EX-10.1






Exhibit 10.1




FOURTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT




     THIS FOURTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is
made as of the 13 day of January, 2009 (the “Closing Date”), by and among ASHTON WOODS USA L.L.C.
(“Borrower”), the LENDERS party hereto, WACHOVIA BANK, NATIONAL ASSOCIATION, as agent (“Agent”),
and the GUARANTORS party hereto.



R E C I T A L S




     WHEREAS, Borrower, Agent and the Lenders have entered into a certain First Amended and
Restated Credit Agreement dated as of December 16, 2005 (as amended by that certain First Amendment
to First Amended and Restated Credit Agreement dated as of January 11, 2007, that certain Second
Amendment to First Amended and Restated Credit Agreement dated as of June 15, 2007, and that
certain Third Amendment to First Amended and Restated Credit Agreement dated as of December 20,
2007, the “Credit Agreement”). Capitalized terms used in this Amendment which are not otherwise
defined in this Amendment shall have the respective meanings assigned to them in the Credit
Agreement;



     WHEREAS, the Guarantors consist of Owner Guarantors that have executed or otherwise become a
party to the Owner Guaranty Agreement and Subsidiary Guarantors that have executed or otherwise
become a party to the Subsidiary Guaranty Agreement;



     WHEREAS, Borrower and the Guarantors have requested Agent and the Lenders to amend the Credit
Agreement to modify certain provisions and to make other such changes as the parties hereunder deem
appropriate upon the terms and conditions hereinafter set forth;



     WHEREAS, certain Specified Defaults (as hereinafter defined) are currently existing as a
result of which the Lenders are under no obligation to continue to make Loans or issue Facility
L/Cs under the Credit Agreement; and



     WHEREAS, Borrower has requested that the Lenders waive the Specified Defaults and make certain
Loans and/or issue Facility L/Cs to Borrower and the Lenders have agreed to do so only if the
Credit Agreement is amended as set forth herein and Borrower fulfills the conditions to
effectiveness of this Amendment including, but not limited to (i) granting the Lenders a first
priority, senior secured lien on substantially all assets of Borrower and the Subsidiary Guarantors
which liens shall secure all Obligations (as defined in the Credit Agreement), (ii) granting the
Lenders a first priority, senior secured lien on any ownership interests in Borrower owned by the
Owner Guarantors and (iii) the acceptance of the Noteholders representing at least 90% of the
Senior Subordinated Notes (as described below) of the Exchanged Notes, the Offering Memorandum and
the Exchange Indenture (each as hereinafter defined);



     NOW, THEREFORE, in consideration of the Recitals and the mutual promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower, Agent, the Lenders and the Guarantors, intending to be legally bound
hereby, agree as follows:



     SECTION 1. Recitals. The Recitals are incorporated herein by reference and shall be deemed to be
a part of this Amendment.



 









 





     SECTION 2. Amendments to the Credit Agreement.



          2.1 As of the Closing Date, the Aggregate Commitment under the Credit Agreement shall hereby
be reduced to $95,000,000.




          2.2 The amendments to the Credit Agreement described in Section 2.3 below will become
effective if, prior to February 20, 2009 (the “Effectiveness Termination Date”), the following
conditions are satisfied (unless waived by the Required Lenders, in writing, in their sole
discretion) (the date on or prior to the Effectiveness Termination Date that such conditions are
satisfied shall be the “Fourth Amendment Effective Date”). If the following conditions are not
satisfied on or prior to the Effectiveness Termination Date, the amendments described in Section
2.3 below shall not be effective at any time:





               (a) The Bond Resolution (as hereinafter defined) shall have been completed;




               (b) Borrower shall have received at least $20,000,000 in new cash equity from
Borrower’s owners or third-party investors since the Closing Date (the “New Equity”);




               (c) The Bridge Loan (as hereinafter defined) shall be repaid and the commitments
thereunder terminated prior to or concurrently with the Fourth Amendment Effective Date and
the Bridge Collateral shall be released by the Bridge Creditor (as hereinafter defined);




               (d) Borrower shall have entered into the Security Documents (as defined in the
amendments set forth in Schedule 1) which shall be satisfactory in all respects to Agent and
the Required Lenders and which provide a first priority, senior secured lien on all
homebuilding assets and all other personal property, cash, and intangible assets and other
assets (subject to such exceptions as may be approved by Agent), owned at such time or
thereafter acquired, of Borrower and its Subsidiaries in favor of Agent for the benefit of
the Lenders to secure the Obligations (the “Security”); provided that each Lender shall be
assumed to have agreed that such forms of Security Documents are satisfactory if they do not
advise Agent otherwise prior to February 1, 2009;




               (e) Borrower shall have delivered to the Agent due diligence related to the Security
which satisfies the Mortgage Requirements (subject to such exceptions as may be approved by
Agent) (other than the Appraisals) (each as defined in Schedule 1) for all real property
assets of Borrower and its Subsidiaries;




               (f) The Security Agreement, the Pledge Agreements, the Mortgages and the Control
Agreements (each as defined in Schedule 1) shall have been properly executed by Borrower,
the Subsidiary Guarantors, the Owner Guarantors and Agent, as appropriate;




               (g) Each document (including each Uniform Commercial Code financing statement) required
by law or reasonably requested by Agent to be filed,



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registered or recorded in order to create in favor of Agent for the benefit of Lenders
a valid, legal and perfected first-priority security interest in and lien on the Security
(subject to Permitted Liens) shall have been filed, registered or recorded and evidence
thereof shall have been delivered to Agent;




               (h) Borrower shall have paid all fees, expenses and costs (including reasonable
attorneys’ fees and expenses but excluding the allocated costs of internal counsel) incurred
by Agent, Lenders or their Affiliates or agents in connection with the Credit Agreement,
this Amendment and the Security, including the remaining 60% of the Consent Fee (as
hereinafter defined);




               (i) Borrower shall have delivered to Agent opinions of counsel addressing due
authorization, execution and enforceability of the Security Documents and such other matters
relating to this Amendment and the transactions contemplated hereby as Agent may reasonably
request;




               (j) Borrower shall provide a supplement to Schedule 2 and Schedule 4.16 to the Credit
Agreement if Borrower determines necessary, and such Schedules, as supplemented, shall be
satisfactory in all respects to Agent;




               (k) The fact that the representations and warranties of Borrower and each Guarantor
contained in Article 4 of the Credit Agreement and Section 8 of this Amendment shall be
true, correct and complete in all material respects on and as of the Fourth Amendment
Effective Date as if made on and as of such date unless stated to relate to a specific
earlier date (in which case such representations and warranties shall have been true,
correct and complete in all material respects on and as of such earlier date);




               (l) No Default or Event of Default shall (i) have occurred or be continuing under the
Credit Agreement or (ii) occur or exist upon effectiveness of this Agreement and the
amendments to the Credit Agreement contemplated hereby;




               (m) No default or event of default shall exist under (i) the Amended Notes, (ii) the
Exchanged Notes, or (iii) the Exchange Indenture; and




               (n) Borrower and all Guarantors shall have delivered to Agent a certificate certifying,
as of the Fourth Amendment Effective Date, as follows:




     EACH OF BORROWER AND THE GUARANTORS ACKNOWLEDGES THAT EACH OF THE AGENT AND THE LENDERS
HAS ACTED IN GOOD FAITH AND HAS CONDUCTED ITSELF IN A COMMERCIALLY REASONABLE MANNER IN ITS
RELATIONSHIPS WITH BORROWER AND THE GUARANTORS IN CONNECTION WITH THE FOURTH AMENDMENT AND
IN CONNECTION WITH THE OBLIGATIONS AND THE CREDIT AGREEMENT, BORROWER AND THE GUARANTORS
HEREBY WAIVING AND RELEASING ANY CLAIMS TO THE CONTRARY. EACH OF BORROWER AND THE
GUARANTORS ON ITS OWN BEHALF AND ON BEHALF OF EACH OF ITS AFFILIATES, RELEASES AND
DISCHARGES THE AGENT AND THE LENDERS, ALL AFFILIATES OF THE



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AGENT AND THE LENDERS, ALL OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS OF THE
AGENT AND THE LENDERS OR ANY OF THEIR AFFILIATES, AND ALL OF THEIR PREDECESSORS IN INTEREST,
FROM ANY AND ALL CLAIMS, DEFENSES AND CAUSES OF ACTION, WHETHER KNOWN OR UNKNOWN AND WHETHER
NOW EXISTING OR HEREAFTER ARISING, INCLUDING WITHOUT LIMITATION, ANY USURY CLAIMS, THAT HAVE
AT ANY TIME BEEN OWNED, OR THAT ARE HEREAFTER OWNED, IN TORT OR IN CONTRACT BY BORROWER, ANY
GUARANTOR OR ANY AFFILIATE OF BORROWER OR ANY GUARANTOR AND THAT ARISE OUT OF ANY ONE OR
MORE CIRCUMSTANCES OR EVENTS THAT OCCURRED PRIOR TO THE FOURTH AMENDMENT EFFECTIVE DATE.
MOREOVER, EACH OF BORROWER AND THE GUARANTORS, JOINTLY AND SEVERALLY, ON ITS OWN BEHALF AND
ON BEHALF OF EACH OF ITS AFFILIATES, WAIVES ANY AND ALL CLAIMS NOW OR HEREAFTER ARISING FROM
OR RELATED TO ANY DELAY BY THE AGENT AND THE LENDERS IN EXERCISING ANY RIGHTS OR REMEDIES
UNDER THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS.



          2.3 On the Fourth Amendment Effective Date, the following amendments to the Credit Agreement
shall be effective:





               (a) The definitions set forth in Part A of Schedule 1, attached hereto and made a part
hereof, shall be deleted from Section 1.1 of the Credit Agreement and such definitions shall
be restated in their entirety as set forth in Part A of Schedule 1;




               (b) The definitions set forth in Part B of Schedule 1, attached hereto and made a part
hereof, shall be added to Section 1.1 of the Credit Agreement in alphabetical order;




               (c) The definitions set forth in Part C of Schedule 1, attached hereto and made a part
hereof, shall be deleted from Section 1.1 of the Credit Agreement in their entirety;




               (d) The sections in the Credit Agreement as set forth in Part D of Schedule 1, attached
hereto and made a part hereof, shall be deleted from the Credit Agreement and such sections
shall be restated in their entirety as set forth in Part D of Schedule 1;




               (e) The sections to the Credit Agreement set forth in Part E of Schedule 1, attached
hereto and made a part hereof, shall be added to the Credit Agreement in the numerical order
set forth in Part E of Schedule 1;




               (f) Exhibit A to the Credit Agreement shall hereby be amended by deleting such Exhibit
A in its entirety and inserting in lieu thereof the Exhibit A attached hereto and made a
part hereof;



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               (g) Exhibits J-1, J-2, J-3, K, L-1, L-2 and M, each as attached hereto and made a part
hereof, shall be added to, and become Exhibits to, the Credit Agreement; and




               (h) Schedule 4.16, delivered as required pursuant to Section 8.17 hereof, shall be
added to, and become a Schedule to, the Credit Agreement.



          2.4 If the conditions set forth in Section 2.2 are not satisfied on or prior to the
Effectiveness Termination Date, the amendments and supplements to the Credit Agreement and Exhibits
and Schedules to the Credit Agreement as set forth in Section 2.3 shall not be effective at any
time.




     SECTION 3. Bond Resolution. On or before the Effectiveness Termination Date (the
“Bond Resolution Date”), Borrower shall have caused to be effective a consent solicitation and
exchange offer for the 9.5% Senior Subordinated Notes (the “Senior Subordinated Notes”) pursuant to
which such Senior Subordinated Notes shall be surrendered and exchanged for new subordinated notes
to be issued by Borrower (the “Exchanged Notes”) and the indenture governing any remaining Senior
Subordinated Notes will be amended (the “Bond Amendment”). Such exchange offer and consent
solicitation shall be evidenced by an offering memorandum and letter of transmittal (collectively,
the “Offering Memorandum”). The Exchanged Notes shall be evidenced by a new indenture (the
“Exchange Indenture”). The Offering Memorandum, the Bond Amendment, the Exchanged Notes and the
Exchange Indenture shall be satisfactory in all respects to Agent and the Required Lenders, and
shall be subject to the conditions listed below. The effective exchange of at least 90% of the
Senior Subordinated Notes pursuant to the terms set forth in the Offering Memorandum on or before
the Bond Resolution Date and satisfaction of the conditions listed below will be termed the “Bond
Resolution”.



          3.1 Noteholders representing at least 90% of the Senior Subordinated Notes must have validly
tendered and not withdrawn their Senior Subordinated Notes pursuant to the Offering Memorandum.




          3.2 The Offering Memorandum and Exchange Indenture and all related documentation must be
satisfactory to Agent and Required Lenders and shall include, without limitation, subordination and
intercreditor terms satisfactory to Agent and Required Lenders providing that (among other things),
in the event of a default under the Exchanged Notes or upon the occurrence of an Event of Default
under the Credit Agreement, the noteholders shall be precluded from exercising any remedies under
the Exchanged Notes (other than in the event of (i) a default in the payment of principal under the
Credit Agreement which is not waived or remedied within 180 days or (ii) an acceleration of the
Credit Agreement), and no payments shall be made or accepted under the Exchanged Notes for at least
180 days following a default under the Exchanged Notes or an Event of Default under the Credit
Agreement; provided that each Lender shall be assumed to have agreed that such subordination and
intercreditor terms are satisfactory if it does not advise Agent otherwise in writing prior to the
Bond Resolution Date.




          3.3 No default or event of default shall exist under (a) the Senior Subordinated Notes (as
amended pursuant to the Bond Amendment on or prior to the effectiveness of the




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Exchange Indenture, the “Amended Notes”), (b) the Exchanged Notes, or (c) the Exchange
Indenture.




          3.4 The terms of the Exchanged Notes shall be based on the provisions set forth in the terms
and conditions attached hereto as Schedule 2.



The Lenders hereby (i) consent to the amendment and exchange of the Senior Subordinated Notes on or
prior to the Effectiveness Termination Date subject to the satisfaction of the conditions listed in
this Section 3, and (ii) agree that an amendment and exchange of the Senior Subordinated Notes on
or prior to the Effectiveness Termination Date subject to the satisfaction of the conditions listed
in this Section 3 shall not constitute a Default under the Credit Agreement.




     SECTION 4. Defaults; Waiver. Borrower is in default under the terms of the Credit
Agreement. In particular, (i) for the fiscal period ending May 31, 2008, Borrower is in
noncompliance with Section 6.10 [Maintenance of Minimum Tangible Net Worth], Section 6.11
[Maintenance of Leverage Ratio] and Section 7.5 [Land Components] of the Credit Agreement, (ii) for
the fiscal period ended August 31, 2008, Borrower is in noncompliance with Section 6.10
[Maintenance of Minimum Tangible Net Worth], Section 6.11 [Maintenance of Leverage Ratio], Section
7.4 [Limitation on Unimproved Entitled Land] and Section 7.5 [Land Components] of the Credit
Agreement and (iii) as of October 1, 2008, Borrower is in noncompliance with Section 9.6(a)
[Default in Payment of any Indebtedness] for the payments due on October 1, 2008 (collectively, the
“Specified Defaults”). Subject to the terms and conditions set forth herein, Agent and the Lenders
hereby agree to waive compliance with the Credit Agreement for the Specified Defaults; provided
however that such waiver shall only be effective on and as of the Fourth Amendment Effective Date.
If the conditions set forth in Section 2.2 are not satisfied on or prior to the Effectiveness
Termination Date, the waiver set forth in this Section 4 shall have no force and effect and the
Lenders hereby reserve all of their rights and remedies with respect to the Specified Defaults.
Other defaults may exist under the terms of the Credit Agreement and the Lenders reserve the right
to assert all other defaults under the Credit Agreement, whether such defaults exist now or may
hereafter occur.



     SECTION 5. No Fundings. No Revolving Credit Loan or Swingline Loan shall be made, nor
shall any Facility L/C be issued, until the Fourth Amendment Effective Date.



     SECTION 6. Bridge Loan.



          6.1 The Lenders hereby consent to the borrowing by Borrower and guaranty by the Borrower
Subsidiaries of a loan which loan shall (a) not exceed $7,000,000, (b) be provided by Parkmount
Land Development Inc. (an entity owned and controlled by existing direct or indirect equity holders
of Borrower) (the “Bridge Creditor”), (c) be secured by assets of Borrower and its Subsidiaries
with an aggregate book value not to exceed the lesser of (i) two times the principal amount of such
loan and (ii) $14,000,000 (the “Bridge Collateral”), (d) contain no covenants, (e) contain no cross
default to the Credit Agreement, (f) have a maturity date not later than one (1) year from the date
the loan is made, (h) provide for interest payments not in excess of the greater of (i) the
Alternate Base Rate plus 6.00% and (ii) the LIBOR Rate plus 6.00%, (h) not require principal
payments on such loan prior to maturity, (i) permit




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prepayment, without penalty or premium, of such loan, and (j) otherwise contain terms and
conditions subject to Agent’s approval (the “Bridge Loan”).




          6.2 Subject to the terms and conditions set forth in Section 6.1 above, the Lenders hereby
waive compliance with the Credit Agreement for (a) the failure of the Borrower to comply or to
cause compliance with Section 7.2 of the Credit Agreement by placing a Lien on the Bridge
Collateral pursuant to the terms of the Bridge Loan, and (b) the failure of the Borrower to comply
or cause compliance with Section 7.9 of the Credit Agreement by incurring additional Indebtedness
under the Bridge Loan.




     SECTION 7. Conditions Precedent to Closing. The Closing Date of this Amendment is
subject to the following conditions:



          7.1 this Amendment shall have been properly executed by the Required Lenders, Agent, the
Guarantors and Borrower;




          7.2 Borrower shall be diligently pursuing the Bond Resolution, pursuant to the terms set forth
in Schedule 2;




          7.3 Borrower shall have paid all fees and expenses to be paid by Borrower to Agent and the
Lenders in connection with the Credit Agreement and this Amendment, all fees, expenses and costs
(including reasonable attorneys’ fees and expenses but excluding the allocated costs of internal
counsel) incurred by Agent, Lenders or their Affiliates or agents in connection with the Credit
Agreement and this Amendment, including a fee to Agent, for the account of each Lender (including
Wachovia Bank, National Association) approving this Amendment, a consent fee (the “Consent Fee”)
equal to 50 basis points multiplied by each such Lender’s Commitment; provided,
however that only 40% of the Consent Fee shall be due and payable on the Closing Date, and
the remaining 60% of the Consent Fee shall be due and payable on the Fourth Amendment Effective
Date; provided further, however, if the Fourth Amendment Effective Date
does not occur prior to the Effectiveness Termination Date, or such later date as may be agreed to
by the Lenders, the remaining 60% of the Consent Fee shall no longer be due and payable;




          7.4 receipt by Agent, unless otherwise agreed to by Agent, of resolutions of Borrower’s and
each Guarantor’s board of directors or similar governing body approving this Amendment and the
amendments to the Credit Agreement contained herein, authorizing, among other things, the execution
and delivery by the appropriate officers on behalf of Borrower, and the performance by Borrower, of
this Amendment, the Credit Agreement and the other Loan Documents and certificates related to such
resolutions;




          7.5 receipt by Agent of opinions of counsel to Borrower and Guarantors, Paul, Hastings,
Janofsky & Walker LLP, addressing due authorization, execution and enforceability of this
Amendment, no conflicts with any law or any other agreements, and such other matters relating to
this Amendment and the transactions contemplated hereby as Agent may reasonably request; and




          7.6 the fact that the representations and warranties of Borrower and each Guarantor contained
in Article 5 of the Credit Agreement and Section 8 of this Amendment shall




7









 




be true, correct and complete in all material respects on and as of the Closing Date as if
made on and as of such date unless stated to relate to a specific earlier date (in which case such
representations and warranties shall have been true, correct and complete in all material respects
on and as of such earlier date).




     SECTION 8. Representations, Covenants and Agreements. In order to induce the Lenders
to enter into this Amendment, Borrower and the Guarantors each represents, warrants, covenants and
agrees that:



          8.1 Credit Agreement. The Credit Agreement, as amended hereby, constitutes the valid, legal
and binding obligation of Borrower and such Credit Agreement, as amended hereby, is fully
enforceable in accordance with its terms and conditions.




          8.2 Guaranty Agreements. The Guaranty Agreements constitute the valid, legal and binding
obligation of the Guarantors and such Guaranty Agreements are fully enforceable in accordance with
their terms and conditions.




          8.3 Security Agreement. On and as of the Fourth Amendment Effective Date, the Security
Agreement is effective to create in favor of Agent, for the ratable benefit of the Secured Parties
(as defined in Schedule 1), a legal, valid and enforceable security interest in the Collateral
identified therein owned by Borrower and Subsidiary Guarantors, and, when financing statements in
appropriate form are filed in the appropriate offices for the locations specified in the schedules
to the Security Agreement, the Security Agreement shall constitute a fully perfected Lien (subject
to Permitted Liens) on, and security interest in, all right, title and interest of the grantors
thereunder in such Collateral that may be perfected by filing, recording or registering a financing
statement under the UCC as in effect, in each case prior and superior in right to any other Lien
(other than Permitted Liens) on any Collateral.




          8.4 Control Agreements. On and as of the Fourth Amendment Effective Date, the Control
Agreements constitute the valid, legal and binding obligation of Borrower and the Subsidiary
Guarantors party thereto and are fully enforceable in accordance with their terms and conditions.




          8.5 Pledge Agreement. On and as of the Fourth Amendment Effective Date, each Pledge Agreement
is effective to create in favor of Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral identified therein, and, when such
Collateral is delivered to Agent, each Pledge Agreement shall constitute a fully perfected first
priority Lien (subject to Permitted Liens) on, and security interest in, all right, title and
interest of the pledgors thereunder in such Collateral, in each case subject to no other Lien
(other than Permitted Liens).




