
   

  
	
   

  	
  A.

  	
  Actual Number of Unsold Units existing as of the end
  of the fiscal quarter:

  	
  $

  
	
   

  	
  B.

  	
  Number of Unit Closings within the four fiscal
  quarters ending on the last day of the fiscal quarter:

  	
  $

  
	
   

  	
  C.

  	
  Maximum Unsold Units (Line X.B. x 25%):

  	
  $

  
	
  XI.

  	
  Section 7.11(h) –
  Model Units.

  	
   

  
	
   

  	
  A.

  	
  Actual Number of Model Units existing as of the end
  of the fiscal quarter:

  	
  $

  
	
   

  	
  B.

  	
  Number of Unit Closings within the four fiscal
  quarters ending on the last day of the fiscal quarter:

  	
  $

  
	
   

  	
  C.

  	
  Maximum Model Units (Line XI.B. x 10%):

  	
  $

  



 


7

















 


EXHIBIT E


 


FORM OF ASSIGNMENT AND ASSUMPTION


 


ASSIGNMENT
AND ASSUMPTION


 


This Assignment and Assumption (this “Assignment
and Assumption”) is dated as of the Effective Date set forth below and is
entered into by and between [Insert name of Assignor] (the “Assignor”)
and [Insert name of Assignee] (the “Assignee”). Capitalized terms used
but not defined herein shall have the meanings given to them in the Credit
Agreement identified below (the “Credit Agreement”), receipt of a copy
of which is hereby acknowledged by the Assignee. The Standard Terms and
Conditions set forth in Annex 1 attached hereto are hereby agreed to and
incorporated herein by reference and made a part of this Assignment and
Assumption as if set forth herein in full.


 


For an agreed consideration, the Assignor hereby
irrevocably sells and assigns to the Assignee, and the Assignee hereby
irrevocably purchases and assumes from the Assignor, subject to and in
accordance with the Standard Terms and Conditions and the Credit Agreement, as
of the Effective Date inserted by the Administrative Agent as contemplated
below (i) all of the Assignor’s rights and obligations as a Lender under
the Credit Agreement and any other documents or instruments delivered pursuant
thereto to the extent related to the amount and percentage interest identified
below of all of such outstanding rights and obligations of the Assignor under
the respective facilities identified below (including, without limitation,
Letters of Credit, Guarantees and Swing Line Loans included in such facilities)
and (ii) to the extent permitted to be assigned under applicable law, all
claims, suits, causes of action and any other right of the Assignor (in its
capacity as a Lender) against any Person, whether known or unknown, arising
under or in connection with the Credit Agreement, any other documents or
instruments delivered pursuant thereto or the loan transactions governed
thereby or in any way based on or related to any of the foregoing, including,
but not limited to, contract claims, tort claims, malpractice claims, statutory
claims and all other claims at law or in equity related to the rights and
obligations sold and assigned pursuant to clause (i) above (the
rights and obligations sold and assigned pursuant to clauses (i) and (ii) above
being referred to herein collectively as, the “Assigned Interest”). Such sale
and assignment is without recourse to the Assignor and, except as expressly
provided in this Assignment and Assumption, without representation or warranty
by the Assignor.


 


Prior to the Effective Date (defined below) of this
Assignment, the parties shall deliver to the Administrative Agent a processing
and recordation fee of $3,500 in accordance with Section 10.07 of
the Credit Agreement.


 


1.             Assignor:                                                                          


 


2.             Assignee:                                                                          
[and is an Affiliate/Approved Fund of [identify Lender](1)]


 


3.             Borrower(s):                                                                      


 






(1)           Select
as applicable


 


1

















 


4.             Administrative Agent:                                             ,
as the administrative agent under the Credit Agreement


 


5.             Credit Agreement:                The First Amended and Restated Credit
Agreement, dated as of May 16, 2006 among Meritage


Homes Corporation, the Lenders parties thereto, and Guaranty Bank, as
Administrative Agent


 


6.             Assigned Interest:


 


	
  Facility Assigned

  	
   

  	
  Aggregate 

  Amount of 

  Commitment 

  for all Lenders*

  	
   

  	
  Amount of 

  Commitment 

  Assigned*

  	
   

  	
  Percentage 

  Assigned of 

  Commitment(2)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
                         

  	
  (3)

  	
  $

  	
   

  	
  $

  	
  %

  	
   

  	
   

  
	
  $

  	
   

  	
  $

  	
  %

  	
   

  	
   

  	
   

  	
   

  
	
  $

  	
   

  	
  $

  	
  %

  	
   

  	
   

  	
   

  	
   

  



 


[7.            Trade Date:                                               ](4)


 


Effective Date:                                     ,
20     [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH
SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]


 






(2)           Set
forth, to at least 9 decimals, as a percentage of the Commitment of all Lenders
thereunder. 


(3)           Fill
in the appropriate terminology for the types of facilities under the Credit
Agreement that are being assigned under this Assignment (e.g. “Revolving Loan,”  “Swing Line Loan”, etc.). 


(4)           To
be completed if the Assignor and the Assignee intend that the minimum
assignment amount is to be determined as of the Trade Date. 


 


2

















 


The terms set forth in this Assignment and Assumption
are hereby agreed to:


 


	
   

  	
  ASSIGNOR

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  [Consented to
  and](5) Accepted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [NAME OF ADMINISTRATIVE
  AGENT], as

  	
   

  	
   

  
	
  Administrative
  Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [Consented
  to:](6)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  



 






(5)           To
be added only if the consent of the Administrative Agent is required by the
terms of the Credit Agreement. 