          8.6 Mortgages. On and as of the Fourth Amendment Effective Date, the Mortgages granted
pursuant to the terms of this Amendment are effective to create in favor of Agent, for the ratable
benefit of the Secured Parties, a legal, valid and enforceable Lien and security interest in the
Property identified therein owned by Borrower and/or one or more Subsidiary Guarantors who are a
party thereto, and, when such Mortgages are filed in the appropriate offices for the locations
specified in such Mortgages, the Mortgages shall constitute a




8









 




fully perfected Lien on, and security interest in, all right, title and interest of the
grantors thereunder in such Property, in each case prior and superior in right to any other Lien
(other than Permitted Liens).




          8.7 Security. Borrower and the Guarantors are entering into the Security Agreement, Control
Agreements, Pledge Agreements and Mortgages as consideration for the Lenders entering into this
Amendment and agreeing to make Loans and issue Facility L/Cs up to the Borrowing Cap and to secure
such Loans and Facility L/Cs up to the Borrowing Cap and all other Obligations under the Loan
Documents.




          8.8 Subordinated Notes. On and as of the Closing Date, the Senior Subordinated Notes are the
only Subordinated Notes issued and outstanding. On and as of the Fourth Amendment Effectiveness
Date, the Amended Notes and the Exchanged Notes are the only Subordinated Notes issued and
outstanding.




          8.9 Bond Resolution. On or before the Effectiveness Termination Date, Borrower shall cause
(i) the Bond Resolution Date to occur or (ii) the Offering Memorandum and Exchange Indenture to be
executed and effective.




          8.10 Continued Payment and Performance. Except as expressly modified by this Amendment,
Borrower and the Guarantors shall continue to pay and perform their obligations herein and under
the Credit Agreement and the Guaranty Agreements in accordance with the terms hereof and thereof
and shall comply with each and every term, provision and agreement contained herein and in the
Credit Agreement and the Guaranty Agreements.




          8.11 No Default. Other than the Specified Defaults, no default or event of default, nor any
act, event, condition or circumstance which with the passage of time or the giving of notice, or
both, would constitute a default or an event of default, under the Credit Agreement, the Guaranty
Agreements or any other Loan Document has occurred and is continuing on the date hereof.




          8.12 Power and Authority. Borrower and the Guarantors each has the power and authority to
enter into this Amendment and the other Loan Documents and to do all acts and things as are
required or contemplated hereunder or thereunder to be done, observed and performed by it.




          8.13 Enforceable Obligations. This Amendment has been duly authorized, validly executed and
delivered by one or more authorized officers of Borrower and Guarantors and constitutes a legal,
valid and binding obligation of Borrower and each Subsidiary Guarantor, enforceable against it in
accordance with its terms, subject to the effect, if any, of bankruptcy, insolvency,
reorganization, arrangement or other similar laws relating to or affecting the rights of creditors
generally and the limitations, if any, imposed by the general principles of equity and public
policy.




          8.14 Approvals; No Conflict. The execution and delivery of this Amendment and the performance
of Borrower and the Guarantors hereunder does not and will not require the consent or approval of
any regulatory authority or governmental authority or agency having jurisdiction over Borrower or
the Guarantors, nor be in contravention of or in conflict with the




9









 




articles of incorporation or bylaws of Borrower or the Guarantors, as applicable, or the
provision of any statute, or any judgment, order or indenture, instrument, agreement or
undertaking, to which any of Borrower or the Guarantors is party or by which the assets or
properties of Borrower and the Guarantors are or may become bound.




          8.15 Resolutions. Within five (5) Business Days of the Closing Date, the Agent shall receive
any certificates and resolutions of Borrower and each Guarantor described in Section 7.4 which
Agent did not require to be delivered on or prior to the Closing Date in accordance with Section
7.4.




          8.16 Legal Opinions. Within five (5) Business Days of the Closing Date, Borrower shall cause
to be delivered to Agent opinions of counsel addressing due authorization, execution and
enforceability of this Amendment and such other matters relating to this Amendment and the
transactions contemplated hereby as Agent may reasonably request by counsel to Borrower and
Guarantors from each jurisdiction in which such parties are organized.




          8.17 Schedule 4.16. On or before January 16, 2009, Borrower shall cause to be delivered to
Agent, each in form and substance satisfactory to Agent, (a) Schedule 4.16 to the Credit Agreement
(as to be amended on the Fourth Amendment Effective Date in accordance with Schedule 1 hereto) and
(b) a certificate executed by the Borrower which certifies that such Schedule 4.16 includes a
complete and accurate list, as of the date of delivery, of the location, by state, county and
street address (if such street address is available) of all items described in Section 4.16(b) (as
set forth on Schedule 1 hereto).




     SECTION 9. Reaffirmation. Borrower confirms, reaffirms and ratifies its obligations
contained in the Credit Agreement and any other agreement or document relating to the Obligations.
Borrower, on its own behalf and on behalf of each of its affiliates, warrants and represents to
Agent and the Lenders that the Facility and the Obligations and any and all other Obligations of
Borrower or any affiliate of Borrower to Agent and the Lenders, any affiliate of Agent and the
Lenders, or any predecessors in interest of Agent and the Lenders or any affiliate of Agent and the
Lenders, are not subject to any credits, charges, claims, counterclaims, defenses, or rights of
offset or deduction of any kind or character whatsoever. Each of the Guarantors hereby (a)
consents to the transactions contemplated by this Amendment and (b) acknowledges and agrees that
(i) the guarantees made by such party contained in the Guaranty Agreements are, and shall remain,
in full force and effect after giving effect to this Amendment and the amendments to the Credit
Agreement contained herein, and (ii) the obligations of each Guarantor pursuant to the Guaranty
Agreements are not subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise of any of the
Obligations guaranteed thereunder, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of
the Obligations guaranteed thereunder or otherwise.



     SECTION 10. WAIVER OF CLAIMS. EACH OF BORROWER AND THE GUARANTORS ACKNOWLEDGES THAT
EACH OF THE AGENT AND THE LENDERS HAS ACTED IN GOOD FAITH AND HAS CONDUCTED ITSELF IN A
COMMERCIALLY REASONABLE MANNER IN ITS RELATIONSHIPS WITH



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BORROWER AND THE GUARANTORS IN CONNECTION WITH THIS AMENDMENT AND IN CONNECTION WITH THE
OBLIGATIONS AND THE CREDIT AGREEMENT, BORROWER AND THE GUARANTORS HEREBY WAIVING AND RELEASING ANY
CLAIMS TO THE CONTRARY. EACH OF BORROWER AND THE GUARANTORS ON ITS OWN BEHALF AND ON BEHALF OF
EACH OF ITS AFFILIATES, RELEASES AND DISCHARGES THE AGENT AND THE LENDERS, ALL AFFILIATES OF THE
AGENT AND THE LENDERS, ALL OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS OF THE AGENT AND
THE LENDERS OR ANY OF THEIR AFFILIATES, AND ALL OF THEIR PREDECESSORS IN INTEREST, FROM ANY AND ALL
CLAIMS, DEFENSES AND CAUSES OF ACTION, WHETHER KNOWN OR UNKNOWN AND WHETHER NOW EXISTING OR
HEREAFTER ARISING, INCLUDING WITHOUT LIMITATION, ANY USURY CLAIMS, THAT HAVE AT ANY TIME BEEN
OWNED, OR THAT ARE HEREAFTER OWNED, IN TORT OR IN CONTRACT BY BORROWER, ANY GUARANTOR OR ANY
AFFILIATE OF BORROWER OR ANY GUARANTOR AND THAT ARISE OUT OF ANY ONE OR MORE CIRCUMSTANCES OR
EVENTS THAT OCCURRED PRIOR TO THE DATE OF THIS AMENDMENT. MOREOVER, EACH OF BORROWER AND THE
GUARANTORS, JOINTLY AND SEVERALLY, ON ITS OWN BEHALF AND ON BEHALF OF EACH OF ITS AFFILIATES,
WAIVES ANY AND ALL CLAIMS NOW OR HEREAFTER ARISING FROM OR RELATED TO ANY DELAY BY THE AGENT AND
THE LENDERS IN EXERCISING ANY RIGHTS OR REMEDIES UNDER THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.



     SECTION 11. Expenses and Indemnification. Borrower agrees to pay upon demand, all
reasonable out-of-pocket costs and expenses of Agent and the Lenders (including the reasonable fees
and disbursements of counsel) in connection with the preparation, execution and delivery of this
Amendment and in connection with the enforcement of the Credit Agreement, this Amendment or any of
the other Loan Documents. Borrower, on its own behalf and on behalf of each of its affiliates,
agrees to indemnify Agent and the Lenders, their officers, directors, employees, attorneys and
agents, and all affiliates of Agent and the Lenders and predecessors in interest of Agent and the
Lenders or any affiliate of Agent and the Lenders (each an “Indemnified Party”) and hold each
Indemnified Party harmless against all claims, losses, liabilities and expenses (including
reasonable fees and disbursements of counsel but excluding the allocated costs of internal counsel)
arising from or relating to the Facility, the Credit Agreement, the other Loan Documents, this
Amendment and any and all loans and other transactions between Borrower or any affiliate of
Borrower and any Indemnified Party. The Guarantors each agree that the foregoing obligations of
Borrower shall be included in and shall constitute part of the “Obligations” as defined in the
Guaranty Agreements.



     SECTION 12. Default; Cross-Default. It shall be a default under this Amendment, and
an Event of Default under the Credit Agreement, the Guaranty Agreements, all other Loan Documents
and under any and all other obligations of Borrower or the Guarantors, if: (a) any one or more of
them shall fail to comply with any of the terms of this Amendment; (b) any one or more of them
shall default under any provision of the Credit Agreement, after giving effect to any applicable
notice or cure periods or materiality standards; (c) any one or more of them shall default under
any other obligation to Agent or to any Lender, after giving effect to any applicable



11









 







notice or cure periods or materiality standards; (d) any entity either affiliated or under
common control with Borrower or the Guarantors shall be in default under any other agreement or
obligation to Agent or to any Lender or (e) the conditions set forth in Section 2.2 are not
satisfied by the Effectiveness Termination Date.



     SECTION 13. Waiver, Rights and Remedies. This Amendment shall not prejudice any right
or remedy of Agent or the Lenders and shall not be deemed a waiver of any right or remedy, except
with respect to the Specified Defaults specifically described herein. Agent and the Lenders
expressly reserve all of the rights and remedies with respect to any other present or future
default or event of default arising under the Credit Agreement, including, without limitation, any
failure to make any payment on the Obligations from and after the date hereof, or failure to
perform any other obligation of Borrower or any other entity affiliated or under common control
with Borrower to Agent or the Lenders. This Amendment shall be binding on, and inure to the benefit
of, the parties and their respective successors, heirs and assigns.



     SECTION 14. Notice. Any notice required to be given under this Amendment shall be
given in accordance with Section 11.1 of the Credit Agreement. Borrower hereby notifies all
parties hereto that all notices to Borrower or any Guarantor should be mailed transmitted or
delivered to the following address and not the address set forth in Section 11.1 of the Credit
Agreement:




1405 Old Alabama Road, Suite 200, Roswell, Georgia 30076, Attention of Kevin Abelson, Vice
President Finance (Telecopier No. (770) 642-1775; Telephone No. (770) 998-9663 ext. 222), with a
copy to 3751 Victoria Park Avenue, Toronto, Ontario, M1W3Z4 Canada, Attention of Seymour Joffe
(Telecopier No. (416) 449-1073; Telephone No. (416) 449-1340) and a copy to 3751 Victoria Park
Avenue, Toronto, Ontario M1W 3Z4 Canada, Attention of Harry Rosenbaum (Telecopier No. (416)
449-6438; Telephone No. (416) 449-1340).



     SECTION 15. Interpretation. This Amendment shall be construed to liberally effectuate
the rights and remedies of the parties hereto as expressed herein, and neither such principle of
interpretation nor the express language of this Amendment shall be impaired or adversely affected
by any instruments and documents executed in connection herewith. The deletion of any provision
from a prior draft of this Amendment shall not and shall not be deemed to constitute (and shall not
be used as) evidence of any fact or interpretation, since the parties may disagree as to the
meaning and effect of such a deletion, and no prior draft of this Amendment shall be admissible as
evidence of the meaning of this Amendment. Should any provision of this Amendment, the Credit
Agreement or the other Loan Documents require judicial interpretation, it is agreed that a court
interpreting or construing same shall not apply a presumption that the terms hereof shall be more
strictly construed against one party by reason of the rule of construction that a document is to be
construed more strictly against the party who itself or through its agent prepared the same, it
being agreed that all parties hereto have participated in the preparation hereof and of the Credit
Agreement and the other Loan Documents.



     SECTION 16. No Other Amendment. Except for the amendments set forth above, the text
of the Credit Agreement shall remain unchanged and in full force and effect. This Amendment is not
intended to effect, nor shall it be construed as, a novation. The Credit Agreement and this
Amendment shall be construed together as a single agreement. Nothing herein contained shall waive,
annul, vary or affect any provision, condition, covenant or



12









 







agreement contained in the Credit Agreement, except as herein amended or specifically waived
with respect to the Specified Defaults, nor affect nor impair any rights, powers or remedies under
the Credit Agreement as hereby amended. The Lenders and Agent do hereby reserve all of their
rights and remedies against all parties who may be or may hereafter become secondarily liable for
the repayment of the Obligations. Borrower promises and agrees to perform all of the requirements,
conditions, agreements and obligations under the terms of the Credit Agreement, as heretofore and
hereby amended. The Credit Agreement, as so amended, is hereby ratified and affirmed. Borrower
hereby expressly agrees that the Credit Agreement, as amended, is in full force and effect.



     SECTION 17. No Course of Conduct. At no time shall the prior or subsequent course of
conduct by Borrower or Agent and the Lenders directly or indirectly limit, impair or otherwise
adversely affect any of the parties’ rights or remedies in connection with this or any of the
instruments and documents executed in connection herewith, since the parties hereto agree that this
Amendment and the Credit Agreement shall only be amended by written instruments executed by the
parties, as provided herein. To the extent that Agent and the Lenders may have previously
permitted Borrower to deviate from the terms and provisions of the Credit Agreement, Borrower and
the Guarantors hereby acknowledge and agree that from the date of this Amendment, Borrower shall be
required and expected to strictly comply with all terms and provisions of this Amendment and the
Credit Agreement and Agent and the Lenders intend to enforce the terms and provisions of this
Amendment and the Credit Agreement as in effect on the date hereof as amended hereby.



     SECTION 18. Limited Relationships. Neither Agent, the Lenders nor any representative
of Agent or the Lenders at any time has agreed or consented to being an agent, principal, business
associate or participant, joint venturer, partner or alter ego of any of Borrower, the Guarantors
or any of their affiliates, and no such relationship is contemplated. No person except employees of
Agent, the Lenders and Agent’s and Lenders’ counsel has at any time been directly or indirectly
authorized by Agent or the Lenders to directly or indirectly represent, speak or act for or on
behalf of Agent or the Lenders with respect to any matter whatsoever related to, arising out of or
connected with this Amendment or any other matter or contract.



     SECTION 19. ARM’S LENGTH AGREEMENT. BORROWER AND EACH GUARANTOR EACH HEREBY
ACKNOWLEDGES THAT IT HAS FREELY AND VOLUNTARILY ENTERED INTO THIS AMENDMENT AFTER AN ADEQUATE
OPPORTUNITY AND SUFFICIENT PERIOD OF TIME TO REVIEW, ANALYZE, AND DISCUSS: (I) ALL TERMS AND
CONDITIONS OF THIS AMENDMENT; (II) ANY AND ALL OTHER DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AMENDMENT; AND (III) ALL FACTUAL AND LEGAL MATTERS
RELEVANT TO THIS AMENDMENT AND/OR ANY AND ALL SUCH OTHER DOCUMENTS, WITH COUNSEL FREELY AND
INDEPENDENTLY SELECTED BY BORROWER AND THE GUARANTORS. BORROWER AND THE GUARANTORS EACH FURTHER
ACKNOWLEDGES AND AGREES THAT IT HAS ACTIVELY AND WITH FULL UNDERSTANDING PARTICIPATED IN THE
NEGOTIATION OF THIS AMENDMENT AND ALL OTHER DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH
THIS AMENDMENT AFTER CONSULTATION AND REVIEW WITH ITS COUNSEL, THAT ALL OF THE TERMS AND



13









 







CONDITIONS OF THIS AMENDMENT AND THE OTHER DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH
THIS AMENDMENT HAVE BEEN NEGOTIATED AT ARM’S-LENGTH, AND THAT THIS AMENDMENT AND ANY AND ALL SUCH
OTHER DOCUMENTS HAVE BEEN NEGOTIATED, PREPARED, AND EXECUTED WITHOUT FRAUD, DURESS, UNDUE
INFLUENCE, OR COERCION OF ANY KIND OR NATURE WHATSOEVER HAVING BEEN EXERTED BY OR IMPOSED UPON ANY
PARTY.



     SECTION 20. Miscellaneous. Except as expressly amended by this Amendment or some
other instrument in writing, the Credit Agreement, the Guaranty Agreements, the other Loan
Documents and any other agreement or document relating to the Obligations evidenced by the Credit
Agreement shall continue, unmodified and unchanged. This Amendment constitutes the entire
agreement of the parties concerning the matters set forth herein and supersedes all prior and
contemporaneous agreements, written or oral, concerning such matters. This Amendment may not be
modified orally, and any modification must be in writing, signed by the party to be bound. The
captions are inserted only for the convenience of the reader and shall not be construed to
interpret or modify the terms of the Agreement. Time shall be of the essence with respect to all
obligations of Borrower and the Guarantors under the terms and provisions of this Amendment. This
Amendment shall be governed by the laws of the State of North Carolina without regard to its
conflicts of law principles and may be executed in multiple counterparts but all of which shall
constitute one agreement.




14









 







IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed under seal as of
the day and year first above written.




	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON WOODS USA, L.L.C., a Nevada limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	OWNER GUARANTORS:	 	 
	 
	 	 	 	 	 	 
	 	 	ELLY NEVADA, INC., a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Harry Rosenbaum
 

Harry Rosenbaum
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	NORMAN NEVADA, INC., a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Harry Rosenbaum
 

Harry Rosenbaum
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	LARRY NEVADA, INC., a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Harry Rosenbaum
 

Harry Rosenbaum
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	BRUCE NEVADA, INC., a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Harry Rosenbaum
 

Harry Rosenbaum
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	HARRY NEVADA, INC., a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Harry Rosenbaum
 

Harry Rosenbaum
	 	 
	 

	 	Title:
	 	President and Secretary	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	SEYMOUR NEVADA, INC., a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Harry Rosenbaum
 

Harry Rosenbaum
	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	LITTLE SHOTS NEVADA L.L.C., a Nevada	 	 
	 	 	limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Harry Rosenbaum
 

Harry Rosenbaum
	 	 
	 

	 	Title:
	 	Manager	 	 
	 
	 	 	 	 	 	 
	 	 	SUBSIDIARY GUARANTORS:	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON ATLANTA RESIDENTIAL,	 	 
	 	 	L.L.C., a Georgia limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON DALLAS RESIDENTIAL L.L.C., a	 	 
	 	 	Texas limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON HOUSTON RESIDENTIAL L.L.C.,	 	 
	 	 	a Texas limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON WOODS ARIZONA L.L.C., a	 	 
	 	 	Nevada limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	ASHTON ORLANDO RESIDENTIAL	 	 
	 	 	L.L.C., a Nevada limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON BURDEN, LLC, a Florida limited	 	 
	 	 	liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON TAMPA RESIDENTIAL LLC, a	 	 
	 	 	Nevada limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON DENVER RESIDENTIAL, LLC, a	 	 
	 	 	Nevada limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	PINERY JOINT VENTURE, a Colorado joint venture	 	 
	 
	 	 	 	 	 	 
	 	 	By:	 	Ashton Woods USA L.L.C., a Nevada limited
	 	 	 	 	liability company, the member authorized to act on its behalf
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON WOODS FINANCE CO., a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	ASHTON WOODS ORLANDO LIMITED	 	 
	 	 	PARTNERSHIP, a Florida limited partnership	 	 
	 
	 	 	 	 	 	 
	 	 	By:	 	Ashton Woods Lakeside L.L.C., a
	 	 	 	 	Nevada limited liability company, its general partner
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON WOODS CORPORATE, LLC, a	 	 
	 	 	Nevada limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON WOODS TRANSPORTATION,	 	 
	 	 	LLC, a Georgia limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON WOODS CONSTRUCTION LLC,	 	 
	 	 	an Arizona limited liability company	 	 
	 
	 	 	 	 	 	 
	 	 	By:	 	Ashton Woods Arizona L.L.C.,
	 	 	 	 	a Nevada limited liability company
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON WOODS LAKESIDE L.L.C., a	 	 
	 	 	Nevada limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	CANYON REALTY L.L.C., a Texas limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	ASHTON BROOKSTONE, INC., a Texas corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas C. Krobot
 

Thomas C. Krobot
	 	 
	 

	 	Title:
	 	President and CEO	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	OWNER GUARANTOR:	 	 
	 
	 	 	 	 	 	 
	 	 	LITTLE SHOTS HOLDINGS L.L.C., a	 	 
	 	 	Nevada limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Harry Rosenbaum
 

Harry Rosenbaum
	 	 
	 

	 	Title:
	 	Manager	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL	 	 
	 	 	ASSOCIATION, as Agent and a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ R. Scott Holtzapple
 

R. Scott Holtzapple
	 	 
	 

	 	Title:
	 	Director	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





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

	 	By:
	 	/s/ Richard Kaunter
 

	 	 
	 

	 	Name:
	 	Richard Kaunter	 	 
	 

	 	Title:
	 	Senior Vice President	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	CITIBANK TEXAS, N.A. (Successor by	 	 
	 	 	merger to Citibank Texas, N.A.), as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Rick Thompson
 

Rick Thompson
	 	 
	 

	 	Title:
	 	VP Citibank, NA	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	REGIONS BANK (Successor by merger to	 	 
	 	 	AmSouth Bank), as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Daniel McClurkin
 

Daniel McClurkin
	 	 
	 

	 	Title:
	 	Vice President	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	GUARANTY BANK, as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Linda Garcia
 

	 	 
	 

	 	Name:
	 	Linda Garcia	 	 
	 

	 	Title:
	 	Senior Vice President	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	COMERICA BANK, as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Laura L. Benson
 

	 	 
	 

	 	Name:
	 	Laura L. Benson	 	 
	 

	 	Title:
	 	Vice President	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	KEY BANK, as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Virgil Hogan
 

Virgil Hogan
	 	 
	 

	 	Title:
	 	Vice President	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]




 









 





	 	 	 	 	 	 	 
	 	 	NATIONAL CITY BANK, as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Kevin Culp
 

Kevin Culp
	 	 
	 

	 	Title:
	 	AVP	 	 






[SIGNATURE PAGE TO FOURTH AMENDMENT TO FIRST AMENDED AND

RESTATED CREDIT AGREEMENT]





 









 








Schedule 1 (Amendments to Credit Agreement )




and




Schedule 2 (Proposed Restructuring Term Sheet – Material Terms)




[See separate documents for Schedules]




Exhibits J-1, J-2, J-3, K, L-1, L-2 and M (Security Documents)




[See separate documents for Exhibits]





 











 





Schedule 1




On and as of the Fourth Amendment Effective Date, the Credit

Agreement shall be amended as follows:




Part A of Schedule 1



The following definitions in Section 1.1 of the Credit Agreement shall be amended and restated
in their entirety as follows:




               “Aggregate Commitment” shall mean the aggregate Commitments of all the Lenders, as
reduced or increased from time to time pursuant to the terms of this Agreement. As of the date of
the Fourth Amendment Closing Date, the Aggregate Commitment is $95,000,000.



               “Applicable ABR Margin” shall mean, as at any date of determination, six percent
(6.00%).



               “Applicable Facility L/C Rate” shall mean, as at any date of determination, six
percent (6.00%).



               “Applicable LIBOR Margin” shall mean, as at any date of determination, six percent
(6.00%).



               “Borrowing Base” shall mean as at any date of determination after the Interim
Borrowing Period, an amount equal to the sum of the following assets of Borrower and each
Subsidiary Guarantor (but only to the extent (v) such assets included in clauses (i), (ii), (iii),
(iv), (v) or (vi) of this definition, are subject to an enforceable recorded Mortgage and the
Mortgage Requirements have been satisfied with respect to such assets, (w) such assets are not
subject to any Liens other than Permitted Liens, (x) such assets are located within the continental
United States, (y) with respect to such assets, no payment or other material default by Borrower or
a Subsidiary Guarantor in the payment or performance of any assessment district obligations,
special facility obligations or other similar obligations has occurred and is continuing with
respect to such assets and (z) with respect to real estate assets, if any such assets are subject
to a purchase money mortgage otherwise permitted in accordance with this Agreement in favor of a
third party other than Agent and such purchase money mortgage (A) is subordinate to the Lien in
favor of Agent with respect to such Collateral or (B) is in effect prior to the Fourth Amendment
Closing Date):




(i) the lesser of (a) twenty-five percent (25%) of the Actual Costs for Unimproved Entitled Land
and (b) twenty-five percent (25%) of the Appraised Value for Unimproved Entitled Land, plus




(ii) the lesser of (a) forty-five percent (45%) of the Actual Costs for Lots Under Development
and (b) forty-five percent (45%) of the Appraised Value for Lots Under



1









 







Development; provided, however, that any Lots Under Development not sold or
converted to Finished Lots within twenty-four (24) months following the date that such Lots
Under Development were first included in the Borrowing Base as “Lots Under Development” shall be
excluded from the Borrowing Base; provided, further, that any Lots Under
Development, which were not included in the Borrowing Base as Lots Under Development on or prior
to the Fourth Amendment Closing Date, shall be excluded from this clause (ii) if either (1) no
development activity has occurred on such Lot Under Development for nine (9) months or (2) such
Lot Under Development is Unimproved Entitled Land and is not being actively developed into a
Finished Lot within nine (9) months following the date that such Unimproved Entitled Land was
first included in the Borrowing Base as a “Lot Under Development”; plus




(iii) the lesser of (a) fifty-five percent (55%) of the Actual Costs for Finished Lots and (b)
fifty-five percent (55%) of the Appraised Value for Finished Lots, plus




(iv) the least of (a) the Presold Housing Unit Borrowing Base Percentage multiplied by the
Actual Costs for Presold Housing Units, (b) the Presold Housing Unit Borrowing Base Percentage
multiplied by the Appraised Value for Presold Housing Units and (c) the Presold Housing Unit
Borrowing Base Percentage multiplied by the Contract Sale Price for Presold Housing Units, plus




(v) the lesser of (a) the Model-Speculative Housing Unit Borrowing Base Percentage multiplied by
the Actual Costs for Speculative Housing Units and (b) the Model-Speculative Housing Unit
Borrowing Base Percentage multiplied by the Appraised Value for Speculative Housing Units, plus




(vi) the lesser of (a) the Model-Speculative Housing Unit Borrowing Base Percentage multiplied
by the Actual Costs for Model Housing Units and (b) the Model-Speculative Housing Unit Borrowing
Base Percentage multiplied by the Appraised Value for Model Housing Units, plus




(vii) one hundred percent (100%) of Unrestricted Cash of Borrower or a Subsidiary Guarantor
pledged to Agent pursuant to the Security Agreement and held in a deposit account subject to a
Control Agreement.



               Notwithstanding the foregoing, (a) the amount calculated pursuant to clause (i) of this
definition shall not exceed at any time twenty percent (20%) of the Borrowing Base, (b) the
aggregate of amounts calculated pursuant to clauses (i), (ii) and (iii) of this definition shall
not exceed at any time forty-five percent (45%) of the Borrowing Base, (c) the aggregate amounts
calculated pursuant to clauses (v) and (vi) of this definition shall not exceed at any time forty
percent (40%) of the aggregate of the amounts calculated pursuant to clauses (iv), (v) and (vi) of
this definition, (d) the amount calculated under this definition with respect to Condo Units shall
not exceed at any time twenty percent (20%) of the Borrowing Base, (e) the amount of any Lien in
favor of the holders of a purchase money mortgage (other than Agent) shall be deducted from the
Borrowing Base, (f) not more than ten percent (10%) of the individual Lots included in the
Borrowing Base shall have a purchase money mortgage in favor of a holder other than Agent and (g)
the contribution to the Borrowing Base of real estate assets subject to a purchase money



2









 




mortgage in favor of a holder other than Agent shall not exceed at any time five percent (5%)
of the aggregate Borrowing Base.




               Notwithstanding anything herein to the contrary, no calculation of the Borrowing Base nor
requirements related to the Borrowing Base shall be necessary prior to the end of the Interim
Borrowing Period.



               “Finished Lot” means Entitled Land comprised of a fully developed single-family
residential lot with respect to which all development and construction work has been completed
(including completion of all public or private roadways necessary to provide sufficient access to
such lot and completion of all water, sanitary and storm sewer facilities in capacities sufficient
for single-family residential use) so that such lot is ready and of sufficient size for a residence
or condominium project to be constructed thereon. The term “Finished Lot” shall not include any
land upon which the construction of a residential unit has commenced or lots that fall under the
definition of a Presold Housing Unit and have all permitting necessary to commence construction in
place.



               “Loan Documents” shall mean this Agreement, the Notes, the Guaranty Agreements, the
Security Documents, the Facility L/C Applications, all other documents (if any) from time to time
executed and delivered by Borrower or a Guarantor that evidence, secure or guarantee any of the
Obligations, and any other document or instrument delivered from time to time in connection with
this Agreement, the Notes, the Guaranty Agreements, the Security Documents, the Swingline Loans,
the Revolving Credit Loans or the Facility L/Cs, as such documents and instruments may be amended
or supplemented from time to time.



               “Lots Under Development” means all Unimproved Entitled Land with respect to which
Borrower or any Subsidiary Guarantor has obtained all necessary approvals for its subdivision for
residential housing units (including condominium units), and which Borrower or any Subsidiary
Guarantor is actively developing into Finished Lots, or which Borrower or any Subsidiary Guarantor
reasonably expects to begin development activity within a nine (9) month period; provided, however,
that the term “Lots Under Development” shall not include any land upon which the construction of a
residential housing unit has commenced; provided, further that, the term “Lots Under Development”
shall not include any land which is not actively being developed into Finished Lots within nine (9)
months after such land was included in the Borrowing Base as “Lots Under Development”.



               “Maximum Swingline Amount” shall mean Five Million Dollars ($5,000,000).



               “Permitted Liens” shall mean the following: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good faith by
appropriate action; (ii) Liens in connection with worker’s compensation, unemployment insurance or
other social security, old age pension or public liability obligations (other than any Lien imposed
by ERISA); (iii) Liens in favor of property owners’ associations securing payment of assessments or
other charges; (iv) easements, rights-of-way, restrictions, plats, declarations of covenants,
conditions and restrictions, condominium declarations, or similar encumbrances on the use of real
property which do not interfere with the ordinary conduct of business of Borrower or any Subsidiary
Guarantor or materially detract from the value of such real property; (v) Liens



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in favor of a seller of Unimproved Entitled Land, Lots Under Development or Finished Lots
requiring Borrower or any Subsidiary Guarantor to make a payment upon the future sale of such
Unimproved Entitled Land, Lots Under Development or Finished Lots in an amount not to exceed five
percent (5%) of the gross sales price or in the case of profit sharing agreements an amount that is
reasonable and customary in the industry and market; (vi) Liens securing the Obligations pursuant
to the Security Documents; and (vii) any Liens of mechanics, materialmen or material suppliers
incurred in the ordinary course of business if, with respect to any such Liens securing
Indebtedness that is past due, (A) such Liens are being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with GAAP have been established
and as to which the property subject to any such Lien is not yet subject to foreclosure, sale or
loss on account thereof or (B) a corresponding deduction is made to the Borrowing Base Availability
so as to deduct from the Borrowing Base Availability the amount secured by any such Lien on any
asset included in the current Borrowing Base calculation.



               “Required Lenders” shall mean, at any particular time, Lenders having at least 66-2/3%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders having at
least 66-2/3% of the aggregate amount of the Revolving Credit Loans then outstanding;
provided that the Commitment of, and the portion of the Loans held by, any Defaulting
Lender shall be excluded for purposes of determining Required Lenders.



               “Secured Indebtedness” shall mean all Indebtedness of Borrower or any of its
Subsidiaries (excluding Indebtedness owing to Borrower or any of its Subsidiaries and excluding
Indebtedness created under this Agreement and owed to Agent or the Lenders hereunder) that is (a)
secured by a Lien on assets of Borrower or any of its Subsidiaries or (b) supported by a guarantee
of Borrower or any Subsidiary (including without limitation purchase money Indebtedness,
Non-Recourse Indebtedness, obligations under sale/leaseback transactions and obligations under
Capital Leases) and in either case is Indebtedness permitted under Section 7.9 hereof; provided,
however, that Indebtedness under the Subordinated Notes shall not be Secured Indebtedness solely by
reason of clause (b) of this definition.



               “Subordinated Notes” means the (i) 9.5% Senior Subordinated Notes due 2015 issued
pursuant to the Indenture, (ii) the Amended Notes, (iii) the Exchanged Notes and (iv) any other
notes, debentures or other similar instruments issued by Borrower or any Subsidiary after the date
of this Agreement pursuant to either (x) a registered public offering or (y) 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, and which other notes, debentures or
similar instruments meet the following requirements:




               (a) the maturity date of such instruments must be a date which is the later of (i)
five (5) years from the date of issuance and (ii) two (2) years after the Maturity
Date;




               (b) such instruments must contain subordination and other provisions and be
subject to a subordination agreement, each satisfactory to Agent in its sole discretion
(including without limitation standstill provisions and provisions requiring blockage
of all payments thereunder for a period of at least one hundred seventy nine (179) days
upon the occurrence of an Event of Default;



4









 






               (c) such instruments are unsecured;




               (d) such instruments shall not permit any cash interest or principal payments
prior to the indefeasible payment in full of the Obligations and termination of the
Commitments;




               (e) such instruments shall not contain any covenants;




               (f) such instruments shall not contain any cross default to a Default under any of
the Loan Documents;




               (g) any other terms, provisions and events of default contained in such
instruments (or in any agreement or indenture under which such instruments are issued)
must be less restrictive, taken as a whole, than the covenants, terms, provisions and
events of default in this Agreement, as determined by Agent in its sole discretion;




               (h) the aggregate outstanding principal amount of all Subordinated Notes pursuant
to this clause (iv) shall not exceed $50,000,000.00 at any time; and




               (i) all terms and conditions shall be reasonably satisfactory to the prior review
and approval of Agent.



               “Unimproved Entitled Land” means Entitled Land which is zoned to permit single-family
residential development (attached or detached) as a use by right (or comparable classification
under local law).



5









 





Part B of Schedule 1




The following definitions shall be added to Section 1.1 of the Credit Agreement in alphabetical
order:




     “Amended Notes” shall have the meaning set forth in the Fourth Amendment.



     “Appraisal” shall mean a FIRREA-conforming appraisal, in form and substance
satisfactory to Agent, prepared by an MAI appraiser satisfactory to Agent which reflects a
valuation for the real property in question in accordance with the following requirement:



     (a) with respect to Unimproved Entitled Land, such appraisal shall value such Unimproved
Entitled Land on an “as is” basis;



     (b) with respect to Lots, such appraisal shall be based on an “as is” basis;



     (c) with respect to any Model Housing Unit, such appraisal shall be based on the fair market
value of individual Housing Units as offered for sale; and



     (d) with respect to any Speculative Housing Unit or any Presold Housing Unit, such appraisal
shall be based on (i) the fair market value of Model Housing Units in the related project, if
available, with adjustment for all Improvements included in such Speculative Housing Unit or
Presold Housing Unit but which are not included in the applicable Model Housing Units, or, (ii) if
the fair market value of Model Housing Units in the related project is not available to be
calculated in clause (i), the fair market value of such Speculative Housing Unit or any Presold
Housing Unit including all Improvements.



     “Appraised Value” shall mean with respect to any Entitled Land, any Lots, any Model
Housing Unit, any Speculative Housing Unit or any Presold Housing Unit, the sum of (a) the
appraised value of such Entitled Land, Lots, Model Housing Unit, Speculative Housing Unit or
Presold Housing Unit as determined by an Appraisal meeting the requirements for an Appraisal set
forth in the definition of the term “Appraisal”, plus (b) the amount that Borrower or any
Subsidiary Guarantor has actually expended (to the extent such expenditures shall ultimately
constitute costs of sales in accordance with GAAP) for the development and construction of such
Lots, Model Housing Units, Speculative Housing Units and Presold Housing Units since the date of
the applicable Appraisal referred to in clause (a) hereof.



     “Bond Resolution” shall have the meaning set forth in Section 3 of the Fourth
Amendment.



     “Borrower and Subsidiary Pledge Agreement” shall mean the Borrower and Subsidiary
Pledge Agreement dated as of the Fourth Amendment Effective Date executed by Borrower and each
Subsidiary Guarantor in favor of Agent, for the ratable benefit of Lenders, substantially in the
form attached hereto as Exhibit L-1, as modified, amended, supplemented or restated from time to
time.



     “Borrowing Cap” shall mean $62,100,000.



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     “Collateral” shall mean, collectively, all of the real, personal and mixed property
(including capital stock) in which Liens are purported to be granted pursuant to the Security
Documents as security for the Obligations.



     “Control Agreement” shall mean any control agreement executed by Borrower or any
Subsidiary Guarantor, Agent and the depository institution in which cash or Cash Equivalents of
Borrower or any Subsidiary Guarantor are being held in a deposit account which control agreement is
substantially in the form attached hereto as Exhibit M, as modified, amended, supplemented or
restated from time to time, all in form and substance satisfactory to Agent.



     “Contract Sale Price” means the sales price reflected in any agreement of sale
satisfying the requirements for an agreement of sale described in the definition of “Presold
Housing Unit”, as such sales price may be adjusted in accordance with the terms of such agreement
of sale.



     “Defaulting Lender” means, as of any date, any Lender that has (a) failed to make a
Loan required to be made by it hereunder, (b) given notice to Agent or Borrower that it will not
make, or that it has disaffirmed or repudiated any obligation to make, any Loan hereunder (unless
such notice is given by all Lenders) or (c) been deemed insolvent or become the subject of a
bankruptcy or insolvency proceeding.



     “Entitled Land” shall mean Land owned 100% by Borrower or by any Subsidiary Guarantor
in fee simple with respect to which (i) all requisite zoning requirements and land use requirements
for such Land’s then current use and state of development have been satisfied and (ii) Borrower has
sole control and management rights. “Entitled Land” shall include all Unimproved Entitled Land,
Lots Under Development and Finished Lots.



     “Exchange Indenture” shall have the meaning set forth in the Fourth Amendment.



     “Exchanged Notes” shall have the meaning set forth in the Fourth Amendment.



     “FIRREA” means the Financial Institutions Reform, Recovery, and Enforcement Act of
1989, as amended from time to time.



     “Fourth Amendment” shall mean the Fourth Amendment to First Amended and Restated
Credit Agreement, dated as of January 13, 2009, by and among Borrower, Lenders party thereto and
Agent.



     “Fourth Amendment Closing Date” shall mean January 13, 2009.



     “Fourth Amendment Effective Date” shall have the meaning set forth in Section 2.2 of
the Fourth Amendment.



     “Interim Borrowing Period” shall mean the period from the Fourth Amendment Effective
Date until such time as all Mortgage Requirements have been satisfied with respect to substantially
all of the real property assets of Borrower and the Subsidiary Guarantors.



7









 





     “Model-Speculative Housing Unit Borrowing Base Percentage” shall mean sixty-five
percent (65%), unless (i) Presold Housing Unit Borrowing Base Percentage is being calculated as set
forth herein as eighty percent (80%) and (ii) the Borrowing Base (calculated with the Presold
Housing Unit Borrowing Base Percentage as 80% and the Model-Speculative Housing Unit Borrowing Base
Percentage as 65%) is less than $95,000,000, in which case “Model-Speculative Housing Unit
Borrowing Base Percentage shall mean seventy percent (70%).



     “Mortgage Requirements” shall have the meaning ascribed thereto in Section 6.17(e).



     “Mortgages” shall mean, collectively, the mortgages securing the Obligations executed
from time to time by Borrower and any Subsidiary Guarantor in favor of Agent, which shall be
substantially in the form attached hereto as Exhibit J-1, Exhibit J-2 or J-3, as applicable, with
such changes as shall be required to conform each such Mortgage to the applicable laws and
customary practices of any other state in which each such Mortgage is to be recorded, all in form
and substance satisfactory to Agent, and as the same may be modified, amended, supplemented or
restated from time to time.



     “New Equity” shall have the meaning set forth in Section 2.2 of the Fourth Amendment.



     “New Subsidiary” means (i) each new Subsidiary (which is not a Subsidiary of Borrower
on the date of this Agreement) of Borrower, (ii) any Subsidiary of Borrower formed or acquired
after the date of this Agreement and (iii) any Subsidiary of Borrower existing on the Closing Date
but which is not a Guarantor if such Subsidiary at any time owns assets having an aggregate value
in excess of $250,000.



     “Owner Guarantor Pledge Agreement” shall mean the Owner Guarantor Pledge Agreement
dated as of the Fourth Amendment Effective Date executed by Little Shots, which has approximately
an 80% ownership interest in Borrower, in favor of Agent, for the ratable benefit of Lenders,
substantially in the form attached hereto as Exhibit L-2, as modified, amended, supplemented or
restated from time to time.



     “Permitted Holders” shall mean (1)(a) Elly Nevada, Inc., (b) Norman Nevada, Inc., (c)
Larry Nevada, Inc., (d) Little Shots Nevada, L.L.C., (e) Elly Colorado, Inc., (f) Norman Colorado,
Inc. (g) Larry Colorado, Inc. and (h) Little Shots Holdings LLC; (2) any equityholder, general
partner or managing member of any of the Persons referenced above in clause (1); (3) any officer,
director, employee, member, partner or equityholder of the manager or general partner of any of the
Persons referenced above in clauses (1) and (2); (4) the spouses and descendants of the Persons
referenced in clause (2); (5) in the event of the incompetence or death of any of the Persons
referred to in clause (2) and (3) above, such Person’s estate, executor, administrator, committee
or other personal representative, in each case who at a particular date shall be the beneficial
owner of or have the right to acquire, directly or indirectly, capital stock of Borrower (or any
other direct or indirect parent company of Borrower); and (6) any trust created for the benefit of,
or any entity or entities wholly-owned by, the Persons referenced above in clauses (1) through (5).



8









 





     “Plans and Specifications” shall mean the final architectural and civil plans and
specifications, including without limitation all maps, sketches, diagrams, surveys, drawings and
lists of materials, for the development of the Land.



     “Pledge Agreements” shall mean the Borrower and Subsidiary Pledge Agreement and the
Owner Guarantor Pledge Agreement.



     “Presold Housing Unit Borrowing Base Percentage” shall mean seventy percent (70%),
unless the Borrowing Base (calculated with the Presold Housing Unit Borrowing Base Percentage as
70% and the Model-Speculative Housing Unit Borrowing Base Percentage as 65%) is less than
$95,000,000, in which case “Presold Housing Unit Borrowing Base Percentage” shall mean eighty
percent (80%).



     “Release Consideration” shall have the meaning ascribed thereto in Section 6.18(f).



     “Restructuring Owners” shall mean the holders of the 9.5% Senior Subordinated Notes
due 2015 issued pursuant to the Indenture as of the Fourth Amendment Closing Date obtaining a
direct ownership or equity interest in Borrower in connection with the Bond Resolution which such
aggregate direct ownership or equity interests in Borrower do not exceed 20% of the ownership or
equity interests in Borrower.



     “Secured Parties” shall mean the Lenders, Agent and any affiliate of a Lender which
affiliate of such Lender enters into a Interest Rate Contract with Borrower or any Guarantor.