(6)           To
be added only if the consent of the Borrower and/or other parties (e.g. Swing
Line Lender, L/C Issuer) is required by the terms of the Credit Agreement. 


 


3

















 


ANNEX 1 TO ASSIGNMENT
AND ASSUMPTION


 


STANDARD TERMS AND CONDITIONS FOR


 


ASSIGNMENT AND ASSUMPTION


 


1.             Representations and Warranties.


 


1.1.          Assignor. The
Assignor (a) represents and warrants that (i) it is the legal and
beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute
and deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of
the Borrower, any of its Subsidiaries or Affiliates or any other Person
obligated in respect of any Loan Document or (iv) the performance or
observance by the Borrower, any of its Subsidiaries or Affiliates or any other
Person of any of their respective obligations under any Loan Document.


 


1.2.          Assignee. The
Assignee (a) represents and warrants that (i) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it meets
all requirements of an Eligible Assignee under the Credit Agreement (subject to
receipt of such consents as may be required under the Credit Agreement), (iii) from
and after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of the Assigned Interest,
shall have the obligations of a Lender thereunder, (iv) it has received a
copy of the Credit Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 6.01 thereof, as
applicable, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance
on the Administrative Agent or any other Lender, and (v) if it is a
Foreign Lender, attached hereto is any documentation required to be delivered
by it pursuant to the terms of the Credit Agreement, duly completed and
executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on the Administrative Agent, the Assignor or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.


 


2.             Payments. From and after the Effective Date, the Administrative Agent shall make
all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignee whether such
amounts have accrued prior to or on or after the Effective Date. The Assignor
and the Assignee shall make all appropriate adjustments


 


4

















 


in payments by the Administrative Agent for periods prior to the Effective
Date or with respect to the making of this assignment directly between themselves.


 


3.             General Provisions. This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Assumption may be executed in
any number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and
Assumption by telecopy shall be effective as delivery of a manually executed
counterpart of this Assignment and Assumption. This Assignment and
Assumption shall be governed by, and construed in accordance with, the law of
the State of Texas.


 


5

















 


EXHIBIT F


 


GUARANTY


 


GUARANTY (this “Guaranty”), dated as of May 16,
2006, made by each of the parties listed on the signature pages hereof
(collectively, the “Guarantors”, and each, a “Guarantor”), in favor of the
Guarantied Parties referred to below.


 


W I T N E S S E T H:


 


WHEREAS, Meritage Homes Corporation, a Maryland
corporation (the “Borrower”), has entered into a First Amended and
Restated Credit Agreement, dated as of May 16, 2006, among the Lenders
party thereto, and Guaranty Bank, as the Administrative Agent, Swing Line
Lender and L/C Issuer (hereinafter, the “Administrative Agent”) for the
Lenders (said Credit Agreement, as it may be amended, supplemented or
otherwise modified from time to time, being the “Credit Agreement”, and
capitalized terms not defined herein but defined therein being used herein as
therein defined); and


 


WHEREAS, the Borrower and each of the Guarantors are
members of the same consolidated group of companies and are engaged in
operations which require financing on a basis in which credit can be made
available from time to time to the Borrower and the Guarantors, and the
Guarantors will derive direct and indirect economic benefit from the Revolving
Loans,  Swing Line Loans and Letters of
Credit under the Credit Agreement; and


 


WHEREAS, it is a condition precedent to the obligation
of the Lenders to make Revolving Loans, Swing Line Loans and issue Letters of
Credit under the Credit Agreement that the Guarantors shall have executed and
delivered this Guaranty; and


 


WHEREAS, the Lenders, the Administrative Agent, any
Affiliate of any Lender entering into a Swap Contract (provided that such
Lender was a Lender at the time such Swap Contract was entered into) with the
Borrower or any Affiliate of the Borrower (“Guarantied Swap Contract”)
and the beneficiaries of each indemnification obligation undertaken by any Loan
Party under any Loan Document are herein referred to as the “Guarantied
Parties”;


 


NOW, THEREFORE, in consideration of the premises and
to induce the Lenders to make Revolving Loans, Swing Line Loans and issue
Letters of Credit the Guarantors hereby agree as follows:


 


SECTION 1. Guaranty. The Guarantors hereby jointly and
severally unconditionally and irrevocably guarantee the full and prompt payment
when due, whether at stated maturity, by acceleration or otherwise, of, and the
performance of, (a) the Obligations, whether now or hereafter existing and
whether for principal, interest, fees, expenses or otherwise, (b) any and
all reasonable out-of-pocket expenses (including, without limitation,
reasonable expenses and reasonable counsel fees and expenses of the
Administrative Agent and the Lenders) incurred by any of the Guarantied Parties
in enforcing any rights under this Guaranty and (c) all present and future
amounts that would become due but for the operation of any provision of Debtor
Relief Laws, and all present and future accrued and unpaid interest, including,
without limitation, all


 