     “Security Agreement” shall mean the Security Agreement among Borrower, the Subsidiary
Guarantors and Agent, substantially in the form attached hereto as Exhibit K, as modified, amended,
supplemented or restated from time to time.



     “Security Documents” shall mean the Security Agreement, Pledge Agreements, the
Mortgages, any Control Agreements, any UCC financing statements, and any other documents pursuant
to which Borrower or any Subsidiary Guarantor shall grant a Lien to Agent to secure the
Obligations, as the same may be modified, amended, supplemented or restated from time to time.



9









 





Part C of Schedule 1




The following definitions shall be deleted from Section 1.1 of the Credit Agreement:





	 	•	 	Adjusted Tangible Net Worth
	 
	 	•	 	Applicable Unused Fee Rate
	 
	 	•	 	Level
	 
	 	•	 	Leverage Ratio





10









 





Part D of Schedule 1




The following Sections of the Credit Agreement shall be amended and restated in their entirety:




     2.1 Commitments.



     (a) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make
Revolving Credit Loans to Borrower from time to time during the Commitment Period, and to purchase
undivided interests and participations in Facility L/Cs in accordance with Section 2.16 hereof, in
an aggregate principal amount of Revolving Credit Loans made by such Lender and of such Lender’s
Ratable Share of the Facility L/C Obligations not to exceed at any time outstanding the amount set
forth in Schedule 1 hereto (such Lender’s obligations to make Revolving Credit Loans and to
purchase undivided interests and participations in Facility L/Cs in accordance with Section 2.16
hereof in such amounts, as reduced, increased or otherwise modified from time to time pursuant to
the terms of this Agreement, being herein referred to as such Lender’s “Commitment”), subject to
the limitations set forth in Section 2.1(b), Section 2.1(c) and Section 2.1(d) hereof.



     (b) After the Interim Borrowing Period, no Revolving Credit Loan or Swingline Loan shall be
made, nor shall any Facility L/C be issued, that would have the effect of increasing the then
outstanding amount of the Borrowing Base Indebtedness to an amount exceeding the Borrowing Base as
of the most recent Inventory Valuation Date, provided that a Revolving Credit Loan shall not be
deemed to have increased the amount of the Borrowing Base Indebtedness if, and only to the extent
that, the proceeds of such Revolving Credit Loan are immediately used to repay a Swingline Loan.



     (c) No Revolving Credit Loan or Swingline Loan shall be made, nor shall any Facility L/C be
issued if, prior to or after giving effect to such requested Loan or Facility L/C, the Unrestricted
Cash of Borrower exceeds $5,000,000 for more than three (3) consecutive Business Days.



     (d) No Revolving Credit Loan or Swingline Loan shall be made, nor shall any Facility L/C be
issued during the Interim Borrowing Period if, prior to or after giving effect to such requested
Loan or Facility L/C, the Aggregate Outstanding Credit Exposure exceeds the Borrowing Cap.



     (e) No Revolving Credit Loans shall be made at any time that any Swingline Loan is
outstanding, except for Revolving Credit Loans that are used, in whole or in part, on the day on
which made, to repay in full the outstanding principal balance of the Swingline Loans. During the
Commitment Period and as long as no Default or Event of Default exists, Borrower may borrow, prepay
in whole or in part and reborrow Revolving Credit Loans, all in accordance with the terms and
conditions hereof.



     (f) Subject to the terms and conditions of this Agreement (including the limitations on the
availability of LIBOR Rate Loans and including the termination of the Aggregate Commitment as set
forth in Article 9 hereof), the Revolving Credit Loans may from time to time



11









 







be (i) LIBOR Rate Loans, (ii) ABR Loans, or (iii) a combination thereof, as determined by
Borrower and notified to Agent in accordance with Section 2.3 hereof, provided that no Revolving
Credit Loan shall be made as a LIBOR Rate Loan after the day that is one month prior to the last
day of the Commitment Period.



     2.3 Procedure for Borrowing.



     (a) Borrower may borrow under the Commitments (subject to the limitations on the availability
of LIBOR Rate Loans), during the Commitment Period, provided Borrower shall give Agent written
notice (the “Notice of Borrowing”), which Notice of Borrowing must be received (i) prior to 11:00
a.m., Charlotte, North Carolina time, at least three (3) Business Days prior to the requested
Borrowing Date for any borrowing of LIBOR Rate Loans, or (ii) prior to 10:00 a.m., Charlotte, North
Carolina time on or before the requested Borrowing Date for any borrowing of ABR Loans, which
Notice of Borrowing shall be irrevocable. Each Notice of Borrowing shall specify (A) the Borrowing
Date (which shall be a Business Day), (B) the amount of the requested borrowing and(C) whether the
borrowing is to be of LIBOR Rate Loans or ABR Loans. Each borrowing pursuant to the Commitments
shall be in the principal amount (1) in the case of ABR Loans, of $1,000,000 or any larger amount
which is an even multiple of $100,000, and (2) in the case of LIBOR Rate Loans, of $10,000,000 or
any larger amount which is an even multiple of $1,000,000.



     (b) Subject to satisfaction of the terms and conditions of this Agreement, each Lender shall
deposit funds with Agent for the account of Borrower by 2:00 p.m. Charlotte, North Carolina time on
the Borrowing Date by wire transfer or other immediately available funds equal to its Ratable Share
of the Revolving Credit Loans to be made on the Borrowing Date. The Loan(s) will then promptly be
made available to Borrower by Agent crediting the account of Borrower on the books of Agent with
the aggregate amounts made available to Agent by Lenders, and in like funds as received by Agent.



     (c) Each Lender may book its Loans and its participations in Facility L/Cs at any Lending
Office selected by such Lender and may change its Lending Office from time to time. All terms of
this Agreement shall apply to any such Lending Office and the Loans and the Notes issued hereunder
shall be deemed held by each Lender for the benefit of any such Lending Office. Each Lender and LC
Issuer may, by written notice to Agent and Borrower in accordance with Section 11.2 hereof,
designate replacement or additional Lending Offices through which Loans will be made by it or
Facility L/Cs will be issued by it and for whose account Loan payments or a payment with respect to
Facility L/Cs are to be made.



     (d) Each ABR Loan shall continue as an ABR Loan unless and until such ABR Loan is converted
into a LIBOR Rate Loan pursuant to Section 3.1 hereof or is repaid in accordance with Section 2.11
hereof. Each LIBOR Rate Loan shall continue as a LIBOR Rate Loan until the end of the then
applicable Interest Period therefor, at which time such LIBOR Rate Loan shall be automatically
converted into an ABR Loan unless (x) such LIBOR Loan is or was repaid in accordance with Section
2.11 hereof or (y) such LIBOR Rate Loan is continued as a LIBOR Rate Loan in accordance with
Section 3.1 hereof.



12









 





     (e) Notwithstanding anything to the contrary in this Agreement, Borrower may submit no more
than one (1) Notice of Borrowing in any one business week.



     2.4 Unused Fee. Borrower agrees to pay to Agent for the benefit of each Lender an
unused fee (the “Unused Fee”) for the Commitment Period, computed at 0.55% per annum on the average
daily unused amount of each Lender’s Commitment during the Commitment Period, payable quarterly in
arrears and due on each Quarterly Payment Date and on the last day of the Commitment Period,
commencing on the first of such dates to occur after the date of this Agreement. For purposes of
determining the unused portion of the Aggregate Commitment and the unused portion of a Lender’s
Commitment hereunder, the Aggregate Commitment shall be deemed used to the extent of the aggregate
face amount of the outstanding Facility L/Cs and Revolving Credit Loans and such Lender’s
Commitment shall be deemed used to the extent of such Lender’s Ratable Share of the aggregate face
amount of the outstanding Facility L/Cs and Revolving Credit Loans made by such Lender. For
purposes of determining the Unused Fee payable to a Swingline Lender, its Swingline Loans shall be
treated as usage of its Commitment.



     2.5 Interest; Default Interest.



     (a) Except as provided in Section 2.5(b) hereof, (i) the Revolving Credit Loans shall bear
interest on the unpaid principal amount thereof at a rate per annum equal to (y) in the case of ABR
Loans, the Alternate Base Rate in effect from time to time, plus the Applicable ABR Margin in
effect for such day, and (z) in the case of LIBOR Rate Loans, the LIBOR Rate determined for the
Interest Period applicable thereto, plus the Applicable LIBOR Margin in effect on the first day of
such Interest Period, and (ii) the Swingline Loans shall bear interest on the unpaid principal
amount thereof at a rate per annum equal to the Alternate Base Rate in effect from time to time,
plus the Applicable ABR Margin in effect for such day, plus 0.25%.



     (b) If all or a portion of the principal amount of any of the Revolving Credit Loans made
hereunder (whether as ABR Loans or LIBOR Rate Loans or a combination thereof) or the Swingline
Loans or any installment of interest on any Revolving Credit Loan or Swingline Loan or any Unused
Fee or Facility L/C Fee shall not be paid when due (whether at the stated maturity, by acceleration
or otherwise and after any applicable opportunity to cure), any such overdue principal amount and,
to the extent permitted by applicable law, any overdue installment of interest on any Revolving
Credit Loan or Swingline Loan or any overdue payment of Unused Fee or Facility L/C Fee hereunder
shall, without limiting any other rights of Lenders, bear interest at a rate per annum which is the
sum of the Alternate Base Rate in effect from time to time, plus the Applicable ABR Margin, plus
four percent (4%), from the date of such non-payment until paid in full (before, as well as after,
judgment); provided, however, if all or any portion of any principal on any Revolving Credit Loan
made as a LIBOR Rate Loan hereunder shall not be paid when due and the then current Interest Period
for such LIBOR Rate Loan has not yet expired, the entire principal amount of such LIBOR Rate Loan
and, to the extent permitted by applicable law, any overdue installment of interest on such LIBOR
Rate Loan shall, without limiting any other rights of Lenders, bear interest at a rate per annum
which is the sum of four percent (4%) plus the applicable non-default interest rate (which is the
sum of the applicable LIBOR Rate and the Applicable LIBOR Margin) on such LIBOR Rate Loan then in
effect from the date of such non-payment until the expiration of the then current Interest Period
with respect to such LIBOR Rate Loan (before, as well as after, judgment); thereafter, the entire
principal



13









 







amount of such LIBOR Rate Loan and, to the extent permitted by applicable law, any overdue
installment of interest on such LIBOR Rate Loan shall, without limiting any other rights of
Lenders, bear interest at a rate per annum which is the sum of the Alternate Base Rate in effect
from time to time, plus the Applicable ABR Margin, plus four percent (4%), until paid in full
(before, as well as after, judgment).


(c) Interest shall be payable in arrears and shall be due on each Interest Payment Date and on the
last day of the Commitment Period.




     2.7 Maturity Date of Commitment; Extension.



     (a) Unless earlier terminated pursuant to the terms of this Agreement, the Aggregate
Commitment shall terminate on the Maturity Date, and the unpaid balance of the Revolving Credit
Loans and Swingline Loans and all other unpaid Obligations outstanding shall be paid on the
Maturity Date.



     (b) Not more than once in any fiscal year of Borrower, Borrower may request an extension of
the Maturity Date to the first anniversary of the then scheduled Maturity Date by submitting a
request for an extension (the “Extension Request”) to Agent not less than 180 days prior to the
then scheduled Maturity Date. Promptly upon (but not later than five (5) Business Days after)
Agent’s receipt and approval of the Extension Request, Agent shall deliver to each Lender a copy
of, and shall request each Lender to approve, the Extension Request. Each Lender approving the
Extension Request shall deliver its written approval no later than 60 days after such Lender’s
receipt of the Extension Request. If the written approval of the Extension Request by Lenders
whose Ratable Shares equal or exceed 66-2/3% in the aggregate is received by Agent within such
60-day period and provided (i) no Default or Event of Default exists on the effective date of such
extension, (ii) Borrower shall deliver title insurance endorsements satisfactory to Agent
confirming the priority of the Liens created under the Mortgages and (iii) after the Interim
Borrowing Period, Borrower shall provide to Agent evidence satisfactory to Agent that all property
taxes owing by Borrower with respect to all Property in the Borrowing Base have been paid, the
Maturity Date shall be extended as specified in the Extension Request but only with respect to
Lenders that have given their written approval. Borrower shall pay to Lenders approving the
extension an extension fee in an amount to be determined by Borrower and Agent, payable on the
effective date of such extension. Except to the extent that a Lender that did not give its written
approval to such Extension Request (“Rejecting Lender”) is replaced as provided in Section 3.10
hereof, the Loans and all interest thereon, fees and other Obligations owed to such Rejecting
Lender shall be paid in full on the Maturity Date as determined prior to such Extension Request
(the “Rejecting Lender’s Facility Termination Date”).



     (c) If Lenders whose Ratable Shares equal or exceed 66-2/3% in the aggregate approve the
Extension Request, Borrower, upon notice to Agent and any Rejecting Lender, may, subject to the
provisions of the next to the last sentence of Section 2.7(d) hereof, terminate the Commitment of
such Rejecting Lender (or such portion of such Commitment that is not assigned to a Replacement
Lender in accordance with Section 3.10 hereof), which termination shall occur as of a date set
forth in Borrower’s notice but in no event more than thirty (30) days following such notice. The
termination of a Lender’s Commitment shall be effected in accordance with Section 2.7 (d) hereof.



14









 





     (d) If Borrower elects to terminate a Commitment of a Rejecting Lender as provided in Section
2.7(c), Borrower shall pay to the Rejecting Lender on the effective date of such termination all
Obligations due and owing to it hereunder or under any other Loan Document, including, without
limitation, the aggregate outstanding principal amount of the Loans owed to such Rejecting Lender,
together with accrued interest thereon through the date of such termination, amounts payable under
Sections 2.9 and 3.5 hereof and the Unused Fee and Facility L/C Fee payable to such Rejecting
Lender. Upon request by Borrower or Agent, the Rejecting Lender will deliver to Borrower and Agent
a letter setting forth the amounts payable to such Rejecting Lender as set forth above. Upon the
termination of such Rejecting Lender’s Commitment and payment of the amounts provided for in the
immediately preceding sentence, Borrower shall have no further obligations to such Rejecting Lender
under this Agreement and such Rejecting Lender shall cease to be a Lender, provided, however, that
such Rejecting Lender shall continue to be entitled to the benefits of Sections 2.9, 3.5, 3.6 and
11.6 hereof, as well as to any fees accrued for its account hereunder not yet paid, and shall
continue to be obligated under Section 11.6(c) hereof with respect to obligations and liabilities
accruing prior to the termination of such Rejecting Lender’s Commitment. If, as a result of the
termination of the Rejecting Lender’s Commitment, any payment of a LIBOR Rate Loan occurs on a day
which is not the last day of the applicable Interest Period, Borrower shall pay to Agent for the
benefit of Lenders (including any Rejecting Lender) any loss or cost incurred by Lenders (including
any Rejecting Lender) resulting therefrom in accordance with Section 3.5 hereof. Upon the
effective date of the termination of the Rejecting Lender’s Commitment, the Aggregate Commitment
shall be reduced by the amount of the terminated Commitment of the Rejecting Lender, and each other
Lender shall be deemed to have irrevocably and unconditionally purchased and received (subject to
the provisions of the next to the last sentence of this Section 2.7(d)), without recourse or
warranty, from the Rejecting Lender, an undivided interest and participation in any Facility L/C
then outstanding, ratably, such that each Lender (excluding the Rejecting Lender but including any
replacement Lender that acquires an interest hereunder from such Rejecting Lender) holds a
participation interest in each Facility L/C in proportion to the ratio that such Lender’s
Commitment (upon the effective date of such termination of the Rejecting Lender’s Commitment) bears
to the Aggregate Commitment (as reduced by the termination of such Rejecting Lender’s Commitment or
a part thereof). Notwithstanding the foregoing, if, upon the termination of the Commitment of such
Rejecting Lender, the sum of the outstanding principal balance of the Loans and the Facility L/C
Obligations would exceed the Aggregate Commitment (as reduced), Borrower may not terminate such
Rejecting Lender’s Commitment unless Borrower, on or prior to the effective date of such
termination, prepays, in accordance with the provisions of this Agreement, outstanding Loans or
causes to be canceled, released and returned to the applicable LC Issuer outstanding Facility L/Cs
or deposits cash into the Facility L/C Collateral Account in sufficient amounts in the aggregate
such that, on the effective date of such termination, the Aggregate Outstanding Credit Exposure
does not exceed the sum of the Aggregate Commitment (as reduced) and the amounts held in the
Facility L/C Collateral Account. In the event that Borrower makes such deposit into the Facility
L/C Collateral Account, such deposits shall be applied by Agent to pay to the applicable LC Issuer
amounts drawn on any Facility L/C that are not reimbursed by Borrower and, provided no Default or
Event of Default has occurred that is continuing, shall be returned to Borrower when the Aggregate
Outstanding Credit Exposure equals or is less than the Aggregate Commitment.



15









 





     2.11 Payments; Pro Rata Treatment.



     (a) Each borrowing by Borrower from Lenders hereunder (other than a Swingline Loan), each
payment (including each prepayment (other than a prepayment pursuant to Section 2.7(d))) by
Borrower on account of principal of and interest on the Revolving Credit Loans, each payment by
Borrower on account of any Unused Fee hereunder and any reduction of the Commitments (in each case,
other than pursuant to Section 2.7(d)) shall be made pro rata according to the respective Lenders’
Ratable Shares. All payments (including prepayments) to be made by Borrower hereunder and under
the Notes, whether on account of principal, interest, fees or otherwise, shall be made without
set-off or counterclaim and shall be made prior to 11:00 a.m., Charlotte, North Carolina time, on
the due date thereof to Agent, for the account of Lenders, at Agent’s office at 301 South College
Street, Charlotte, North Carolina, or at such other office as directed by Agent from time to time,
in Dollars and in immediately available funds. Agent shall promptly distribute such payments to
Lenders upon receipt in like funds as received. If any payment hereunder on an ABR Loan becomes
due and payable on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. If any payment hereunder on a LIBOR Rate
Loan becomes due and payable on a day other than a Business Day, such payment shall be extended to
the next succeeding Business Day (and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension) unless the result of such
extension would be to extend such payment into another calendar month, in which event such payment
shall be made on the immediately preceding Business Day.



     (b) Prior to the occurrence of a Default, Agent shall apply all payments and prepayments in
respect of the Obligations of Borrower under this Agreement or any other Loan Document in such
order as shall be specified by Borrower; provided that if Borrower does not specify how such
payments and prepayments are to be applied prior to Agent’s receipt of such payments, and
prepayments, such amounts received shall be applied, first, to ABR Loans, and second, any excess to
LIBOR Rate Loans. After the occurrence of a Default, Agent shall, unless otherwise specified at
the direction of the Required Lenders which direction shall be consistent with the last two
sentences of this paragraph, apply all payments and prepayments in respect of any Obligations of
Borrower and all proceeds of any enforcement action (or other realization), in the following order:



          (i) first, to pay all costs and expenses incurred in connection with any enforcement
(or other realization) of the Loan Documents or any Interest Rate Contract between Borrower or any
Guarantor and a Secured Party, including reasonable attorneys’ fees and out-of-pocket expenses
actually incurred (but excluding the allocated costs of internal counsel) and enforcement,
maintenance or realization of any Collateral;




          (ii) second, to pay all accrued interest on and then principal of any portion of the
Loans which Agent may have advanced on behalf of any Lender for which Agent has not then been
reimbursed by such Lender or Borrower;




          (iii) third, to pay Obligations in respect of any fees, expenses, reimbursements or
indemnities then due to Agent;




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          (iv) fourth, to pay Obligations in respect of any fees, expenses, reimbursements or
indemnities then due under the Loan Documents to the Lenders, the Swingline Lender or any LC Issuer
(other than the Reimbursement Obligations);




          (v) fifth, to pay all accrued interest in respect of the Loans;




          (vi) sixth, to the ratable payment or prepayment of principal outstanding on the
Swingline Loans and any outstanding Reimbursement Obligations, to the extent not previously paid by
a mandatory borrowing hereunder;




          (vii) seventh, to the ratable payment or prepayment on a pari passu basis of (y)
principal outstanding on the Revolving Credit Loans in such order as Agent may determine in its
sole discretion and (z) any amounts then due under any Interest Rate Contract between Borrower or
any Guarantor and a Secured Party; and




          (viii) eighth, to the ratable payment of all other Obligations, including without
limitation, any obligation to fund any Collateral Shortfall Amount under Article 8.




     Borrower shall remain liable and will pay, on demand, any deficiency remaining in respect of
the Obligations, together with interest thereon pursuant to the terms of this Agreement, which
interest shall constitute part of the Obligations. The order of priority set forth in clauses (ii)
and (iii) above and the related provisions of this Agreement are set forth solely to determine the
rights and priorities of Agent. The order of priority set forth in clauses (iv), (v), (vi) and
(vii) above may be changed only with the prior written consent of all the Lenders, the Swingline
Lender and the LC Issuers without necessity of notice to or consent of or approval by Borrower, or
any other Person. The order of priority set forth in clauses (ii) and (iii) above may be changed
only with the prior written consent of Agent.



     (c) Borrower may from time to time pay, without penalty or premium, all outstanding ABR Loans,
or, in a minimum aggregate amount of $250,000 or any integral multiple of $500,000 in excess
thereof, any portion of the outstanding ABR Loans upon notice to Agent not later than 11:00 a.m.
Charlotte, North Carolina time on the date of payment. Borrower may from time to time pay, subject
to the payment of any indemnification amounts required by Section 3.5 but without penalty or
premium, all outstanding LIBOR Rate Loans, or, in a minimum aggregate amount of $5,000,000 or any
integral multiple of $1,000,000 in excess thereof, any portion of the outstanding LIBOR Rate Loans
upon notice to Agent not later than 10:00 a.m. Charlotte, North Carolina time on the date of
payment; provided, that, notwithstanding the foregoing, other than any prepayment of Revolving
Credit Loans made by Borrower in order to comply with Section 6.4 hereof, no more than two
prepayments of Revolving Credit Loans may be made each calendar month.