F-1

















 


post-petition
interest if the Borrower or any Guarantor voluntarily or involuntarily becomes
subject to any Debtor Relief Laws (the items set forth in clauses (a), (b) and
(c) immediately above being herein referred to as the “Guarantied
Obligations”). Upon failure of the Borrower to pay any of the Guarantied
Obligations when due after the giving by the Administrative Agent and/or the
Lenders of any notice and the expiration of any applicable cure period in each
case provided for in the Credit Agreement, other Loan Documents or any Guarantied
Swap Contract (whether at stated maturity, by acceleration or otherwise), the
Guarantors hereby further jointly and severally agree to promptly pay the same
after the Guarantors’ receipt of notice from the Administrative Agent of the
Borrower’s failure to pay the same, without any other demand or notice
whatsoever, including without limitation, any notice having been given to any
Guarantor of either the acceptance by the Guarantied Parties of this Guaranty
or the creation or incurrence of any of the Obligations. This Guaranty is an
absolute guaranty of payment and performance of the Guarantied Obligations and
not a guaranty of collection, meaning that it is not necessary for the
Guarantied Parties, in order to enforce payment by the Guarantors, first or
contemporaneously to accelerate payment of any of the Guarantied Obligations,
to institute suit or exhaust any rights against any Loan Party, or to enforce
any rights against any collateral. Notwithstanding anything herein, in any
other Loan Document or any Guarantied Swap Contract  to the contrary, in any action or proceeding
involving any state corporate law, or any state or federal bankruptcy,
insolvency, reorganization or other law affecting the rights of creditors
generally, if, as a result of applicable law relating to fraudulent conveyance
or fraudulent transfer, including Section 548 of Bankruptcy Code or any
applicable provisions of comparable state law (collectively, “Fraudulent
Transfer Laws”), the obligations of any Guarantor under this Section 1
would otherwise, after giving effect to (a) all other liabilities of such
Guarantor, contingent or otherwise, that are relevant under such Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor in respect of intercompany Indebtedness to the Borrower to the extent
that such Indebtedness would be discharged in an amount equal to the amount
paid by such Guarantor hereunder) and (b) to the value as assets of such
Guarantor (as determined under the applicable provisions of such Fraudulent
Transfer Laws) of any rights of subrogation, contribution, reimbursement,
indemnity or similar rights held by such Guarantor pursuant to (i) applicable
requirements of Law, (ii) Section 10 hereof or (iii) any other
contractual obligations providing for an equitable allocation among such
Guarantor and other Subsidiaries or Affiliates of the Borrower of obligations
arising under this Guaranty or other guaranties of the Obligations by such
parties, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under this Section 1, then the amount of such liability
shall, without any further action by such Guarantor, any Lender, the
Administrative Agent or any other Person, be automatically limited and reduced
to the highest amount that is valid and enforceable and not subordinated to the
claims of other creditors as determined in such action or proceeding.


 


SECTION 2. Guaranty Absolute. Each Guarantor guaranties
that the Guarantied Obligations will be paid strictly in accordance with the
terms of the Credit Agreement, the Notes, the other Loan Documents and each
Guarantied Swap Contract, without set-off or counterclaim, and regardless of
any Applicable Law now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Guarantied Parties with respect thereto. The
liability of each Guarantor under this Guaranty shall be absolute and
unconditional irrespective of:


 


F-2

















 


(a)                                  any
lack of validity or enforceability of any provision of any other Loan Document
or any Guarantied Swap Contract or any other agreement or instrument relating
to any Loan Document or any Guarantied Swap Contract, or avoidance or
subordination of any of the Guarantied Obligations;


 


(b)                                 any
change in the time, manner or place of payment of, or in any other term of, or
any increase in the amount of, all or any of the Guarantied Obligations, or any
other amendment or waiver of any term of, or any consent to departure from any
requirement of, the Credit Agreement, the Notes, any of the other Loan
Documents or any Guarantied Swap Contract;


 


(c)                                  any
exchange, release or non-perfection of any Lien on any collateral for, or any
release of any other Loan Party or amendment or waiver of any term of any other
guaranty of, or any consent to departure from any requirement of any other
guaranty of, all or any of the Guarantied Obligations;


 


(d)                                 the
absence of any attempt to collect any of the Guarantied Obligations from the
Borrower or from any other Loan Party or any other action to enforce the same
or the election of any remedy by any of the Guarantied Parties;


 


(e)                                  any
waiver, consent, extension, forbearance or granting of any indulgence by any of
the Guarantied Parties with respect to any provision of any other Loan Document
or any Guarantied Swap Contract;


 


(f)                                    the
election by any of the Guarantied Parties in any proceeding under any Debtor
Relief Law;


 


(g)                                 any
borrowing or grant of a security interest by the Borrower, as
debtor-in-possession, under any Debtor Relief Law; or


 


(h)                                 any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of the Borrower or any Guarantor other than payment or
performance of the Obligations.


 


SECTION 3. Waiver.


 


(a)                                  Each
Guarantor hereby (i) waives (A) promptness, diligence, notice of
acceptance and any and all other notices, including, without limitation, notice
of intent to accelerate and notice of acceleration, with respect to any of the
Obligations or this Guaranty, (B) any requirement that any of the
Guarantied Parties protect, secure, perfect or insure any security interest in
or other Lien on any property subject thereto or exhaust any right or take any
action against the Borrower or any other Person or any collateral, (C) the
filing of any claim with a court in the event of receivership or bankruptcy of
the Borrower or any other Person, (D) except as otherwise provided herein,
protest or notice with respect to nonpayment of all or any of the Guarantied
Obligations, (E) the benefit of any statute of limitation, (F) all
demands whatsoever (and any requirement that demand be made on the Borrower or
any other Person as a condition precedent to such Guarantor’s obligations
hereunder), (G) all rights by which any Guarantor might be entitled to
require suit on an accrued right of action in respect of any of the Guarantied
Obligations or require suit against the Borrower or any other Guarantor or
Person, whether


 


F-3

















 


arising
pursuant to Section 34.02 of the Texas Business and Commerce Code, as
amended, Section 17.001 of the Texas Civil Practice and Remedies Code, as
amended, Rule 31 of the Texas Rules of Civil Procedure, as amended,
or otherwise, (H) any defense based upon an election of remedies by any
Guarantied Party, or (I) notice of any events or circumstances set forth
in clauses (a) through (h) of Section 2 hereof; and (ii) covenants
and agrees that, except as otherwise agreed by the parties, this Guaranty will
not be discharged except (i) by complete payment and performance of the
Guarantied Obligations and any other obligations of such Guarantor contained
herein or (ii) as to any Guarantor, upon the sale or other disposition of
all of the Equity Interests of such Guarantor as permitted under the Credit
Agreement.