     (d) In addition to the principal payments otherwise required hereunder, Borrower shall make
mandatory prepayments of principal as set forth below:



          (i) Borrower shall pay to Agent for the ratable benefit of Lenders the Release Consideration
for any Land sold or released as provided in Section 6.18 upon the closing date for such Land sold
and released from the Mortgages;




17









 








          (ii) If, at any time after the Interim Borrowing Period, Borrowing Base Indebtedness exceeds
the then applicable Borrowing Base, Borrower shall have five (5) Business Days after having
knowledge thereof, (A) to prepay the Loans so that the Borrowing Base Indebtedness does not exceed
the then applicable Borrowing Base, or (B) to deliver to Agent a more current Borrowing Base
Certificate that demonstrates that the Borrowing Base Indebtedness does not exceed the Borrowing
Base, or (C) to increase the Unrestricted Cash included in the Borrowing Base so long as such
increase shall not result in the Unrestricted Cash of Borrower being greater than $5,000,000, or
(D) to otherwise provide cash collateral in accordance with Article 8 such that the Borrowing Base
Indebtedness (less any Facility L/C’s which are cash collateralized in accordance with Article 8)
does not exceed the then applicable Borrowing Base; and




          (iii) If, at any time Unrestricted Cash of Borrower exceeds $5,000,000 for more than three (3)
Business Days, Borrower shall immediately after having knowledge thereof prepay the Loans so that
Unrestricted Cash of Borrower does not exceed $5,000,000.




     Amounts repaid hereunder may be reborrowed under this Section 2.11(d) in accordance with this
Agreement.



     2.13 The Facility L/Cs. So long as no Default or Event of Default exists, Wachovia
Bank and each other Lender that is designated as an LC Issuer in accordance with Section 2.14(a)
hereof, agree to issue Facility L/Cs, on the terms and conditions hereof, provided that (a) the
aggregate of all Facility L/C Obligations at any one time outstanding shall not exceed Thirty
Million Three Hundred Thousand Dollars ($30,300,000), (b) the sum of the aggregate amount of all
Loans and the aggregate amount of all Facility L/C Obligations at any one time outstanding shall
not exceed the Aggregate Commitment and (c) the issuance of Facility L/Cs is subject to the
limitation set forth in Section 2.1(b) hereof. Each letter of credit issued by Wachovia Bank under
the terms of the Existing Credit Agreement shall be treated as a Facility L/C issued hereunder.



     2.15 Issuance of Facility L/Cs.



     (a) Borrower may request an LC Issuer to issue a Facility L/C by delivering to such LC Issuer
(with a copy to Agent if Agent is not such LC Issuer), no later than 11:00 a.m. (local time at such
LC Issuer’s office designated herein) two (2) Business Days prior to the date on which issuance of
the Facility L/C is requested by Borrower, a standby letter of credit application and reimbursement
agreement in such LC Issuer’s then customary form (the “Facility L/C Application”) completed to the
satisfaction of such LC Issuer, together with the proposed form of such letter of credit (which
shall comply with the applicable requirements of Section 2.15(b) below) and such other
certificates, documents and other papers and information as such LC Issuer may reasonably request.



     (b) Each Facility L/C issued hereunder shall, among other things, (i) be in such form
requested by Borrower as shall be acceptable to the LC Issuer thereof in its sole discretion, and
(ii) have an expiry date (taking into account any automatic renewal provisions thereof) occurring
prior to the Maturity Date. If the Aggregate Commitment is terminated (whether by acceleration,
demand, or otherwise), then, not later than simultaneously with such termination, all outstanding



18









 







Facility L/Cs shall be returned to the LC Issuer thereof or Borrower shall cash collateralize
all outstanding Facility L/Cs in accordance with Article 8 hereof. Each Facility L/C Application
and each Facility L/C shall be subject to the Uniform Customs and, to the extent not inconsistent
therewith, the laws of the state in which is located the LC Issuer’s office from which such
Facility L/C is issued.



     (c) An LC Issuer shall not issue, amend or extend, at any time, any Facility L/C:




          (i) if the aggregate maximum amount then available for drawing under Letters of Credit issued
by such LC Issuer, after giving effect to the Facility L/C or amendment or extension thereof
requested hereunder, shall exceed any limit imposed by law or regulation upon such LC Issuer;




          (ii) if, after giving effect to the issuance, amendment or extension of the Facility L/C
requested hereunder, the aggregate principal amount of the Facility L/C Obligations would exceed
Thirty Million Three Hundred Thousand Dollars ($30,300,000);




          (iii) if, after the Interim Borrowing Period and after giving effect to the issuance,
amendment or extension of the Facility L/C requested hereunder, Borrowing Base Indebtedness would
exceed the Borrowing Base as of the most recent Inventory Valuation Date;




          (iv) if, after giving effect to the issuance, amendment or extension of the Facility L/C
requested hereunder, the sum of (A) the outstanding and unpaid principal amount of the Loans and
(B) the Facility L/C Obligations would exceed the Aggregate Commitment;




          (v) if such LC Issuer receives written notice from Agent at or before 11:00 a.m. Charlotte,
North Carolina time on the proposed date of issuance, amendment or extension of such Facility L/C
that one or more of the conditions precedent contained in Section 2.15(d) below would not on such
date be satisfied, unless such conditions are thereafter satisfied or waived and written notice of
such satisfaction is given to such LC Issuer by Agent; or




          (vi) that is in a currency other than Dollars.




     (d) The issuance, amendment or extension of any Facility L/C is subject to the satisfaction in
full of the following conditions on the date of such issuance, amendment or extension:



          (i) the conditions of Sections 5.1 and 5.2 hereof are satisfied; and




          (ii) no order, judgment or decree of any court, arbitrator or governmental authority shall
enjoin or restrain the LC Issuer thereof from issuing the Facility L/C and no law, rule or
regulation applicable to such LC Issuer and no directive from any governmental authority with
jurisdiction over such LC Issuer shall prohibit such LC Issuer from issuing Letters of Credit
generally or from issuing that Facility L/C.




     (e) Upon receipt of any Facility L/C Application from Borrower, the LC Issuer will process
such Facility L/C Application, and the other certificates, documents and other papers delivered to
such LC Issuer in connection therewith, in accordance with its customary procedures



19









 







and, upon satisfaction of all conditions contained in this Agreement, shall promptly issue the
original of such Facility L/C and deliver it to the beneficiary thereof, or to Borrower which shall
deliver such original Facility L/C to the beneficiary, and furnish a copy thereof to Borrower. The
LC Issuer shall give Agent written notice, or telephonic notice confirmed promptly thereafter in
writing, of the issuance of a Facility L/C.



     (f) No LC Issuer shall extend or amend any Facility L/C unless the requirements of this
Section 2.15 are met as though a new Facility L/C were being requested and issued.



     2.20 Obligations Absolute.



     (a) The obligations of the other Lenders to an LC Issuer with respect to Facility L/Cs issued
by such LC Issuer, and the Reimbursement Obligations of Borrower with respect to Facility L/Cs,
under this Agreement shall be unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances, including without limitation
the following:



          (i) the existence of any claim, set-off, defense or other right which Borrower may have at any
time against any beneficiary, or any transferee, of any Facility L/C (or any Persons for whom any
such beneficiary or any such transferee may be acting), any LC Issuer or any other Person, whether
in connection with this Agreement, the transaction contemplated herein, or any unrelated
transaction (including any underlying transaction between Borrower or any Subsidiary and the
beneficiary of such Facility L/C);




          (ii) any draft, certificate, statement or any other document presented under any Facility L/C
proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;




          (iii) payment by an LC Issuer under any Facility L/C against presentation of a draft or
certificate which does not comply with the terms of such Facility L/C, provided that such LC Issuer
has made such payment to the beneficiary set forth on the face of such Facility L/C;




          (iv) the occurrence or any Default or Event of Default;




          (v) the surrender or impairment of any security for the performance or observance of any of
the terms of any of the Loan Documents; or




          (vi) any other circumstances or happening whatsoever, whether or not similar to any of the
foregoing.




     (b) Each LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon
any Facility L/C, draft, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or other document
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, independent accountants and other
experts selected by such LC Issuer. Each LC Issuer shall be fully justified in failing or refusing
to take any action under this Agreement unless it shall first have received such advice or
concurrence of the Required Lenders as it reasonably deems appropriate or it shall first be



20









 







indemnified to its reasonable 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 such action.
Notwithstanding any other provision of this Section 2.20, each LC Issuer shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement in accordance with a
request of the Required Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon the Lenders and any future holders of a participation in any Facility
L/Cs.



     4.3 Power; Authorization; Enforceable Obligations. Borrower and each Subsidiary
Guarantor has the corporate, partnership or limited liability company (as applicable) power and
authority to make, deliver and perform the Loan Documents to which it is a party and (in the case
of Borrower) to borrow hereunder, and has taken all corporate or other action necessary to be taken
by it to authorize (a) (in the case of Borrower) the borrowings on the terms and conditions of this
Agreement and the Notes, and (b) the execution, delivery and performance of the Loan Documents to
which it is a party. No consent, waiver or authorization of, or filing with any Person (including
without limitation any Governmental Authority) is required to be made or obtained by Borrower in
connection with the borrowings hereunder or by Borrower or any Guarantor in connection with the
execution, delivery, performance, validity or enforceability of the Loan Documents to which it is a
party. This Agreement has been, and each Note and each other Loan Document will be, duly executed
and delivered on behalf of Borrower or each Guarantor (as the case may be), and this Agreement
constitutes, and each Note and each other Loan Document when executed and delivered hereunder will
constitute, a legal, valid and binding obligation of Borrower or the Subsidiary Guarantors or the
Owner Guarantors (as the case may be), enforceable against Borrower or the Subsidiary Guarantors or
the Owner Guarantors (as the case may be), in accordance with its terms, subject to the effect, if
any, of bankruptcy, insolvency, reorganization, arrangement or other similar laws relating to or
affecting the rights of creditors generally and the limitations, if any, imposed by the general
principles of equity and public policy.



     4.4 No Legal Bar. The execution, delivery and performance of this Agreement, the
Notes and the other Loan Documents, the borrowings hereunder and the use of the proceeds thereof
and the execution, delivery and performance by the Subsidiary Guarantors of the Subsidiary Guaranty
Agreements and the other Loan Documents (a) do not violate any Requirement of Law or Contractual
Obligation of Borrower or any of Borrower’s Subsidiaries, (b) do not contravene the articles of
incorporation, charter, bylaws, partnership agreement, articles or certificate of formation,
operating agreement or other organizational documents of Borrower or any of Borrower’s Subsidiaries
and (c) do not result in, or require, the creation or imposition of any Lien on any of its
properties or revenues pursuant to any Requirement of Law or Contractual Obligation.



     4.5 No Material Litigation. No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of Borrower, threatened by
or against Borrower or any of Borrower’s Subsidiaries or against any of their respective properties
or revenues (a) with respect to this Agreement, the Notes or any other Loan Document or any of the
transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a
material adverse effect on the business, operations, property or financial or other condition of
Borrower and Borrower’s Subsidiaries taken as a whole.



21









 





     4.16 Ownership and Liens.



     (a) Borrower and each Subsidiary have title to, or valid leasehold interests in, all of their
respective properties and assets, real and personal, including the properties and assets and
leasehold interests reflected in the financial statements referred to in Section 4.1 hereof (other
than any properties or assets disposed of in the ordinary course of business), and none of the
properties and assets owned by Borrower or any Subsidiary and none of their leasehold interests is
subject to any Lien, except for (a) Permitted Liens, (b) Liens pursuant to Secured Indebtedness
permitted under Section 7.1, (c) Liens incurred or deposits made in the ordinary course of business
to secure performance of tenders, statutory obligations, surety and appeal bonds, bid, leases,
government contracts, performance and return-of-money bonds and similar obligations (exclusive of
obligations for the payment of borrowed money), (d) leases and subleases (or any Liens related
thereto) granted to others that do not materially interfere with the ordinary course of business of
Borrower and its Subsidiaries, (e) Liens on assets that are not included in the Borrowing Base
incurred in connection with a sale/leaseback transaction, (f) judgment Liens not giving rise to an
Event of Default, (g) any right of first refusal, right of first offer, option, contract or other
agreement to sell an asset, (h) Liens of a lessor under any Capital Leases, and (i) banker’s Liens
(and rights of set off) arising in accordance with applicable law.



     (b) Schedule 4.16 contains a complete and accurate list as of the Fourth Amendment Effective
Date of the location, by state, county and street address (if such street address is available), of
(i) all real property in which Borrower or any Subsidiary has any interest as owner and (ii) each
other location where any of the Collateral is located or where any records relating to the
Collateral are kept, if any. To the extent such real property will be a part of the Collateral,
the recording office in which the Mortgage applicable to such real property will be filed and the
record owner of such real property are also listed on Schedule 4.16. Borrower and Subsidiary
Guarantors are the record and beneficial owners of all of the presently existing Collateral covered
by the Security Documents, in each case free and clear of all Liens, except for Permitted Liens.
Borrower and its Subsidiaries have good, marketable and insurable fee simple title in all real
property listed on Part A of Schedule 4.16, free and clear of all Liens, except for Permitted
Liens. Borrower and Subsidiary Guarantors are in possession of all real property constituting part
of the Collateral and no default by Borrower or Subsidiary Guarantors exists and Borrower and
Subsidiary Guarantors do not have any knowledge of any other default under any agreement relating
to any real property constituting part of the Collateral, to the extent that any such default would
result in loss of possession, the imposition of any Lien (other than Permitted Liens) or loss of
any ownership interest in any such real property; no Lien exists on or with respect to the interest
of Borrower and Subsidiary Guarantors in any such real property, other than Permitted Liens. Each
party other than Borrower and Subsidiary Guarantors in possession of any part of the real property
which is a part of the Collateral is listed on Schedule 4.16, together with the terms of such
possession (i.e., lease or other agreement, monthly payment and term of agreement).



     (c) Each of Borrower and its Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual property material to its business, and the
use thereof by Borrower and its Subsidiaries does not infringe upon the rights of another Person,
except for any such infringements that, individually or in the aggregate, could not reasonably be
expected to result in a material adverse effect on Borrower or any of its Subsidiaries.



22









 





     (d) All capital stock, debentures, bonds, notes and all other securities of Borrower and its
Subsidiaries presently issued and outstanding are validly and properly issued in accordance with
all applicable laws, including, but not limited to, the “Blue Sky” laws of all applicable states
and the federal securities laws. The issued shares of capital stock of Borrower’s wholly-owned
Subsidiaries are owned by Borrower, directly or indirectly, free and clear of any Lien or adverse
claim, except for the Liens provided in the Borrower and Subsidiary Pledge Agreement. At least a
majority of the issued shares of capital stock of each of Borrower’s other Subsidiaries (other than
wholly-owned Subsidiaries) is owned by Borrower, directly or indirectly, free and clear of any Lien
or adverse claim, except for the Liens provided in the Borrower and Subsidiary Pledge Agreement.
The issued member interests of Borrower held by any Owner Guarantor are owned by such Owner
Guarantor, directly or indirectly, free and clear of any Lien or adverse claim, except for the
Liens provided in the Owner Guarantor Pledge Agreement.



     5.2 Conditions to All Loans. In addition to the other terms and conditions of this
Agreement with respect to the making of Loans and the issuance of Facility L/Cs, the obligation of
each Lender to make any Loan and of the LC Issuers to issue, amend or extend any Facility L/C
hereunder on any date (including without limitation the first Borrowing Date) is subject to the
satisfaction of the following conditions precedent as of such date:



     (a) Representations and Warranties. The representations and warranties made by Borrower in
this Agreement and any representations and warranties made by Borrower or any Subsidiary of
Borrower which are contained in any other Loan Document, any other certificate, document or
financial or other statement furnished at any time under or in connection herewith or therewith,
shall be true and correct in all material respects on and as of the date of such Loan or issuance
of such Facility L/C as if made on and as of such date unless stated to relate to a specific
earlier date.



     (b) No Default or Event of Default. No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the Loan to be made or Facility L/C to be issued,
amended or extended on such date.



     (c) Facility L/C Application. In the case of the issuance, amendment or extension of any
Facility L/C, Borrower shall have delivered to the applicable LC Issuer a Facility L/C Application
in accordance with Section 2.15 hereof for each Facility L/C that Borrower has requested such LC
Issuer to issue, amend or extend.



     (d) Borrowing Base Certificate. In the case of any request for a Loan or issuance, amendment
or extension of a Facility L/C after the Interim Borrowing Period, Borrower shall have delivered
its monthly Borrowing Base Certificate for the preceding month showing the calculation of the
Borrowing Base.



     (e) Borrowing Base. Such borrowing or the issuance, amendment or extension of such Facility
L/C shall not violate the provisions of Section 2.1 or Section 2.22 hereof.



     (f) Loan Documents. The Loan Documents shall have been duly executed and delivered by
Borrower and all Guarantors which are parties thereto to Agent.



23









 





     (g) Cash Limit. Borrower shall certify to Agent that prior to, and after giving effect to,
such borrowing or issuance, Unrestricted Cash of Borrower shall not exceed $5,000,000 for more than
three (3) consecutive Business Days.



Each borrowing by Borrower and each submission of a Facility L/C Application under this Agreement
shall constitute a representation and warranty by Borrower as of the date of such borrowing or
submission of such Facility L/C Application that the conditions contained in the foregoing
paragraphs of this Section 5.2 have been satisfied.



     6.2 Certificates; Other Information. Furnish to each Lender and Agent:



     (a) concurrently with the delivery of each financial statement referred to in Section 6.1(a)
above and each financial statement referred to in Section 6.1(b) above, a certificate of the Chief
Financial Officer of Borrower (in the form of Exhibit F attached hereto or such other form as shall
be reasonably acceptable to Agent) stated to have been made after due examination by such Chief
Financial Officer (i) stating that, to the best of such officer’s knowledge, Borrower and each of
its Subsidiaries during such period has observed or performed in all material respects all of its
covenants and other agreements, and satisfied every condition contained in this Agreement, the
Notes and the other Loan Documents to be observed, performed or satisfied by it, and that such
Chief Financial Officer has obtained no knowledge of any Default or Event of Default except as
specified in such certificate, and (ii) showing in detail the calculations supporting such
statement in respect of Sections 6.10, 6.15, 7.1, 7.5, 7.6(g), 7.10 and 7.12 hereof;



     (b) concurrently with the delivery of the financial statements referred to in Section 6.1(a)
above, a copy of the management prepared business plan and budget of Borrower and its Subsidiaries
for the current fiscal year;



     (c) within sixty (60) days after the end of each quarterly period of each fiscal year, a sales
report identifying as to Borrower and its Subsidiaries the inventory of real estate operations,
including Land and Housing Units as of such date, designated in such categories as are reasonably
required by Agent; such summary shall include a delineation of sold or unsold items in each
category;



     (d) promptly upon receipt thereof, copies of all final reports submitted to Borrower by
independent certified public accountants in connection with each annual, interim or special audit
of the books of Borrower or any of its Subsidiaries made by such accountants, including without
limitation any final comment letter submitted by such accountants to management in connection with
their annual audit;



     (e) copies of all reports, notices and other information furnished to any holder of any
Subordinated Notes as and when such reports, notices and other information are so furnished to such
holder; and



     (f) promptly, on notice to Borrower, such additional financial and other information as any
Lender may from time to time reasonably request.



     6.3 Borrowing Base Certificate. After the Interim Borrowing Period, furnish to Agent
as soon as available, but in any event within twenty (20) days after the end of each



24









 







calendar month, a Borrowing Base Certificate, certified by the Chief Financial Officer of
Borrower, showing the calculation of the Borrowing Base as of the second (2nd) to last Tuesday of
such month.



     6.4 Compliance with Borrowing Base Requirements. At any time any Borrowing Base
Certificate required to be furnished to Agent in accordance with Section 6.3 hereof indicates that
the aggregate amount of Borrowing Base Indebtedness outstanding exceeds the Borrowing Base, within
fifteen (15) calendar days after the delivery of such Borrowing Base Certificate to Agent, (a)
reduce the principal amount of the Loans and undrawn and drawn Facility L/Cs (or, if no Loans are
outstanding, provide cash collateral for undrawn Facility L/Cs in accordance with Article 8) or
other Borrowing Base Indebtedness then outstanding by an amount sufficient to reduce the aggregate
amount of Borrowing Base Indebtedness outstanding to be equal to or less than the Borrowing Base,
or (b) deliver to Agent a more current Borrowing Base Certificate that demonstrates that the
aggregate amount of Borrowing Base Indebtedness does not exceed the Borrowing Base.



     6.7 Maintenance of Property, Insurance.



     (a) Keep all property useful in and necessary to its business in good working order and
condition;



     (b) Maintain, at Borrower’s sole cost and expense, the following insurance: (i) comprehensive
commercial general liability insurance (including public liability, general liability and business
interruption insurance) for Borrower and Subsidiary Guarantors and insurance with respect to their
property against such casualties, contingencies and risks and in at least such amounts and against
at least such risks as are usually insured against in the same general area by companies engaged in
the same or similar business, (ii) “All-Risk” fire and extended coverage hazard insurance
(including include fire, vandalism, sinkhole (if applicable) and malicious mischief coverage)
covering the Property related to any Land owned by Borrower or any Subsidiary Guarantor in an
aggregate amount of not less than 100% of the agreed upon full insurable replacement value of the
Property, including coverage for loss of rents or business interruption; (iii) during the course of
any construction, reconstruction, remodeling or repair of any Improvements, builders’ all-risk
extended coverage insurance in amounts based upon the completed replacement value of the
Improvements (excluding site improvements, below grade improvements, roads, foundations, parking
areas, paths, walkways and like improvements) and endorsed to provide that occupancy by any person
shall not void such coverage; (iv) insurance which complies with the workers’ compensation and
employers’ liability laws of all states in which Borrower and Subsidiary Guarantors shall be
required to maintain such insurance; and (v) such other insurance as Agent may reasonably require.