 


(b)                                 If,
in the exercise of any of its rights and remedies, any of the Guarantied
Parties shall forfeit any of its rights or remedies, including, without
limitation, its right to enter a deficiency judgment against the Borrower or
any other Person, whether because of any Applicable Law pertaining to “election
of remedies” or the like, each Guarantor hereby consents to such action by such
Guarantied Party and waives any claim based upon such action. Any election of
remedies which results in the denial or impairment of the right of such
Guarantied Party to seek a deficiency judgment against the Borrower shall not
impair the obligation of such Guarantor to pay the full amount of the
Guarantied Obligations or any other obligation of such Guarantor contained
herein.


 


(c)                                  In
the event any of the Guarantied Parties shall bid at any foreclosure or trustee’s
sale or at any private sale permitted by law, under any of the Loan Documents
or under any Guarantied Swap Contract, to the extent not prohibited by
Applicable Law, such Guarantied Party may bid all or less than the amount
of the Guarantied Obligations and the amount of such bid, if successful, need
not be paid by such Guarantied Party but shall be credited against the
Guarantied Obligations.


 


(d)                                 Each
Guarantor agrees that notwithstanding the foregoing and without limiting the
generality of the foregoing if, after the occurrence and during the continuance
of an Event of Default, the Guarantied Parties are prevented by Applicable Law
from exercising their respective rights to accelerate the maturity of the
Guarantied Obligations, to collect interest on the Guarantied Obligations, or
to enforce or exercise any other right or remedy with respect to the Guarantied
Obligations, or the Administrative Agent is prevented from taking any action to
realize on any collateral, such Guarantor agrees to pay to the Administrative
Agent for the account of the Guarantied Parties, upon demand therefor, the
amount that would otherwise have been due and payable had such rights and
remedies been permitted to be exercised by the Guarantied Parties.


 


(e)                                  Each
Guarantor hereby assumes responsibility for keeping itself informed of the
financial condition of the Borrower and of each other Loan Party, and of all
other circumstances bearing upon the risk of nonpayment of the Guarantied
Obligations or any part thereof, that diligent inquiry would reveal. Each
Guarantor hereby agrees that the Guarantied Parties shall have no duty to
advise any Guarantor of information known to any of the Guarantied Parties
regarding such condition or any such circumstance. In the event that any of the
Guarantied Parties in its sole discretion undertakes at any time or from time
to time to provide any such information to any Guarantor, such Guarantied Party
shall be under no obligation (i) to undertake any investigation not a part of
its regular business routine, (ii) to disclose any information which,


 


F-4

















 


pursuant
to accepted or reasonable banking or commercial finance practices, such
Guarantied Party wishes to maintain as confidential, or (iii) to make any
other or future disclosures of such information or any other information to
such Guarantor.


 


(f)                                    Each
Guarantor consents and agrees that the Guarantied Parties shall be under no
obligation to marshal any assets in favor of any Guarantor or otherwise in
connection with obtaining payment of any or all of the Guarantied Obligations
from any Person or source.


 


SECTION 4. Representations and Warranties. Each Guarantor
hereby represents and warrants to the Guarantied Parties that the
representations and warranties set forth in Article 5 of the Credit
Agreement as they relate to such Guarantor or to the Loan Documents to which
such Guarantor is a party are true and correct in all material respects in the
manner specified in the Credit Agreement and the Guarantied Parties shall be
entitled to rely on each of them as if they were fully set forth herein.


 


SECTION 5. Amendments, Etc. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by any Guarantor
herefrom shall in any event be effective unless the same shall be in writing,
approved by the Required Lenders (or by all the Lenders where the approval of
each Lender is required under the Credit Agreement) and signed by the
Administrative Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.


 


SECTION 6. Addresses for Notices. All notices and other
communications provided for hereunder shall be effectuated in the manner
provided for in Section 10.02 of the Credit Agreement, provided
that if a notice or communication hereunder is sent to a Guarantor, said notice
shall be addressed to such Guarantor, in care of the Borrower.


 


SECTION 7. No Waiver; Remedies.


 


(a)                                  No
failure on the part of any Guarantied Party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
Applicable Law, any of the other Loan Documents or any Guarantied Swap
Contract.


 


(b)                                 No
waiver by the Guarantied Parties of any default shall operate as a waiver of
any other default or the same default on a future occasion, and no action by
any of the Guarantied Parties permitted hereunder shall in way affect or impair
any of the rights of the Guarantied Parties or the obligations of any Guarantor
under this Guaranty, under any of the other Loan Documents or any Guarantied
Swap Contract, except as specifically set forth in any such waiver. Any
determination by a court of competent jurisdiction of the amount of any
principal and/or interest or other amount constituting any of the Guarantied
Obligations shall be conclusive and binding on each Guarantor irrespective of
whether such Guarantor was a party to the suit or action in which such
determination was made provided that the Borrower was so a party.


 


F-5

















 


SECTION 8. Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default under the Credit Agreement, each of the
Guarantied Parties is hereby authorized at any time and from time to time, to
the fullest extent permitted by Applicable Law, to set-off and apply any and
all deposits (general or special (except trust and escrow accounts), time or
demand, provisional or final) at any time held and other Indebtedness at any
time owing by such Guarantied Party to or for the credit or the account of each
Guarantor against any and all of the obligations of such Guarantor now or
hereafter existing under this Guaranty, irrespective of whether or not such
Guarantied Party shall have made any demand under this Guaranty and although
such obligations may be contingent and unmatured; provided, however, such
Guarantied Party shall promptly notify such Guarantor and the Borrower after
such set-off and the application made by such Guarantied Party. The rights of
each Guarantied Party under this Section 8 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which
such Guarantied Party may have.


 


SECTION 9. Continuing Guaranty; Transfer of Notes. This
Guaranty is a continuing guaranty and shall remain in full force and effect
until the Release Date, (ii) be binding upon each Guarantor, its permitted
successors and assigns, and (iii) inure to the benefit of and be
enforceable by the Guarantied Parties and their respective successors,
permitted transferees, and permitted assigns. Without limiting the generality
of the foregoing clause (iii), each of the Guarantied Parties may assign
or otherwise transfer any Note held by it or the Guarantied Obligations owed to
it to any other Person, and such other Person shall thereupon become vested
with all the rights in respect thereof granted to such Guarantied Party herein
or otherwise with respect to such of the Notes and the Guarantied Obligations
so transferred or assigned, subject, however, to compliance with the provisions
of Section 10.07 of the Credit Agreement in respect of assignments. No
Guarantor may assign any of its obligations under this Guaranty without
first obtaining the written consent of the Lenders as set forth in the Credit
Agreement.


 


SECTION 10. Reimbursement. To the extent that any Guarantor
shall be required hereunder to pay a portion of the Guarantied Obligations
exceeding the greater of (a) the amount of the economic benefit actually
received by such Guarantor from the Loans and the Letters of Credit and (b) the
amount such Guarantor would otherwise have paid if such Guarantor had paid the
aggregate amount of the Guarantied Obligations (excluding the amount thereof
repaid by the Borrower) in the same proportion as such Guarantor’s net worth at
the date enforcement is sought hereunder bears to the aggregate net worth of
all the Guarantors at the date enforcement is sought hereunder, then such
Guarantor shall be reimbursed by such other Guarantors for the amount of such
excess, pro rata, based on the respective net worths of such other Guarantors
at the date enforcement hereunder is sought. Notwithstanding anything to the
contrary, each Guarantor agrees that the Guarantied Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing its guaranty herein or effecting the rights and
remedies of the Guarantied Parties hereunder. This Section 10 is
intended only to define the relative rights of the Guarantors, and nothing set
forth in this Section 10 is intended to or shall impair the
obligations of the Guarantors, jointly and severally, to pay to the Guarantied
Parties the Guarantied Obligations as and when the same shall become due and
payable in accordance with the terms hereof.


 


SECTION 11. Reinstatement. This Guaranty shall remain in
full force and effect and continue to be effective should any petition be filed
by or against any Loan Party for liquidation


 


F-6

















 


or
reorganization, should any Loan Party become insolvent or make an assignment
for the benefit of creditors or should a receiver or trustee be appointed for
all or any significant part of any Loan Party’s assets, and shall, to the
fullest extent permitted by Applicable Law, continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of
the Obligations, or any part thereof, is, pursuant to Applicable Law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any obligees of the Obligations or such part thereof, whether as a “voidable
preference,” “fraudulent transfer,” or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part thereof,
is rescinded, reduced, restored or returned, the Guarantied Obligations shall,
to the fullest extent permitted by law, be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.


 


SECTION 12. GOVERNING LAW.


 


(a)                                  THIS
GUARANTY 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 EACH PARTY SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW.


 


(b)                                 The
parties hereto agree that Chapter 346 (other than 346.004) of the Texas
Finance Code (which regulates certain revolving credit accounts and revolving
tri-party accounts) shall not apply to Loans under this Guaranty.


 


(c)                                  ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY, ANY OTHER LOAN DOCUMENT
OR ANY GUARANTIED SWAP CONTRACT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF TEXAS SITTING IN DALLAS COUNTY, TEXAS OR IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS (DALLAS DIVISION), AND BY EXECUTION AND
DELIVERY OF THIS GUARANTY, THE GUARANTOR, 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 GUARANTOR, 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, OTHER DOCUMENT RELATED THERETO OR ANY GUARANTIED
SWAP CONTRACT, THE GUARANTOR, 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.


 


SECTION 13. WAIVER OF JURY TRIAL. EACH PARTY TO THIS
GUARANTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR ANY
GUARANTIED SWAP CONTRACT OR IN ANY WAY CONNECTED WITH OR


 


F-7

















 


RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT
TO ANY LOAN DOCUMENT OR ANY GUARANTIED SWAP CONTRACT, 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.


 


SECTION 14. Section Titles. The Section titles
contained in this Guaranty are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Guaranty.


 


SECTION 15. Execution in Counterparts. This Guaranty may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same Guaranty.


 


SECTION 16. Miscellaneous.


 


(a)                                  All
references herein to the Borrower or to any Guarantor shall include their
respective successors and assigns, including, without limitation, a receiver,
trustee or debtor-in-possession of or for the Borrower or such Guarantor. All
references to the singular shall be deemed to include the plural where the
context so requires.


 


(b)                                 All
payments made by any Guarantor hereunder shall be made to the Administrative
Agent, for the account of the respective Guarantied Party to which such payment
is owed, at the Administrative Agent’s Office in Dollars and in immediately
available funds.