     (c) Each insurance policy required under this Section shall: (i) be written by an insurance
company authorized or licensed to do business in the state within which any Land is located having
an Alfred M. Best Company, Inc. rating of “A-“ or higher and a financial size category of not less
than IX; (ii) be for terms of at least one year, with premium prepaid for the term of the policy;
(iii) be subject to the reasonable approval of Agent as to insurance companies, amounts, content,
forms of policies and expiration dates; (iv) name Agent, its successors and assigns (1) as an
additional insured and loss payee under all liability insurance policies, and (2)



25









 







as the first mortgagee, under a standard non-contributory mortgagee clause, on all property
insurance policies and all loss of rents or loss of business income insurance policies; and (v)
contain provisions providing for written notice to Agent at least thirty (30) days prior to any
cancellation, termination or modification thereof (if, in the case of any termination or
modification, Borrower or any Subsidiary knows or has reason to know of such termination or
modification), or of any coverage provided that if such cancellation or termination is due to
non-payment of premiums, the time period for such notice may not be less than ten (10) days.



     (d) At least thirty (30) days prior to the expiration of any insurance policy required herein,
Borrower shall furnish evidence satisfactory to Agent that such policy has been renewed or replaced
or is no longer required.



     (e) Notwithstanding the foregoing, in the event Borrower or any Subsidiary fails to maintain
insurance accordance with this Section 6.7, and Agent elects to obtain insurance to protect its
interests hereunder, Agent may obtain insurance in any amount and of any type Agent deems
appropriate to protect Agent’s interest only and Agent shall have no duty or obligation to any
Borrower or any Guarantor or Subsidiary to maintain insurance in any greater amount or of any other
type for the benefit of any Borrower or any Guarantor or Subsidiary. All insurance premiums
incurred or paid by Agent shall be at Borrower’s sole cost and expense. Agent’s election to obtain
insurance shall not be deemed to waive any Event of Default hereunder.



     6.10 Maintenance of Tangible Net Worth. Maintain Tangible Net Worth in amounts at all
times equal to or exceeding (i) 55% of the Tangible Net Worth for the fiscal period ending November
30, 2008, after giving effect to any adjustments (proforma or actual when available) related to the
Bond Resolution or the Fourth Amendment including, but not limited to (x) any gain realized from
the exchange of the 9.5% Senior Subordinated Notes for the Exchanged Notes, (y) the New Equity and
(z) an adjustment up to $31,000,000 representing the aggregate amount of all interest payments due
on the Exchanged Notes which must be shown as a liability on the balance sheet of Borrower in
accordance with GAAP and which interest payments shall not be required to commence prior to 2012,
plus (ii) fifty percent (50%) of any and all new equity received after the Fourth Amendment
Effective Date (excluding the New Equity), plus (iii) fifty percent (50%) of positive net
income earned in any quarter ended after the Fourth Amendment Effective Date.



     6.11 [Intentionally omitted.]



     6.12 [Intentionally omitted.]



     6.13 Additional Subsidiaries and Guarantors. (a) Cause (i) each New Subsidiary to, on
or before the date ten (10) days prior to the last day of the fiscal quarter in which such
Subsidiary is formed, acquired or first owns assets in excess of $250,000, (A) become a “Subsidiary
Guarantor” by execution and delivery of a Supplemental Subsidiary Guaranty by such Subsidiary to
Agent, (B) become a party to, and agree to be bound by the terms of, the Security Agreement and
Borrower and Subsidiary Pledge Agreement pursuant to an instrument in form and substance reasonably
satisfactory to Agent which instrument shall be executed by such New Subsidiary and delivered to
Agent and cause to be filed any financing statements necessary to perfect the Lien of Agent in such
New Subsidiary’s assets, (C) execute and cause to be filed, in favor of Agent for



26









 







the benefit of Lenders to secure the Obligations, Mortgages constituting a fully perfected
Lien on, and security interest in, all right, title and interest of such New Subsidiary to, in each
case prior and superior in right to any other Lien (subject to the Permitted Liens) on, all Land
owned by such New Subsidiary and cause the Mortgage Requirements for each such parcel of Land to be
completed concurrently with the filing of such Mortgage (or within 30 days thereafter or such
additional reasonable time as Agent may determine in its sole discretion with respect to each
individual Mortgage and parcel of Land), (D) deliver such proof of corporate or other appropriate
action, incumbency of officers, opinions of counsel and other documents delivered by the Subsidiary
Guarantors pursuant to Section 5.1 hereof or as Agent shall have reasonably requested in each case,
and (ii) cause Borrower or any Subsidiary (the “Pledgor Subsidiary”) to, pledge one hundred percent
(100%) of the shares of capital stock owned by Borrower or such Pledgor Subsidiary in any New
Subsidiary pursuant to the Borrower and Subsidiary Pledge Agreement or a supplement thereto and
deliver to Agent the certificates representing such shares of capital stock of the New Subsidiary
together with stock powers executed in blank. After the Interim Borrowing Period, Borrower shall
also cause the requirements of this Section 6.13(a) and of Section 6.17(e) to be satisfied prior to
any assets owned by such New Subsidiary being included in the Borrowing Base.



     (b) Cause each Person (other than any Guarantor) that obtains after the date of this Agreement
a direct ownership or equity interest in Borrower (other than (A) a Special Membership Interest, as
such term is defined in the Amended and Restated Regulations of Borrower dated as of September 1,
2005, as amended November 29, 2005 (the “AW Regulations”), which interest is limited to the special
allocations of the profits and cash distributions from the Pinery Joint Venture and which, except
as expressly provided in the AW Regulations, shall not confer any rights to participate in the
management or operation of Borrower or (B) the Restructuring Owners) or Little Shots after the date
of this Agreement to (i) become an “Owner Guarantor” by execution and delivery of a Supplemental
Owner Guaranty by such Person to Agent, (ii) with respect Persons obtaining a direct ownership or
equity interest in Borrower, enter into an Owner Guarantor Pledge Agreement, cause to be filed any
financing statements necessary to perfect the Lien of Agent in the ownership interests of Borrower
pledged thereunder, and deliver any certificates evidencing the ownership interests of Borrower
pledged thereunder to Agent, and (iii) to deliver such proof of corporate or other appropriate
action, incumbency of officers, opinions of counsel and other documents delivered by the Owner
Guarantors pursuant to Section 5.1 hereof or as Agent shall have reasonably requested in each case,
on or before the date 10 days prior to the last day of the fiscal quarter in which such Person
became a direct holder of ownership or equity interests in Borrower or Little Shots.



     6.15 Minimum Liquidity. During the Interim Borrowing Period, Borrower shall maintain
(a) Unrestricted Cash plus (b) the Borrowing Cap minus (c) the aggregate principal amount of the
Loans outstanding and Facility L/C Obligations, in an amount of not less than $6,000,000. After
the Interim Borrowing Period, if, as of the last day of the fiscal quarter most recently ended, the
ratio of (1) Adjusted Cash Flow From Operations to (2) Interest Expense for either (A) more than
one of the last four quarters then ended is less than 1.50 to 1.00, or (B) any of the last four
fiscal quarters then ended is less than 1.25 to 1.00, then on and after such day, Borrower shall
maintain Unrestricted Cash, together with any Borrowing Base Availability, in an amount of not less
than the greater of (i) (y) $20,000,000 if the current Borrowing Base (calculated with the Presold
Housing Unit Borrowing Base Percentage as 70% and the Model-



27









 







Speculative Housing Unit Borrowing Base Percentage as 65%) is equal to or greater than
$95,000,000 and (z) $15,000,000 if the current Borrowing Base (calculated with the Presold Housing
Unit Borrowing Base Percentage as 70% and the Model-Speculative Housing Unit Borrowing Base
Percentage as 65%) is less than $95,000,000, and (ii) 1.5 times the Interest Expense (excluding any
imputed interest) for the four (4) consecutive fiscal quarters most recently ended.



     7.1 Limitation on Secured Indebtedness. Create, incur, assume or suffer to exist any
Secured Indebtedness other than Indebtedness subject to Permitted Liens.



     7.2 Easements Encumbrances, Liens and Restrictive Covenants. With respect to any of
the Property included in the Borrowing Base, Borrower shall not, without the prior written consent
of Agent, create, place, suffer or permit to be created or placed or, through any act or failure to
act, acquiesce in the placing or allow to remain, any Lien, regardless of whether same is expressly
subordinate to the Obligations, or grant any easement or impose any restrictive covenants, or
execute or file any subdivision plat, other than Permitted Liens; or contractually agree with any
other Person to provide such Person a negative pledge, or other covenant similar to this Section
7.2, except as set forth in Section 4.11 of the Indenture (as amended in connection with Bond
Resolution) or the Exchange Indenture, and, with respect to specific collateral pledged (excluding
in any case any assets included in the Borrowing Base), except as set forth in documents evidencing
Secured Debt.



     7.4 [Intentionally omitted.]



     7.5 Land Components. Permit Land Value to exceed $115,000,000.00. Notwithstanding
the foregoing, (a) for the reporting period beginning on December 1, 2009, Land Value shall not
exceed, at any one time, an amount representing the equivalent of 3.5 times the applicable year’s
Supply (as defined below) and (b) for the reporting period beginning on June 1, 2010 and
thereafter, Land Value shall not exceed, at any one time, an amount representing the equivalent of
3.0 times the applicable year’s Supply. For the purpose of the foregoing, the applicable year’s
“Supply” shall be the quotient of (1) the total number of Lots owned minus (A) all Lots owned by
Borrower in the Pinery subdivision located in Douglas County, Colorado and (B) all Lots consisting
of Presold Housing Units and Speculative Housing Units divided by (2) two times the total number of
sales of Lots for the preceding six (6) months.



     7.6 Investments, Loans and Advances. Make or permit to remain outstanding any loans
or advances to or investments in any Person, except that the foregoing restriction shall not apply
to:



     (a) investments, loans or advances, the material details of which have been set forth in the
financial statements delivered to Agent and which are disclosed to Agent and Lenders in Schedule
7.6 hereto;



     (b) investments in or loans or advances to Subsidiary Guarantors;



     (c) investments in or loans or advances to Subsidiaries which are not Guarantors; provided
that any such investments, loans and advances do not exceed $250,000 in the aggregate per
Subsidiary at any one time;



28









 





     (d) investments in direct obligations of the United States of America or any agency thereof;



     (e) investments in certificates of deposit of maturities less than one (1) year, issued by
commercial banks in the United States of America having capital and surplus in excess of
$50,000,000;



     (f) investments in commercial paper of maturities less than one (1) year, if at the time of
purchase such paper is rated in either of the two highest rating categories of S&P, Moody’s or, if
either the S&P or Moody’s rating is not available, any other rating agency selected by Agent; and



     (g) investments in, loans or advances to, or, as indicated in Section 7.9(xiv) hereof,
guarantees of indebtedness of Joint Ventures in an aggregate amount not to $10,000,000.



     7.8 Limitation on Payment of Subordinated Indebtedness. Pay, repay, purchase or
defease any Subordinated Indebtedness, directly or indirectly, in cash or in other property, or by
set-off or in any other manner, unless and until all Obligations have been paid in full and all
Commitments have been terminated. Notwithstanding the foregoing, Borrower or any Subsidiary may
(a) make scheduled payments of interest (including any default interest) on the Subordinated
Indebtedness, (b) repay Subordinated Indebtedness upon its scheduled maturity, (c) pay reasonable
amounts required or permitted in accordance with the Bond Resolution as approved by Agent in its
sole discretion, and (d) repurchase the Amended Notes from the proceeds of either additional equity
of Borrower or additional Indebtedness incurred as permitted by this Agreement, so long as, with
respect to clauses (a), (b), (c) and (d) above, no Default or Event of Default has occurred and is
continuing or would occur as a result of making such payment, redemption, purchase or repayment, as
the case may be.



     7.9 Indebtedness. Neither Borrower nor any Subsidiary will create, incur or suffer to
exist any Indebtedness, except, without duplication and without duplication as to Borrower and
Subsidiaries:



     (i) The Obligations.



     (ii) Indebtedness existing on the date hereof (and not otherwise permitted under this Section
7.9) and described in Schedule 7.9 hereto and Refinancing Indebtedness with respect thereto.



     (iii) Indebtedness owed to a seller of Unimproved Entitled Land, Lots Under Development or
Finished Lots under the terms of which Borrower or such Subsidiary, as obligor, is required to make
a payment upon the future sale of such Unimproved Entitled Land, Lots Under Development or Finished
Lots in an amount not to exceed five percent (5%) of the gross sales price or, in the case of
profit sharing agreements between such seller and Borrower or such Subsidiary, an amount that is
reasonable and customary in the industry and market, provided, that such Indebtedness is
subordinated to the Obligations in a manner satisfactory to Agent.



     (iv) Rate Hedging Obligations entered into in respect of the Obligations.



29









 





     (v) Intercompany Indebtedness between Borrower and any Guarantor or between any Guarantors;
provided, however, that (a) any Indebtedness of Borrower owed to a Subsidiary Guarantor is
unsecured and subordinated, pursuant to a written agreement approved by Agent in its sole
discretion, to Borrower’s Obligations hereunder and (b) upon any such Subsidiary Guarantor ceasing
to be a Subsidiary Guarantor or such Indebtedness being owned to any Person other than Borrower or
a Subsidiary Guarantor, Borrower or such Subsidiary Guarantor hereunder, as applicable, shall be
deemed to have incurred Indebtedness not permitted by this clause (v).



     (vi) Trade accounts payable and accrued expenses arising or occurring in the ordinary course
of business.



     (vii) Indebtedness owing under Capital Leases incurred in the ordinary course of business for
the acquisition of office equipment and other personal property not to exceed $250,000 in any
single instance.



     (viii) Indebtedness with respect to Facility L/Cs.



     (ix) Indebtedness consisting of taxes payable, obligations in respect of, customer deposits,
all to the extent incurred in the ordinary course of Borrower’s or any Subsidiary’s business.



     (x) Indebtedness under the 9.5% Senior Subordinated Notes due 2015, the Amended Notes and the
Exchanged Notes; provided that the outstanding principal amount due under the 9.5%
Senior Subordinated Notes due 2015, the Amended Notes and the Exchanged Notes (excluding the
outstanding amount due under the 9.5% Senior Subordinated Notes due 2015 issued pursuant to the
Indenture and under the Exchanged Notes) shall not exceed $71,000,000 at any time.



     (xi) Non-Recourse Indebtedness secured by purchase-money Liens on any Property hereafter
acquired or the assumption of any Lien on Property existing at the time of such acquisition (and
not created in contemplation of such acquisition), or by a Lien incurred in connection with any
conditional sale or other title retention; provided that




     (A) Any Property subject to any of the foregoing is acquired by Borrower or any
Subsidiary in the ordinary course of its respective business and the Lien on any such
Property attaches to such asset concurrently or within ninety (90) days after the
acquisition thereof; and




     (B) Each Lien shall attach only to the Property so acquired.



     (xii) Performance bonds, completion bonds, guarantees of performance, and guarantees of
Indebtedness of a special district entered into in the ordinary course of business.



     (xiii) Subordinated Notes (other than those described in clause (x) above) if the outstanding
principal amount due under such Subordinated Notes does not exceed $50,000,000.00 in the aggregate.




30












 





     (xiv) Indebtedness arising under a guarantee of indebtedness of any Joint Venture (provided
that such guarantee shall be deemed to be an investment in such Joint Venture and subject to the
limitation in Section 7.6(g) hereof).



     (xv) Indebtedness consisting of obligations under lot purchase agreements to the extent
incurred in the ordinary course of Borrower’s or any Subsidiary’s business.



     (xvi) Indebtedness which arises pursuant to a guarantee of payment or collection, guaranteeing
the Indebtedness of Borrower or any Subsidiary which is permitted under clause (xv) of this Section
7.9.



     (xvii) Indebtedness which arises pursuant to a guarantee of payment or collection,
guaranteeing the Indebtedness of Borrower or any Subsidiary which is permitted under clauses (i)
through (x) or (xii) or (xiii) of this Section 7.9.



     Notwithstanding anything herein to the contrary, the aggregate Indebtedness permitted under
clause (xi), (xiv), (xv) and (xvi) shall not exceed more than:



     (a) $30 million Indebtedness outstanding at any one time incurred solely for the acquisition
of real estate assets, borrowed from third parties unaffiliated with the Permitted Holders which
Indebtedness may rank senior in priority in right of payment to the Subordinated Notes but shall
rank no higher than pari passu in right of payment with the Obligations; provided that to the
extent any or all of such Indebtedness is secured from parties affiliated with the Permitted
Holders, such Indebtedness shall rank no higher than pari passu in right of payment with the
Subordinated Notes and shall be subordinated in right of payment to the Obligations; and



     (b) $30 million of Indebtedness outstanding at any one time ranking pari passu in right of
payment with the Subordinated Notes and subordinated in right of payment to the Obligations;
provided that in no event shall the aggregate of Indebtedness incurred pursuant to clause (a) and
this clause (b) exceed the sum of $60 million.



     7.10 Limitation on Distributions. Declare or make, directly or indirectly, any
Distribution, or incur any obligation (contingent or otherwise) to do so, provided, however,
notwithstanding the foregoing, so long as no Default shall have occurred and be continuing at the
time of any Distribution or would result therefrom, Borrower may make Distributions to its direct
parents in amounts required to pay federal, state and local income taxes payable by such direct
parent that are solely attributable to the pretax operating income of Borrower and its Subsidiaries
by virtue of Borrower being a pass-through entity for federal or state income tax purposes;
provided, however, that (a) the amount of Distributions paid with respect to such tax obligations
at any time will not exceed the amount of such federal, state and local income taxes actually owing
by any such direct parent at such time for the respective period (excluding any tax liability of
any such direct parent not attributable to Borrower or its Subsidiaries) (provided that Borrower
may make periodic Distributions based on an estimate of such tax liability with an annual
reconciliation at the end of each tax year) and (b) any refunds received by or on behalf of, or any
overpayment based on the annual reconciliation to, any of Borrower’s direct parents attributable to
Borrower and its Subsidiaries shall, at such direct parents’ election, either (1)



31









 







promptly be returned by such direct parent to Borrower or (2) be credited against Borrower’s
ability to make additional Distributions pursuant to the foregoing provisions of this Section 7.10;
provided, further, however, that nothing in this Section 7.10 shall allow Borrower to make
distributions in excess of 40% of the amount which would be set forth opposite the caption “net
income” (or any like caption) in a consolidated statement of income or operations of Borrower and
its Subsidiaries for such period prepared in accordance with GAAP allocated to its direct parent
for income tax purposes (before taking into account the Built in Loss and any such gain included in
such net income resulting from forgiveness of indebtedness income realized as a result of the
exchange of the 9.5% Senior Subordinated Notes due 2015 issued pursuant to the Exchange Indenture)
(provided that such 40% deemed rate shall be subject to adjustment to reflect changes to applicable
federal and state tax rates as approved from time to time by the independent director of Borrower
in his or her reasonable judgment). The term “Built in Loss” as used in this Section 7.10 shall
mean (i) any operating loss attributable to the period prior to the admission of holders of any
Subordinated Notes as members of Borrower in connection with the Bond Resolution, and (ii)
cumulative differences attributable to book and tax balance sheet carrying amounts at the Fourth
Amendment Effective Date including, without limitation, the difference between the adjusted tax
basis and fair market value of Borrower’s assets on the Fourth Amendment Effective Date (including
for this purpose assets held by Borrower’s Subsidiaries).



     7.11 Ownership and Management. Permit the sale or transfer of any of the ownership
interests in Borrower or any Subsidiary Guarantor if the owners of each of the Subsidiary
Guarantors and Borrower, as of the Fourth Amendment Closing Date, do not maintain at least 51% of
the ownership interests having voting power for the election of directors or similar governing body
of such Subsidiary Guarantor or Borrower; provided, however, that there shall be no limit on the
sale or transfer of the ownership interests in Borrower to any Owner Guarantor. Upon any sale or
transfer of all of the direct ownership interests of Borrower and Little Shots held by any Owner
Guarantor that is not prohibited by this Agreement, such Owner Guarantor’s obligations under the
Owner Guaranty automatically shall be terminated in accordance with Section 10 of the Owner
Guaranty.