 


SECTION 17. Subrogation and Subordination.


 


(a)                                  Subrogation.
Notwithstanding any reference to subrogation contained herein to the contrary,
until the Release Date, each Guarantor hereby irrevocably waives any claim or
other rights which it may have or hereafter acquire against the Borrower
that arise from the existence, payment, performance or enforcement of such
Guarantor’s obligations under this Guaranty, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution,
indemnification, any right to participate in any claim or remedy of any Lender
against the Borrower or any collateral which any Lender now has or hereafter
acquires, whether or not such claim, remedy or right arises in equity, or under
contract, statutes or common law, including without limitation, the right to
take or receive from the Borrower, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account
of such claim or other rights. If any amount shall be paid to any Guarantor in
violation of the preceding sentence and the Guarantied Obligations shall not
have been paid in full, such amount shall be deemed to have been paid to such
Guarantor for the benefit of, and held in trust for the benefit of, the
Lenders, and shall forthwith be paid to the Administrative Agent to be credited


 


F-8

















 


and
applied upon the Guarantied Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement. Each Guarantor acknowledges
that it will receive direct and indirect benefits from the financing
arrangements contemplated by the Credit Agreement and that the waiver set forth
in this Section 17 is knowingly made in contemplation of such
benefits.


 


(b)                                 Subordination.
All debt and other liabilities of the Borrower to any Guarantor (“Borrower
Debt”) are expressly subordinate and junior to the Guarantied Obligations
and any instruments evidencing the Borrower Debt to the extent provided below.


 


(i)                                     Until
the Release Date, each Guarantor agrees that it will not request, demand,
accept, or receive (by set-off or other manner) any payment amount, credit or
reduction of all or any part of the amounts owing under the Borrower Debt
or any security therefor, except as specifically allowed pursuant to
clause (ii) below;


 


(ii)                                  Notwithstanding
the provisions of clause (i) above, the Borrower may pay to the
Guarantors and the Guarantors may request, demand, accept and receive and
retain from the Borrower payments, credits or reductions of all or any part of
the amounts owing under the Borrower Debt or any security therefor on the
Borrower Debt, provided that the Borrower’s right to pay and the Guarantors’
right to receive any such amount shall automatically and be immediately
suspended and cease (A) upon the occurrence and during the continuance of
a Default or (B) if, after taking into account the effect of such payment,
a Default would occur and be continuing. The Guarantors’ right to receive
amounts under this clause (ii) (including any amounts which
theretofore may have been suspended) shall automatically be reinstated at
such time as the Default which was the basis of such suspension has been cured
or waived (provided that no subsequent Default has occurred) or such earlier
date, if any, as the Administrative Agent gives notice to the Guarantors of
reinstatement by the Required Lenders, in the Required Lenders’ sole
discretion;


 


(iii)                               If
any Guarantor receives any payment on the Borrower Debt in violation of this
Guaranty, such Guarantor will hold such payment in trust for the Lenders and
will immediately deliver such payment to the Administrative Agent; and


 


(iv)                              In
the event of the commencement or joinder of any suit, action or proceeding of
any type (judicial or otherwise) or proceeding under any Debtor Relief Law
against the Borrower (an “Insolvency Proceeding”) and subject to court
orders issued pursuant to the Bankruptcy Code, the Guarantied Obligations shall
first be paid, discharged and performed in full before any payment or
performance is made upon the Borrower Debt notwithstanding any other provisions
which may be made in such Insolvency Proceeding. In the event of any
Insolvency Proceeding, each Guarantor will at any time prior to the payment in
full of the Obligations on the Maturity Date (A) file, at the request of
any Guarantied Party, any claim, proof of claim or similar instrument necessary
to enforce the Borrower’s obligation to pay the Borrower Debt, and (B) hold
in trust for and pay to the Guarantied Parties any and all monies, obligations,
property, stock dividends or other assets received in any such proceeding on
account of the Borrower Debt in order that the Guarantied Parties may apply
such monies or the cash proceeds of such other assets to the Obligations.


 


F-9

















 


SECTION 18. Guarantor Insolvency. Should any Guarantor
voluntarily seek, consent to, or acquiesce in the benefits of any Debtor Relief
Law or become a party to or be made the subject of any proceeding
provided for by any Debtor Relief Law (other than as a creditor or claimant)
that could suspend or otherwise adversely affect the rights of any Guarantied
Party granted hereunder, then, the obligations of such Guarantor under this
Guaranty shall be, as between such Guarantor and such Guarantied Party, a
fully-matured, due, and payable obligation of such Guarantor to such Guarantied
Party (without regard to whether the Borrower is then in default under the
Credit Agreement or whether any part of the Guarantied Obligations is then
due and owing by the Borrower to such Guarantied Party), payable in full by
such Guarantor to such Guarantied Party upon demand, which shall be the estimated
amount owing in respect of the contingent claim created hereunder.


 


SECTION 19. Rate Provision. It is not the intention of any
Guarantied Party to make an agreement violative of the laws of any applicable
jurisdiction relating to usury. Regardless of any provision in this Guaranty,
no Guarantied Party shall ever be entitled to contract, charge, receive,
collect or apply, as interest on the Guarantied Obligations, any amount in
excess of the Highest Lawful Rate. In no event shall any Guarantor be obligated
to pay any amount in excess of the Highest Lawful Rate. If from any
circumstance the Administrative Agent or any Guarantied Party shall ever
receive, collect or apply anything of value deemed excess interest under
Applicable Law, an amount equal to such excess shall be applied to the
reduction of the principal amount of outstanding Revolving Loans, Swing Line
Loans, L/C Borrowings and any remainder shall be promptly refunded to the payor.
In determining whether or not interest paid or payable with respect to the
Guarantied Obligations, under any specified contingency, exceeds the Highest
Lawful Rate, the Guarantors and the Guarantied Parties shall, to the maximum
extent permitted by Applicable Law, (a) characterize any non-principal
payment as an expense, fee or premium rather than as interest, (b) amortize,
prorate, allocate and spread the total amount of interest throughout the full
term of such Obligations so that the interest paid on account of such
Guarantied Obligations does not exceed the Highest Lawful Rate and/or (c) allocate
interest between portions of such Guarantied Obligations; provided that if the
Guarantied Obligations are paid and performed in full prior to the end of the
full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Highest Lawful Rate, the Guarantied
Parties shall refund to the payor the amount of such excess or credit the
amount of such excess against the total principal amount owing, and, in such
event, no Guarantied Party shall be subject to any penalties provided by any
laws for contracting for, charging or receiving interest in excess of the
Highest Lawful Rate.


 


SECTION 20. Severability. Any provision of this Guaranty
which is for any reason prohibited or found or held invalid or
unenforceable by any court or governmental agency shall be ineffective to the
extent of such prohibition or invalidity or unenforceability, without
invalidating the remaining provisions hereof in such jurisdiction or affecting
the validity or enforceability of such provision in any other jurisdiction.


 


SECTION 21. ENTIRE AGREEMENT. THIS GUARANTY REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES REGARDING THE SUBJECT MATTER HEREIN AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS. OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE


 


F-10

















 


PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


 


SECTION 22. Conflicts. If in the event of a conflict
between the terms and conditions of this Guaranty and the terms and conditions
of the Credit Agreement, the terms and conditions of the Credit Agreement shall
control.


 


SECTION 23. Taxes.


 


(a)                                  Except
as provided below in this Section 23, any and all payments by each
Guarantor to or for the account of the Administrative Agent or any Lender under
this Guaranty, any other Loan Document or any Guarantied Swap Contract shall be
made free and clear of and without deduction for any and all present or future
income, stamp or other taxes, duties, levies, imposts, deductions, assessments,
fees, withholdings or similar charges, now or thereafter imposed, and all
liabilities with respect thereto, excluding, in the case of the Administrative
Agent and any 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 upon 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 under the laws
of which the Administrative Agent, or such Lender, applicable lending office,
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 is 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
solely 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 any Guarantor shall be required
by any Laws to deduct any Taxes from or in respect of any sum payable under
this Guaranty, any other Loan Document or any Guarantied Swap Contract 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) such
Guarantor shall make such deductions, (iii) such Guarantor shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable Laws, and (iv) promptly (but in no event later
than 30 days) after the date of such payment, such Guarantor 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 such Guarantor 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 the Credit Agreement or (ii) that are U.S. withholding taxes imposed on
amounts payable to such Lender at the time such Lender becomes a party to the
Credit Agreement.


 


(b)                                 In
addition, each Guarantor 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


 


F-11

















 


which
arise from any payment made under this Guaranty, any other Loan Document,
any  Guarantied Swap Contract or from the
execution, delivery, performance, enforcement or registration of, or otherwise
with respect to, this Guaranty, any other Loan Document or any Guarantied Swap
Contract (hereinafter referred to as “Other Taxes”).


 


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


 


(d)                                 Each
Guarantor 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 23(c) and (iii) any liability (including
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 23
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 of any Lender’s
lending office) and (ii) otherwise cooperate with the Borrower to minimize
amounts payable by each Guarantor under this Section 23; provided,
however, the Lenders and the Administrative Agent shall not be obligated
by reason of this Section 23(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 any Guarantor pays sums
pursuant to this Section 23 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 Guaranty or, to the
extent that no amounts are due and owing under this Guaranty at the time such
refunds are received, the party receiving such refund shall promptly pay over
all such refunded sums to such Guarantor, provided that no Default is in
existence at such time.


 


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(g)                                 The
obligations of each Guarantor and each Lender or Participant under this Section 23
shall survive the termination of this Agreement and the payment of the Loans
and all other amounts payable hereunder, under the other Loan Documents and
under any Guarantied Swap Contract.


 


	
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F-13

















 


IN WITNESS WHEREOF, each Guarantor has caused this
Guaranty to be duly executed and delivered by its duly authorized officer on
the date first above written.


 


	
   

  	
  [GUARANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [GUARANTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								



 


F-14

















 


EXHIBIT G


 


OPINION
MATTERS


 


The matters contained in the following
Sections of the Credit Agreement should be covered by the legal opinion:


 


•                                          Section 5.01(a),
(b) and (c)


 


•                                          Section 5.02


 


•                                          Section 5.03


 


•                                          Section 5.04


 


•                                          Section 5.06


 


•                                          Section 5.14(b)


 


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EXHIBIT H


 


FORM OF
BORROWING BASE CERTIFICATE


 


Date:                  


 


To:                              Guaranty
Bank, as Administrative Agent, L/C Issuer and Swing Line Lender


 


Ladies and Gentlemen:


 


Reference is made to that certain First Amended and
Restated Credit Agreement, dated as of May 16, 2006 (as amended, extended,
supplemented or otherwise modified in writing from time to time, the “Agreement;”
the terms defined therein being used herein as therein defined), among Meritage
Homes Corporation (the “Borrower”), the Lenders from time to time party
thereto, and Guaranty Bank, as Administrative Agent, L/C Issuer and Swing Line
Lender.