     ARTICLE 9: DEFAULTS, EVENTS OF DEFAULT; DISTRIBUTION OF PROCEEDS AFTER EVENT OF DEFAULT



     Upon the occurrence of any of the following events:



     (1) Borrower shall fail to pay any principal of any Note or make any reimbursement (including
payment of Reimbursement Obligations) in connection with any Facility L/C when due in accordance
with the terms thereof and such failure shall continue uncured for five (5) Business Days; or



     (2) Borrower shall fail to pay (a) any interest on any Note or in connection with any Facility
L/C, or (b) any fee, charge or other amount payable hereunder, and such failure shall continue
uncured for five (5) Business Days; or



     (3) any representation or warranty made or deemed made by Borrower or any Guarantor herein, in
any other Loan Document or which is contained in any certificate,



32









 







document or financial or other statement furnished at any time under or in connection herewith
or therewith, shall prove to have been incorrect in any material respect on or as of the date made
or deemed made; or



     (4) (a) Borrower shall default in the observance or performance of Section 7.18 of this
Agreement; or (b) Borrower shall default in the observance or performance of any covenant or
agreement contained in any other provision of this Agreement which default under this clause (b)
shall remain uncured thirty (30) days after Agent or any Lender notifies Borrower that such a
default has occurred, which notice shall specify the nature of the default; or



     (5) (a) Borrower, any Owner Guarantor or any of Borrower’s Subsidiaries shall commence any
case, proceeding or other action (i) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (ii) seeking
appointment of a receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or Borrower, any Owner Guarantor or any of Borrower’s Subsidiaries
shall make a general assignment for the benefit of its creditors; or (b) there shall be commenced
against Borrower, any Owner Guarantor or any of Borrower’s Subsidiaries any case, proceeding or
other action of a nature referred to in clause (a) above which (i) results in the entry of an order
for relief of any such adjudication or appointment, and (ii) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (c) there shall be commenced against Borrower, any
Owner Guarantor or any of Borrower’s Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (d) Borrower, any Owner Guarantor or any of Borrower’s Subsidiaries shall take
any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of
the acts set forth in clauses (a), (b) or (c) above; or (e) Borrower, any Owner Guarantor or any of
Borrower’s Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or



     (6) Borrower, any Owner Guarantor or any Subsidiary of Borrower shall (a) default in any
payment of principal of or interest on any Indebtedness (other than the Obligations) or in the
payment of any Contingent Obligation beyond the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness or Contingent Obligation was created, and the aggregate
principal amount then outstanding of all such Indebtedness and Contingent Obligations of Borrower,
the Owner Guarantors and all Subsidiaries exceeds $1,000,000, or (b) default in the observance or
performance of any other agreement or condition relating to any such Indebtedness or Contingent
Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or
any other event shall occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Contingent Obligation (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 become due or repurchased, prepaid, defeased or redeemed prior to its stated
maturity or such Contingent Obligation to become payable; or



33









 





     (7) (a) any party in interest (as defined in Section 3(14) of ERISA) affiliated with Borrower
or any of Borrower’s Subsidiaries shall engage in any “prohibited transaction” (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (b) any “accumulated funding
deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect
to any Plan, (c) a Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or institution of proceedings is, in the opinion of
the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of
ERISA, and, in the case of a Reportable Event, the continuance of such Reportable Event unremedied
for thirty (30) days after notice of such Reportable Event pursuant to Section 4043 (a), (c) or (d)
of ERISA is given or, in the case of institution of proceedings, the continuance of such
proceedings for thirty (30) days after commencement thereof, (d) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, or (e) any other event or condition shall occur or
exist with respect to a Single Employer Plan, and in each case in clauses (a) through (e) above,
such event or condition, together with all other such events or conditions, if any, could subject
Borrower or any of Borrower’s Subsidiaries to any tax, penalty or other liabilities in the
aggregate material in relation to the business, operations, property or financial or other
condition of Borrower or of Borrower and Borrower’s Subsidiaries taken as a whole; or



     (8) one or more final judgments or decrees shall be entered against Borrower, or any of
Borrower’s Subsidiaries involving in the aggregate a liability (not covered by insurance) of
$1,000,000 or more and all such judgments or decrees in excess of $1,000,000 shall not have been
vacated, satisfied, discharged, or stayed or bonded pending appeal within thirty (30) days from the
entry thereof; or



     (9) any subordination agreement that evidences any Subordinated Indebtedness (i) ceases to be
the legal, valid and binding agreement of any Person party or subject thereto, enforceable against
such Person in accordance with its terms or a payment is made by Borrower or any other obligor in
respect of such Subordinated Indebtedness in violation of any provision thereof, or (ii) shall be
terminated, invalidated or set aside, or be declared ineffective or inoperative or the Indebtedness
related thereto is in any way not fully subordinate to all of (A) Borrower’s Indebtedness and other
liabilities to Lenders and Agent under this Agreement and the Notes or (B) any Guarantor’s
liabilities to Lenders and Agent under any Guaranty Agreement; or



     (10) any event of default under or in connection with any Subordinated Note; or



     (11) if any provision of this Agreement, any Note or any other Loan Document shall for any
reason cease to be valid and binding on Borrower or any Guarantor which is a party thereto or if
Borrower or any Guarantor shall deny or disaffirm its obligations thereunder; or



     (12) if any Security Document shall for any reason cease to create a valid and perfected first
priority security interest (subject to the existence of Permitted Liens) in any of the Collateral
purported to be encumbered thereby; or



     (13) (i) an event of default shall occur and be continuing under any Security Document and
such default or event of default continues beyond any applicable cure or grace period



34









 







provided in such Security Document, or (ii) if in any twelve (12) month period mechanics’,
materialmens’ or other Liens are foreclosed or other action is taken by third parties which result
in Agent’s Lien being eliminated or reduced with respect to Collateral having an Appraised Value or
book value in excess of $750,000 in the aggregate;



     then, and in any such event, (a) if such event is an Event of Default specified in paragraph
(5) above, the Commitments, if still outstanding, shall automatically and immediately terminate and
all Obligations shall immediately become due and payable and Borrower shall immediately cash
collateralize all outstanding Facility L/Cs in accordance with Article 8 hereof, and (b) if such
event is any other Event of Default and is continuing, either or both of the following actions may
be taken: (i) with the consent of the Required Lenders, Agent may, or upon the request of the
Required Lenders, Agent shall, by notice to Borrower, declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate and, upon demand by Agent,
Borrower shall fully cash collateralize all outstanding Facility L/Cs in accordance with Article 8
hereof; and (ii) with the consent of the Required Lenders, Agent may, or upon the request of the
Required Lenders, Agent shall, by notice of default to Borrower, declare the full amount of all
outstanding Obligations to be due and payable forthwith, whereupon the same shall immediately
become due and payable. Except as expressly provided above in this Article 9, presentment, demand,
protest and all other notices of any kind are hereby expressly waived. Additionally, Agent and each
Lender may (i) obtain appointment of a receiver (to which Borrower, for itself and each Subsidiary
Guarantor, hereby consents) and/or judicial or nonjudicial sale and/or foreclosure under the
Security Documents and (ii) exercise any and all other rights and remedies available to Agent and
each Lender at law or in equity to the extent not inconsistent with the rights specifically granted
to Agent and each Lender hereunder.



     Borrower hereby appoints, for itself and each Subsidiary Guarantor, Agent as Borrower’s and
each Subsidiary Guarantor’s attorney-in-fact, which power of attorney is irrevocable and coupled
with an interest, with full power of substitution if Agent so elects, to do any of the following in
Borrower’s or any Subsidiary Guarantor’s name upon the occurrence of an Event of Default: (a) use
such sums as are necessary, including any proceeds of the Loans, make such changes or corrections
in any plans, and employ such architects, engineers, and contractors as may be required, or as
lenders may otherwise consider desirable, for the purpose of completing construction of the any
Improvements on the Land substantially in accordance with the Plans and Specifications (as modified
as deemed necessary by Agent), the Loan Documents, and all applicable laws, governmental
requirements and restrictive covenants; (b) execute all applications and certificates in the name
of Borrower or any Subsidiary Guarantor which may be required for completion of construction of the
Improvements on the Land; (c) endorse the name of Borrower or any Subsidiary Guarantor on any
checks or drafts representing proceeds of the insurance policies, or other checks or instruments
payable to Borrower or any Subsidiary Guarantor with respect to any Collateral; (d) do every act
with respect to the completion of the Improvements on the Land that Borrower or any Subsidiary
Guarantor may do; (e) prosecute or defend any action or proceeding incident to the Collateral; (f)
pay, settle, or compromise all bills and claims so as to clear title to any Land subject to the
Security Documents; and (g) take over and use all or any part of the labor, materials, supplies and
equipment contracted for, owned by, or under the control of Borrower or any Subsidiary Guarantor,
whether or not previously incorporated into any Housing Unit. Any amounts expended by Agent to
construct or complete the intended construction of the Improvements on the Land or in connection
with the exercise of



35









 







its remedies herein shall be deemed to have been advanced to Borrower hereunder as a demand
obligation owing by Borrower to Agent or the Lenders as applicable and shall constitute a portion
of the Obligations, regardless of whether such amounts exceed any limits for Obligations otherwise
set forth herein. Neither Agent nor any Lender shall have any liability to Borrower for its
sufficiency or adequacy of any such actions taken by Agent.



     Notwithstanding any provisions concerning distribution of payments to the contrary in this
Agreement, so long as any Event of Default exists that has not been waived by all Lenders, each
Lender shall share in any payments or proceeds, including proceeds of any Collateral, received by
Agent or any Lender made or received at any time from and after any Event of Default (“Proceeds
after Default”) in an amount equal to such Lender’s Ratable Share of the Proceeds after Default;
provided, however, if any one or more of the Lender(s) has not made any funding when required
hereunder, the distribution of Proceeds after Default shall be adjusted so that each Lender shall
receive Proceeds after Default in an amount equal to (a) the Proceeds after Default multiplied by
(b) the percentage (rounded to five decimal places) of the total amount outstanding funded by all
Lenders that such Lender has actually funded (including the amount of such Lender’s participation
in outstanding Facility L/Cs). If necessary, Agent and each Lender shall use the adjustments
procedure set forth in Section 11.8(b) hereof to make the appropriate distributions to Lenders as
set forth in this paragraph of this Article 9.



     11.2 Notices. (a) Except in the case of notices and other communications expressly
permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and
other communications provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by telecopier as follows:




     (i) 1405 Old Alabama Road, Suite 200, Roswell, Georgia 30076, Attention of
Kevin Abelson, Vice President Finance (Telecopier No. (770) 642-1775; Telephone No.
(770) 998-9663 ext. 222), with a copy to 3751 Victoria Park Avenue, Toronto,
Ontario, M1W3Z4 Canada, Attention of Seymour Joffe (Telecopier No. (416) 449-1073;
Telephone No. (416) 449-1340) and a copy to 3751 Victoria Park Avenue, Toronto,
Ontario M1W 3Z4 Canada, Attention of Harry Rosenbaum (Telecopier No. (416) 449-6438;
Telephone No. (416) 449-1340).




     (ii) if to Agent, to Wachovia Bank, National Association, at One Wachovia
Center, 401 South Tryon Street NC1193 , Charlotte, North Carolina 28288, Attention
of Scott Holtzapple (Telecopier No. (704) 383-7146; Telephone No. (704) 383-0474);




     (iii) if to an LC Issuer, to it at its address (or telecopier number) set
forth in its Administrative Questionnaire; and




     (iv) if to a Lender, to it at its address (or telecopier number) set forth in
its Administrative Questionnaire.



36









 





     Notices sent by hand or overnight courier service, or mailed by certified or registered mail,
shall be deemed to have been given when received; notices sent by telecopier shall be deemed to
have been given when sent (except that, if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the next business day
for the recipient). Notices delivered through electronic communications to the extent provided in
paragraph (b) below, shall be effective as provided in said paragraph (b).



     (b) Notices and other communications to Lenders and LC Issuers hereunder may be delivered or
furnished by electronic communication (including e mail and Internet or intranet websites) pursuant
to procedures approved by Agent, provided that the foregoing shall not apply to notices to any
Lender or LC Issuer pursuant to Article 2 if such Lender or LC Issuer, as applicable, has notified
Agent that it is incapable of receiving notices under such Article by electronic communication.
Agent or 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. If (i) any
notice is delivered hereunder to a Lender, or LC Issuer by Agent with a request for an amendment,
supplement or modification to this Agreement or any other Loan Document and (ii) such Lender or LC
Issuer fails to deliver a written response within ten (10) days, the failure to respond shall be
deemed a written consent to such amendment, supplement or modification.



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



     (c) Any party hereto may change its address or telecopier number for notices and other
communications hereunder by notice to the other parties hereto.



     11.6 Costs and Expenses; Indemnification; Reimbursement; Waiver of Damages. (a)
Borrower shall pay (i) all reasonable out of pocket expenses incurred by Agent and its Affiliates
(including the reasonable fees, charges and disbursements of counsel for Agent), in connection with
the syndication of the credit facilities provided for herein, the preparation, negotiation,
execution, delivery and administration of this Agreement and the other Loan Documents or any
amendments, modifications or waivers of the provisions hereof or thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out of
pocket expenses incurred by any LC Issuer in connection with the issuance, amendment, renewal or
extension of any Facility L/C or any demand for payment thereunder, (iii) fees and charges of each,
inspector and engineer, (iv) appraisal, re-appraisal and survey costs and related review fees, (v)
title insurance charges and premiums, (vi) title search or examination costs, including abstracts,
abstractors’ certificates and Uniform Commercial Code searches, (vii) judgment and



37









 







tax Lien searches for Borrower and each Subsidiary Guarantor, (viii) escrow fees, (ix) fees
and costs of environmental investigations, site assessments and remediations, (x) recordation
taxes, documentary taxes, transfer taxes and mortgage taxes, (xi) filing and recording fee, and
(xii) all out of pocket expenses incurred by Agent, any Lender or any LC Issuer (including the
fees, charges and disbursements of any counsel for Agent, any Lender or any LC Issuer), in
connection with the enforcement or protection of its rights (A) in connection with this Agreement
and the other Loan Documents, including its rights under this Section, or (B) in connection with
the Loans made or Facility L/Cs issued hereunder, including all such out of pocket expenses
incurred during any workout, restructuring or negotiations in respect of such Loans or Facility
L/Cs, and (iv) any civil penalty or fine assessed by the U.S. Department of the Treasury’s Office
of Foreign Assets Control against, and all reasonable costs and expenses (including counsel fees
and disbursements) incurred in connection with defense thereof by Agent, any Lender or any LC
Issuer as a result of the funding of Loans, the issuance of Facility L/Cs or the acceptance of
payments due under the Loan Agreement.



     (b) Borrower shall indemnify Agent (and any sub-agent thereof), each Lender and LC Issuer,
and each Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses (including the fees, charges and disbursements of any counsel for
any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party
or by Borrower or any Guarantor arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto of their respective
obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or
thereby, (ii) any Loan or Facility L/C or the use or proposed use of the proceeds therefrom
(including any refusal by any LC Issuer to honor a demand for payment under a Facility L/C if the
documents presented in connection with such demand do not strictly comply with the terms of such
Facility L/C), (iii) any defect in any Land or any Housing Units, (iv) any failure to construct,
complete, protect or insure each parcel of Land and Housing Unit, (v) the payment of costs of
labor, materials or services supplied for the construction of each parcel of Land and Housing Unit,
(vi) in connection with the enforcement, maintenance, realization, protection and preservation of
the Collateral (including those with respect to property taxes, insurance premiums, completion of
construction, operation, management, improvements, maintenance, repair, sale and disposition),
(vii) any actual or alleged Hazardous Discharge on or from any property owned or operated by
Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to Borrower
or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or any other theory,
whether brought by a third party or by Borrower or any Guarantor, and regardless of whether any
Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or related expenses (x) 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 or (y) result from a
claim brought by Borrower or any Guarantor against an Indemnitee for breach in bad faith of such
Indemnitee’s obligations hereunder or under any other Loan Document, if Borrower or such Guarantor
has obtained a final and nonappealable judgment in its favor on such claim as determined by a court
of competent jurisdiction. Inspection, whether or not followed by notice of Default, shall not



38









 







constitute a waiver of any Default then existing, or a waiver of Agent’s and Lenders’ right
thereafter to insist that all Land and Housing Units be constructed in accordance with any
applicable plans, the Loan Documents, and all applicable Requirements of Laws and restrictive
covenants. Agent’s failure to inspect shall not constitute a waiver of any rights of Agent or
Lenders under the Loan Documents or at law or in equity.



     (c) To the extent that Borrower for any reason fails to indefeasibly pay any amount required
under paragraph (a) or (b) of this Section to be paid by it to Agent (or any sub-agent thereof),
any LC Issuer or any Related Party of any of the foregoing, each Lender severally agrees to pay to
Agent (or any such sub-agent), such LC Issuer or such Related Party, as the case may be, such
Lender’s Ratable Share (determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or
indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against Agent (or any such sub-agent) or such LC Issuer in its capacity as such, or
against any Related Party of any of the foregoing acting for Agent (or any such sub-agent) or such
LC Issuer in connection with such capacity. The obligations of Lenders under this paragraph (c)
are several and not joint or joint and several.



     (d) To the fullest extent permitted by applicable law, Borrower shall not assert, and hereby
waives, any claim against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or
Facility L/C or the use of the proceeds thereof. No Indemnitee referred to in paragraph (b) above
shall be liable for any damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or other information
transmission systems in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby.



     (e) All amounts due under this Section shall be payable not later than ten (10) days after
demand therefor.



39









 





Part E of Schedule 1



The following Sections of the Credit Agreement shall be added to the Credit Agreement with the
Section numbers designated below:




     2.22 Adjustments to and Exclusions from the Borrowing Base.



     (a) If at any time the Required Lenders reasonably believe that the fair market value of any
property included in the Borrowing Base is less than the lower of its Actual Cost or Appraised
Value, Agent shall, at its option, either (i) deliver to Borrower a written notice setting forth
Agent’s determination of the fair market value of such property with respect to which Borrower
shall have ten (10) days to accept or reject by written notice to Agent, and if Borrower accepts
such determination (or fails to respond within such ten (10) day period), such determination shall
be used as the “Appraised Value” of such property under this Section 2.22(a), but if Borrower
rejects such determination, Agent or counsel for Agent then shall obtain at Borrower’s cost an
Appraisal of such property to determine its Appraised Value, or (ii) immediately obtain, or have
its counsel obtain, an Appraisal of such property to determine its Appraised Value. The Appraised
Value as determined pursuant to this Section 2.22, of any such Property, shall thereafter be used
to calculate the Borrowing Base with respect to such Property as if such value as determined in
this Section 2.22(a) is the Appraised Value of such property. Further, in the event that at any
time the Required Lenders reasonably believe that the fair market value of any property included in
calculating the Borrowing Base is less than the fair market value previously determined in
accordance with this Section 2.22(a), then Agent shall re-determine the fair market value of such
property in accordance with the provisions of this Section 2.22(a).



     (b) Agent, at any time at the direction of the Required Lenders, shall recalculate the
Borrowing Base and shall exclude any property from the calculation of the Borrowing Base, if, upon
a review of such property, such property is subject to a recognized environmental condition, such
property or the use thereof is in violation of zoning restrictions or applicable laws, or then
necessary utility services are not available to such property, as determined by Agent in its
reasonable discretion.



     (c) If any Collateral at any time ceases to satisfy the requirements set forth in the
definition of “Borrowing Base,” such Collateral shall automatically no longer be included in
calculating the Borrowing Base.



     (d) If any adjustment in the calculation of the Borrowing Base or exclusion of real property
from the Borrowing Base causes the Borrowing Base Indebtedness to exceed the then applicable
Borrowing Base, Borrower shall have five (5) Business Days from the date Agent notifies Borrower of
such adjustment or exclusion, (i) to prepay the Loans so that the Borrowing Base Indebtedness does
not exceed the then applicable Borrowing Base, (ii) to deliver to Agent a more current Borrowing
Base Certificate that demonstrates that the Borrowing Base Indebtedness does not exceed the
Borrowing Base or (iii) increase the Unrestricted Cash included in the Borrowing Base so long as
such increase shall not result in the Unrestricted Cash of Borrower being greater than $5,000,000.



40









 





     (e) If at any time the outstanding principal balance of the Loans plus the undrawn amount of
issued and outstanding Facility L/Cs, exceeds the then applicable Borrowing Base for any reason,
Borrower shall have five (5) Business Days from the date Borrower first acquires knowledge of such
fact to (i) prepay the Loans so that the outstanding principal balance of the Loans, plus the
undrawn amount of issued and outstanding Facility L/Cs, does not exceed the then applicable
Borrowing Base, (ii) deliver to Agent a more current Borrowing Base Certificate that demonstrates
that the Aggregate Outstanding Credit Exposure does not exceed the Borrowing Base or (iii) increase
the Unrestricted Cash included in the Borrowing Base. Without limiting the foregoing, Borrower
shall be deemed to have known of such excess over the then applicable Borrowing Base if Borrower
submits to Agent a Borrowing Base Certificate indicating such a fact.



     (f) Agent, in its sole discretion, shall have the right to have, or have its counsel have, at
Borrower’s expense, an updated Appraisal prepared for any Property included in the Borrowing Base,
whose most recent appraisal is dated more than twelve (12) months prior to the date of the most
recent Borrowing Base Certificate. Borrower shall, at all times, act reasonably to cause such
Appraisals to be completed.



     (g) In addition to the provision set forth in subsection (f) above, after initial Appraisals
have been conducted on the Property to be included in the Borrowing Base, and such Appraisals have
been received by Agent, Agent shall have the right, on a quarterly basis, to have, or have its
counsel have, updated Appraisals prepared (at no cost to Borrower or its Subsidiaries) for up to
25% of the Borrowing Base. Borrower shall, at all times, act reasonably to cause such Appraisals
to be completed.



     (h) Any Collateral previously included in the calculation of the Borrowing Base but which is
not included in a Borrowing Base Certificate subsequently submitted pursuant to this Agreement
shall no longer be included in the calculation of the Borrowing Base (effective as of the date of
receipt by Agent of such Borrowing Base Certificate and until such time, if ever, as Agent consents
in writing).



     4.20 Security Documents.



     (a) The Security Agreement is effective to create in favor of Agent, for the ratable benefit
of the Secured Parties, a legal, valid and enforceable security interest in the Collateral
identified therein owned by Borrower and Subsidiary Guarantors, and, when financing statements in
appropriate form are filed in the appropriate offices for the locations specified in the schedules
to the Security Agreement, the Security Agreement shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the grantors thereunder in such Collateral
that may be perfected by filing, recording or registering a financing statement under the UCC as in
effect, in each case prior and superior in right to any other Lien (other than Permitted Liens) on
any Collateral.



     (b) The Borrower and Subsidiary Pledge Agreement is effective to create in favor of Agent, for
the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the
Collateral identified therein (including all capital stock or other ownership interests of any
Subsidiary of Borrower owned by Borrower or any other Subsidiary), and, when



41









 







such Collateral is delivered to Agent, the Borrow and Subsidiary Pledge Agreement shall
constitute a fully perfected first priority Lien (subject to Permitted Liens) on, and security
interest in, all right, title and interest of the pledgors thereunder in such Collateral, in each
case subject to no other Lien other than Permitted Liens. The Owner Guarantor Pledge Agreement is
effective to create in favor of Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in all membership interests or other ownership interests of
Borrower owned by any Owner Guarantor, and, when such Collateral is delivered to Agent, the Owner
Guarantor Pledge Agreement shall constitute a fully perfected first priority Lien (subject to
Permitted Liens) on, and security interest in, all right, title and interest of the pledgors
thereunder in such Collateral, in each case subject to no other Lien other than Permitted Liens.



     (c) The Security Agreement, together with any notice of grant of a security interest in
trademarks when duly recorded in the United States Patent and Trademark Office, will constitute a
fully perfected Lien on, and security interest in, all right, title and interest of the grantors
thereunder in all Trademarks and Trademark Licenses (each as defined in the Security Agreement)
owned by such grantors and in which a security interest may be perfected by filing, recording or
registration of a notice in the United States Patent and Trademark Office, in each case prior and
superior in right to any other Lien other than Permitted Liens.