 


This Borrowing Base Certificate is delivered pursuant
to Section 6.02(c) of the Credit Agreement. All capitalized
terms used herein and defined in the Credit Agreement shall be used herein as
so defined.


 


I.                                         Borrowing Base [to be completed
monthly]


 


Borrower hereby
represents and warrants that the following Borrowing Base Report is true and
correct in all respects as of                 ,
          (the “Reporting Date”). The
Borrowing Base is determined as follows:


 


 


	
  1.

  	
   

  	
  Net Book Value of
  Presold Units:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Net Book Value
  of Eligible Model Units:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Net Book Value
  of Unsold Units Under Constructions:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Net Book Value
  of Completed Unsold Units Less Than 18 Months Since Completion:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Net Book Value
  of Finished Lots:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Net Book Value
  of Land/Lots Under Development:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Net Book Value
  of Unimproved Entitled Land:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Borrowing Base
  on Reporting Date ((90% x Line 1.) + (80% x Line 2.) + (80% x Line 3.) + (80%
  x Line 4.) + (70% x Line 5.) + (60% x Line 6.) + (50% x Line 7.)):

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Borrowing Base
  Debt

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
   

  	
  Consolidated
  Indebtedness as of Reporting Date (Line

  	
   

  	
  $

  	
   

  
								



 


H-1

















 


	
   

  	
   

  	
   

  	
   

  	
  I.A.3 of
  Compliance Certificate):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
   

  	
  Any portion of
  any Subordinated Debt of any Loan Party which is due and payable more than
  one year from such date of determination:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
   

  	
  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 secured by Liens on such
  assets (i) 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):

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  D.

  	
   

  	
  The face amount
  of all undrawn Performance Letters of Credit, in each case issued for the
  account of, or guaranteed by the Borrower or any of its Subsidiaries (other
  than Unrestricted Subsidiaries):

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E.

  	
   

  	
  Cash and Cash
  Equivalents of the Loan Parties not subject to any Lien securing Indebtedness
  in an aggregate amount in excess of $5,000,000:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  F.

  	
   

  	
  Borrowing Base
  Debt (Lines 9.A. - B. - C. - D. - E.):

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Availability
  (Line 8 - Line 9.F.)

  	
   

  	
  $

  	
   

  



 


II.                                     Borrowing Base Certifications


 


Borrower hereby represents and warrants that as of the
Reporting Date:


 


1.                                       No
more than 50% of the Borrowing Base is comprised of the items set forth in
lines 5, 6 and 7 above.


 


2.                                       No
more than 25% of the Borrowing Base is comprised of the items set forth in
lines 6 and 7 above.


 


3.                                       The
aggregate amount of condominiums included in the Borrowing Base does not exceed
15% of the aggregate number of Units comprising the items set forth in lines 1,
2, 3 and 4 in the aggregate.


 


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IN WITNESS WHEREOF, the
undersigned has executed this Certificate as of                          ,         .


 


	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 


H-3

















 


EXHIBIT I


 


FORM OF
SWING LINE NOTE


 


	
  $                                                    

  	
   

  	
                           

  



 


FOR VALUE RECEIVED, MERITAGE HOMES CORPORATION, a
Maryland corporation (the “Borrower”), hereby promises to pay to the
order of GUARANTY BANK (“Swing Line Lender”), on the date when due in
accordance with the Credit Agreement referred to below, the aggregate unpaid
principal amount of each Swing Line Loan from time to time made by the Swing
Line Lender to the Borrower under that certain First Amended and Restated
Credit Agreement, dated as of May 16, 2006 (as amended, extended,
supplemented or otherwise modified in writing from time to time, the “Agreement;”
the terms defined therein being used herein as therein defined), among the
Borrower, the Lenders from time to time party thereto, and Guaranty Bank, as
Administrative Agent, L/C Issuer and Swing Line Lender.


 


The Borrower promises to pay interest on the unpaid
principal amount of each Swing Line Loan from the date of such Swing Line Loan
until such principal amount is paid in full, at such interest rates and at such
times as provided in the Agreement.


 


All payments of principal and interest shall be made
to the Swing Line Lender in Dollars in immediately available funds at its
Lending Office.


 


If any amount is not paid in full when due hereunder,
such unpaid amount shall bear interest, to be paid upon demand, from the due
date thereof until the date of actual payment (and before as well as after
judgment) computed at the per annum rate set forth in the Agreement.


 


This Note is the Swing Line Note referred to in the
Agreement, is entitled to the benefits thereof and is subject to optional and
mandatory prepayment in whole or in part as provided therein. This Note is
also entitled to the benefits of the Guaranty. Upon the occurrence of one or
more of the Events of Default specified in the Agreement, all amounts then
remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable all as provided in the Agreement. Swing Line Loans
made by the Swing Line Lender shall be evidenced by one or more loan accounts
or records maintained by Swing Line Lender in the ordinary course of business. The
Swing Line Lender may also attach schedules to this Note and endorse
thereon the date, amount and maturity of the Swing Line Loans and payments with
respect thereto.


 


The Borrower, for itself, its successors and assigns,
hereby waives diligence, presentment, protest and demand and notice of protest,
demand, intent to accelerate, acceleration, dishonor and non-payment of this
Note.


 


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THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.


 


	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 


I-2

















 


SWING
LINE LOANS AND PAYMENTS WITH RESPECT THERETO


 


 


	
  Date

  	
   

  	
  Amount of Loan

  Made

  	
   

  	
  Amount of

  Principal or

  Interest Paid This

  Date

  	
   

  	
  Outstanding Principal

  Balance This Date

  	
   

  	
  Notation Made By

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


I-3