     (d) The Mortgages are effective to create in favor of Agent, for the ratable benefit of the
Secured Parties, a legal, valid and enforceable Lien and security interest in all real property
assets (with such exceptions as may be agreed to by Agent) owned by Borrower and Subsidiary
Guarantors and, when such Mortgages are filed in the appropriate offices for the locations
specified in such Mortgages, the Mortgages shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in such Property, in each
case prior and superior in right to any other Lien other than Permitted Liens.



     (e) Each Subsidiary of Borrower is a Subsidiary Guarantor. Each Person that owns a direct
ownership or equity interest in Borrower (other than (A) a Special Membership Interest, as such
term is defined in the Amended and Restated Regulations of the Borrower dated as of September 1,
2005, as amended November 29, 2005 (the “AW Regulations”), which interest is limited to the special
allocations of the profits and cash distributions from the Pinery Joint Venture and which, except
as expressly provided in the AW Regulations, shall not confer any rights to participate in the
management or operation of the Borrower or (B) the Restructuring Owners) is an Owner Guarantor.



     6.16 Minimum Borrowing Base Availability. Maintain Borrowing Base Availability that,
at all times after the Interim Borrowing Period, is equal to or in excess of the Aggregate
Outstanding Credit Exposure.



     6.17 Collateral.



     (a) Enter into the Security Agreement, the Control Agreements, the Mortgages and the Pledge
Agreements on the Fourth Amendment Effective Date and take all actions as Agent may reasonably
require in connection therewith.



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     (b) On or before the Fourth Amendment Effective Date, cause to be filed in the appropriate
governmental offices UCC financing statements showing Borrower and Subsidiary Guarantors as
debtors, Agent as secured party and all personal property assets of the debtors as collateral in
order to perfect Agent’s security interest in all the Collateral.



     (c) Within twenty (20) days of the Fourth Amendment Closing Date, provide any information
necessary and take all other actions necessary, to facilitate Agent and Agent’s counsel in ordering
for Agent, Appraisals to be performed with respect to all real property owned by Borrower or any
Subsidiary Guarantor. Borrower shall, at all times, act reasonably to cause such Appraisals and
Borrower shall pay for such Appraisals and any review costs associated therewith.



     (d) Cause (i) Borrower or any Subsidiary Guarantor who acquires real property assets after the
Fourth Amendment Effective Date within thirty (30) days of acquiring an interest in such real
property assets, (ii) any New Subsidiary becoming a New Subsidiary after the Fourth Amendment
Effective Date who owns real property assets which is to be included in the Borrowing Base within
thirty (30) days of becoming a New Subsidiary, to (A) execute, deliver and cause to be filed
Mortgages (or amendments to any existing Mortgages) which are effective to create in favor of
Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable Lien (subject to
Permitted Liens) and security interest in such real property assets and related Premises owned by
Borrower or any Subsidiary Guarantor, which such Mortgages when filed in the appropriate offices
for the locations specified in such Mortgages, shall constitute a fully perfected Lien (subject to
Permitted Liens) on, and security interest in, all right, title and interest of the grantors
thereunder in such real property assets and related Premises, in each case prior and superior in
right to any other Lien (other than Permitted Liens), and (B) cause the Mortgage Requirements for
each parcel of real property with which a Mortgage is executed and delivered in accordance with
clause (e) below, to be completed concurrently with the filing of such Mortgages or within 30 days
thereafter or such additional reasonable time as Agent may determine in its reasonable discretion
with respect to each individual Mortgage and parcel of real property.



     (e) With respect to each Mortgage entered into in pursuant to this Agreement and the Premises
related thereto, Borrower and the Subsidiary Guarantors shall cause the following items to be
completed, all in form and substance reasonably satisfactory to Agent (collectively, the “Mortgage
Requirements”):



          (i) Mortgage. The description of the applicable real property contained in or attached to the
Mortgages shall conform to the description in the title policy referred to below.




          (ii) Title Insurance. Borrower shall deliver to Agent standard ALTA mortgagee title insurance
commitments (to be issued to and reviewed and approved by Agent) and policies issued by a title
insurance company approved by Agent insuring Agent’s Lien position and all appurtenances thereto
for all Collateral and Properties upon which a Mortgage is granted, or required to be granted, by
Borrower and Subsidiary Guarantors, subject only to Permitted Liens. As Land and Properties are
added to the Collateral, additional policies or endorsements to the policies shall be issued in
form and substance, acceptable to Agent insuring Agent’s Lien position and all appurtenances
thereto with respect to such additional Land and




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Properties, subject only to Permitted Liens. The commitments shall commit to insure, and the
policies (including endorsements) shall affirmatively insure, reasonable means of ingress and
egress to and from the Collateral satisfactory to Agent, to the extent available in the applicable
state. The policies and all endorsements shall contain no matters objectionable to Agent,
including, without limitation, exceptions with respect to mechanics’ and materialmens’ Liens, for
Collateral where construction is not ongoing or where construction is completed but the statutory
period applicable in such jurisdiction has not ended, and prior years’ taxes. The policies and
subsequent endorsements adding additional Collateral to the policies shall contain such
endorsements as Agent shall require, including, without limitation, to the extent available in the
applicable state, the following endorsements: Environmental Protection Lien Endorsement (ALTA Form
8.1); Variable Rate Mortgage Endorsement (ALTA Form 6 or 6.1 as applicable or equivalent);
Restrictions, Encroachments, Minerals Endorsement (“Comprehensive Endorsement”); Zoning
Endorsement; Tie-In Spreader Endorsement (Florida properties only, if applicable); and Revolving
Credit Endorsement. Agent must be provided with copies of all exceptions noted in the commitments
and policies at the request of Agent. The policies and all endorsements shall be issued on or
after the Fourth Amendment Effective Date in accordance with the commitments and the terms of this
Agreement. For all for Collateral where construction is not ongoing or where construction is
completed but the statutory period applicable in such jurisdiction has not ended at the time the
applicable title insurance is issued, Borrower shall deliver to Agent at the time any Mortgage is
filed with respect to such Collateral an affidavit acceptable to Agent of the amount of any
Indebtedness or other amounts due for work in progress or work which has been completed but for
which payment for such work has not been made. The parties hereto agree that such amount shall be
deducted from the Borrowing Base.




          (iii) Survey. A recorded plat or a current ALTA survey for each parcel of land prepared,
certified and sealed by a surveyor reasonably satisfactory to Agent as to form, substance and date
setting forth such detail and pertaining to such matters as is customary for surveys obtained by
companies involved in the same type of business as Borrower and its Subsidiaries. The survey shall
also locate any special flood hazard area or wetlands area.




          (iv) Liability Insurance. Certificates of insurance on terms acceptable to Agent and meeting
the requirements for insurance set forth in Section 6.7 of this Agreement.




          (v) Appraisals. Receipt by Agent of Appraisals in form and substance satisfactory to Agent,
with respect to all real property Collateral, dated on or after the date of the Fourth Amendment
Effective Date.




          (vi) Environmental Protection. Phase I Environmental Reports, Phase II Environmental Reports,
if applicable, and evidence that the Collateral and any fill dirt that has been or will be
deposited on the Collateral is free from Hazardous Materials, except as set forth in the Phase I
Environmental Report, and complies with all applicable laws and regulations pertaining to the
protection and preservation of the environment. In the event that there is suggestion of any
environmental problem on, at or adjacent to the Collateral, including any unremedied environmental
condition set forth in the Phase I Environmental Report, either prior to or after the Fourth
Amendment Effective Date, Agent may, at its option, require evidence of the nature of the problem
at Borrower’s expense. Such evidence may include opinions and certifications from appropriate
governmental authorities, Borrower’s counsel, and/or an




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environmental specialist reasonably acceptable to Agent. Should the Collateral contain
Hazardous Material of any quantity unacceptable to Agent or the Required Lenders, the Required
Lenders reserve the right to elect to remove such Collateral from the Borrowing Base.




          (vii) Flood Insurance. If any above grade Improvements (or any part thereof) are located or
to be located in a special flood hazard area according to the Federal Emergency Management Agency
(“FEMA”) or other Agent approved source, then Borrower shall obtain a flood insurance policy on
terms acceptable to Agent and meeting the requirements for insurance set forth in Section 6.20 of
this Agreement.




          (viii) UCC Financing Statements. Uniform Commercial Code Financing Statements, properly filed
in any jurisdiction identified by Agent, providing Agent with a valid first Lien (subject to
Permitted Liens) on all Collateral.




          (ix) Intentionally omitted.




          (x) Certificate of Completion. Agent may require, a Certificate of Completion or other
evidence satisfactory to Agent stating that any applicable Finished Lot has been completed in
accordance with applicable governmental requirements.




          (xi) Intentionally omitted.




          (xii) Plans and Specifications. Receipt by Agent of Plans and Specifications. Agent may
require evidence that Borrower or Subsidiary of Borrower owning the Collateral, any general
contractor, all government agencies having jurisdiction, and all others having the right, by law or
agreement, to approve the Plans and Specifications, have approved the Plans and Specifications for
the Improvements.




          (xiii) Permits. Agent may require copies of the grading, building and any other governmental
permits to the extent available.




          (xiv) Zoning. Written evidence from the appropriate governmental authority(ies) or title
insurer that the Improvements are or will be in compliance with all applicable zoning ordinances,
concurrency requirements and land use laws and regulations prior to commencing site work. If a
zoning endorsement is not delivered in accordance with clause (ii) above, Borrower shall deliver a
zoning letter from the appropriate governmental authority(ies) with copies of the applicable zoning
code provisions.




          (xv) Payments for Work. Evidence reasonably satisfactory to Agent, if requested by Agent in
its reasonable discretion, of the payment of all debts which are due, owing contractors, surveyors,
engineers, architects, materialmen and the like for labor done or professional design or surveying
services, or material furnished pursuant to any contract with respect to the Improvements.




     (f) If at any time Agent requests, in its sole but reasonable discretion, Borrower shall (i)
deliver certification from the record engineer with respect to any Collateral related to a Mortgage
(A) that all required licenses, permits and other governmental approvals for the construction of
the Improvements have been issued; (B) that the Collateral, if and when the



45









 







Improvements are completed in accordance with the final Plans and Specifications, will comply
with the Clean Water Act (if applicable), and all environmental, zoning, fire and building code,
statutes and regulations to which the Collateral is subject; (C) that all necessary utilities are,
or will be, available on or at the Collateral and Lots; and (D) that the recommendations contained
in any subsoil report have been included in the Plans and Specifications and (ii) permit Agent to
perform any inspections of any Collateral or other real property of Borrower or any Subsidiary
Guarantor, which inspections Agent has reasonably determined necessary.



     (g) Execute and/or cause to be filed any and all further amendments, documents, financing
statements, agreements and instruments, and take all further action that may be required under
applicable law, or that Agent may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the
validity and first priority of the Security Documents (subject to Permitted Liens) in all
Collateral and other assets and property of Borrower and the Subsidiary Guarantors. In addition,
from time to time, Borrower will, at its cost and expense, promptly secure the Obligations by
pledging or creating, or causing to be pledged or created, perfected Liens with respect to such of
its assets and properties as Agent shall designate (it being understood that it is the intent of
the parties hereto that the Obligations shall be secured, by among other things, substantially all
of the assets of Borrower and its Subsidiaries (including assets acquired subsequent to the date of
this Agreement)). Such Liens will be created under the Security Documents and other security
agreements and other instruments and documents in form and substance reasonably satisfactory to
Agent, and Borrower shall deliver or cause to be delivered to Agent all such instruments and
documents (including legal opinions and Lien searches) as Agent shall reasonably request to
evidence compliance with this Section. Borrower agrees to provide such evidence as Agent shall
reasonably request as to the perfection and priority status of each such Lien. In addition to the
items to be delivered in accordance with the preceding clauses in this Section 6.17, Borrower
agrees to provide Agent, upon Agent’s reasonable request, any of the items included in the Mortgage
Requirements with respect to any Premises included in any Mortgage.



     6.18 Lot Releases. Sell, transfer or convey Collateral only if the following
conditions are met:



     (a) Other than with respect to Unimproved Entitled Land, Borrower shall have completed
construction of the Improvements on such Collateral in accordance with the Plans and Specifications
(except as otherwise permitted by Agent) and all Requirements of Law;



     (b) The sales price for any sale, transfer or conveyance must be at the fair market value for
such Collateral;



     (c) The sales price for all Collateral sold during any calendar month must be not less than
the contribution to the Borrowing Base as calculated in the most recently delivered Borrowing Base
Certificate of such Collateral sold;



     (d) No Event of Default has occurred and is continuing (unless Agent specifically permits such
sale, transfer or conveyance in its reasonable discretion) (excluding the sale, transfer or
conveyance of any Housing Unit for which a third party has, prior to the occurrence of the
applicable Event of Default, entered into a noncontingent contract for the sale of such



46









 







Housing Unit with Borrower or a Subsidiary, unless Agent gives notice to Borrower during the
continuance of an Event of Default that any sale, transfer or conveyance of any Housing Unit may
only occur if Agent specifically permits such sale, transfer or conveyance in its reasonable
discretion);



     (e) If Collateral constituting more than 10% of the Borrowing Base in the Borrowing Base
Certificate most recently delivered is to be released from the Mortgages in any month, Borrower
shall deliver to Agent a more current Borrowing Base Certificate that demonstrates that the
Aggregate Outstanding Credit Exposure does not exceed the Borrowing Base after giving effect to all
the Collateral intended to be released from the Mortgages and the prepayments or Release
Consideration to be paid in such month;



     (f) Borrower shall pay to Agent a release price for any Collateral to be released from the
Mortgages in an amount equal to 100% of net proceeds from the sale or disposition of such
Collateral (the “Release Consideration”);



     (g) Borrower requests in writing to Agent a partial release of such Collateral from the
Mortgages not less than ten (10) Business Days prior to the date the partial release is needed,
together with all data reasonably necessary to support Borrower’s being entitled to the partial
release, including, without limitation, a legal description for each Lot to be released, a partial
release document prepared by Borrower, all at Borrower’s expense and all in form and content
satisfactory to Agent;



     (h) Borrower shall submit to Agent within two (2) Business Days after the closing of the sale,
a photocopy of the final signed closing statement with respect to the sale of such Collateral; and



     (i) Borrower shall pay all costs and expenses of Agent, including, without limitation,
reasonable legal fees incurred by Agent in connection with any partial release of the Mortgages
(but excluding the allocated costs of internal counsel).



     Provided that the terms in this Section 6.18 are met, Agent and Lenders agree that Agent may
release Collateral from the Lien of the Mortgages in accordance with the terms, provisions and
conditions of the Mortgages. Releases of Collateral from the Mortgages shall not affect or impair
the Lien of the Mortgages and Agent’s Lien and security interests created by the other Loan
Documents as to the Collateral and other property encumbered by the Mortgages and the other Loan
Documents not theretofore released, and said Liens and security interests shall continue in full
force and effect as to the unreleased Collateral and Lots and such other property. Upon request by
Borrower and without payment of any release price or amount, Agent shall also release land from
the Lien of the Mortgages or subordinate such Liens, all as necessary to effect necessary
dedications of roadways or utility and serve areas to governmental authorities, to convey common
areas to homeowners or condominium associations, and to allow the recordation of easements and
declarations to the extent such are common or reasonably necessary for the development of
Collateral for residential purposes, and Borrower shall pay all costs and expenses of Agent
including, without limitation, reasonable legal fees incurred by Agent in connection with any such
release.



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     6.19 Environmental Protection. In the event that there is any evidence or indication
of any environmental problem which violates applicable law on, at or adjacent to any Collateral,
either prior to or after the date of this Agreement, Agent or any Lender may, at its option,
require evidence of the nature of the problem and any remediation cost, all at Borrower’ expense.
Such evidence may include opinions and certifications from appropriate governmental authority,
Borrower, counsel, and/or an environmental specialist acceptable to Agent. Should any Collateral
contain Hazardous Material of any quantity unacceptable to Agent or any Lender, Agent and the
Lender reserve the right, to elect not to have any Lender make a Loan in connection with such
Collateral and such Collateral shall not be included in the Borrowing Base.



     6.20 Flood Insurance. If any above grade Improvements (or any part thereof) are
located in a special flood hazard area according to the Federal Emergency Management Agency
(“FEMA”) or other Agent approved source, then Borrower shall obtain a flood insurance policy
insuring Agent in an amount equal to the replacement value of the above grade Improvements located
in the special flood hazard area, and such insurance policy shall conform to the requirements of
the paragraph above captioned “Hazard Insurance”. An independent flood insurance determination
shall be made by Agent or its representatives or agents, the cost of which shall be paid for by
Borrower. The cost of the independent flood insurance determination is due and payable in full by
Borrower upon request by Agent. If, after closing, any Collateral is remapped and if the
applicable above grade Improvements are determined to be located in a special flood hazard area,
Borrower shall be required to obtain and maintain a flood insurance policy in accordance with the
provisions of this Section. Borrower acknowledges that if, within forty-five (45) days of receipt
of notification from Agent that any portion of the above grade Improvements has been reclassified
by the FEMA as being located in a special flood hazard area, Borrower shall have not provided
sufficient evidence of flood insurance, Agent and/or Lenders may be required under federal law to
purchase flood insurance on behalf of Borrower is mandated, at Borrower’s expense. If any above
grade Improvements or any portion thereof located on a proposed lot is located in a flood hazard
area, the Required Lenders, may elect not to have Lenders to make a Loan in connection with such
Collateral.



     7.18 Unrestricted Cash. Permit Unrestricted Cash of Borrower and the Subsidiary
Guarantors to exceed $5,000,000 for more than three (3) consecutive Business Days.



     10.8 Releases; Acquisition and Transfers of Collateral.



     (a) The Lenders hereby irrevocably authorize Agent to transfer or release any Lien on, or
after foreclosure or other acquisition of title by Agent on behalf of the Secured Parties to
transfer or sell, any Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full of all Obligations, (ii) in connection with a release, transfer or sale of a
property or Lien if the release, transfer or sale is permitted under this Agreement or the other
Loan Documents, and (iii) after foreclosure or other acquisition of title (A) for a purchase price
of at least 60% of the value indicated in the most recent Appraisals of the Collateral obtained by
Agent, less any reduction indicated in the Appraisals estimated by experts in such areas, or (B) if
approved by the Required Lenders.



     (b) If all or any portion of the Collateral is acquired by foreclosure or by deed in lieu of
foreclosure Agent shall take title to the Collateral in its name or by an Affiliate of Agent, for



48









 







the benefit of the Secured Parties. Agent and all Lenders hereby expressly waive and
relinquish any right of partition with respect to any Collateral so acquired. After any Collateral
is acquired, Agent may appoint and retain one or more persons (individually and collectively, the
“Property Manager”) experienced in the development, sale and/or disposition of similar properties.
After consulting with the Property Manager, Agent shall prepare a written plan for completion of
construction (if required), operation, management, improvement, maintenance, repair, sale and
disposition of the Collateral and a budget for the aforesaid, which may include a reasonable
management fee payable to Agent (the “Business Plan”). Agent will deliver the Business Plan not
later than the sixtieth (60th) day after the date of the foreclosure sale or recordation of the
deed in lieu of foreclosure (the “Acquisition Date”) to each Lender with a written request for
approval of the Business Plan. If the Business Plan is approved by the Required Lenders, Agent and
the Property Manager shall adhere to the Business Plan until a different Business Plan is approved
by the Required Lenders. Agent may propose an amendment to the Business Plan as it deems
appropriate, which shall also be subject to the Required Lenders’ approval. If the Business Plan
(as may be amended) proposed by Agent is not approved by the Required Lenders, or if sixty (60)
days have elapsed following the Acquisition Date without a Business Plan being proposed by Agent,
any Lender may propose an alternative Business Plan, which Agent shall submit to all Lenders for
their approval. If an alternative Business Plan is approved by the Required Lenders, Agent may
appoint one of the approving Lenders to implement the alternative Business Plan. Notwithstanding
any other provision of this Agreement, unless in violation of an approved Business Plan or
otherwise in an emergency situation, Agent shall, subject to Section 10.8(a), have the right but
not the obligation to take any action in connection with the Collateral (including those with
respect to property taxes, insurance premiums, completion of construction, operation, management,
improvement, maintenance, repair, sale and disposition), or any portion thereof.



     (c) Upon request by Agent or Borrower at any time, the Lenders will confirm in writing Agent’s
authority to sell, transfer or release any such Liens of particular types or items of Collateral
pursuant to this Section 10.8; provided, however, that (a) Agent shall not be required to execute
any document necessary to evidence such release, transfer or sale on terms that, in Agent’s
opinion, would expose Agent to liability or create any obligation or entail any consequence other
than the transfer, release or sale without recourse, representation or warranty, and (b) such
transfer, release or sale shall not in any manner discharge, affect or impair the obligations of
Borrower other than those expressly being released.



     (d) If only two (2) Lenders exist at the time Agent receives a purchase offer for Collateral
for which one of the Lenders does not consent within ten (10) Business Days after notification from
Agent, the consenting Lender may offer (“Purchase Offer”) to purchase all of the non-consenting
Lender’s right, title and interest in the Collateral for a purchase price equal to the
non-consenting Lender’s Ratable Share of the net proceeds anticipated from such sale of such
collateral (as reasonably determined by Agent, including the undiscounted face principal amount of
any purchase money obligation not payable at closing) (“Net Proceeds”). Within ten (10) Business
Days thereafter the non-consenting Lender shall be deemed to have accepted such Purchase Offer
unless the non-consenting Lender notifies Agent that it elects to purchase all of the consenting
Lender’s right, title and interest in the collateral for a purchase price payable by the
non-consenting Lender in an amount equal to the consenting Lender’s Ratable Share of the Net
Proceeds. Any amount payable hereunder by a Lender shall be due on the earlier to occur of



49









 







the closing of the sale of the collateral or ninety (90) days after the Purchase Offer,
regardless of whether the Collateral has been sold.



50