Exhibit
10.1


 


EXECUTION VERSION


 


CREDIT AGREEMENT


 


DATED AS OF
JANUARY 12, 2006


 


AMONG


 


THE RYLAND GROUP,
INC.,


 


THE LENDERS,


 


JPMORGAN CHASE
BANK, N.A.,

AS AGENT,


 


BANK OF AMERICA,
N.A.

AND

WACHOVIA BANK, NATIONAL ASSOCIATION,

AS SYNDICATION AGENTS


 


AND


 


SUNTRUST BANK,

AND

THE ROYAL BANK OF SCOTLAND PLC,

AS DOCUMENTATION AGENTS


 


AND


 


GUARANTY BANK,

WASHINGTON MUTUAL BANK, FA,

BARCLAYS BANK PLC,

CITICORP NORTH AMERICA, INC.,

PNC BANK,  NATIONAL ASSSOCIATION,

AND

UBS LOAN FINANCE LLC,

AS MANAGING AGENTS


 


AND


 




AMSOUTH
BANK,

COMERICA BANK,

AND

CALYON NEW YORK BRANCH,

AS CO-AGENTS







J.P. MORGAN
SECURITIES INC.,

LEAD ARRANGER AND SOLE BOOK RUNNER


 













 


TABLE OF
CONTENTS


 


	
  ARTICLE I  DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
  1

  
	
  1.2

  	
  Classification
  of Loans and Advances

  	
  21

  
	
  1.3

  	
  Terms
  Generally

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE II  THE CREDITS

  	
  21

  
	
   

  	
   

  
	
  2.1

  	
  Commitment

  	
  21

  
	
  2.2

  	
  Required
  Payments; Termination

  	
  21

  
	
  2.3

  	
  Ratable
  Revolving Loans

  	
  21

  
	
  2.4

  	
  Types
  of Advances

  	
  22

  
	
  2.5

  	
  Commitment
  Fee; Reductions and Increases in Aggregate Commitment

  	
  22

  
	
  2.6

  	
  Minimum
  Amount of Each Advance

  	
  24

  
	
  2.7

  	
  Optional
  Principal Payments

  	
  24

  
	
  2.8

  	
  Method
  of Selecting Types and Interest Periods for New Advances

  	
  25

  
	
  2.9

  	
  Conversion
  and Continuation of Outstanding Advances

  	
  25

  
	
  2.10

  	
  Changes
  in Interest Rate, etc.

  	
  26

  
	
  2.11

  	
  Rates
  Applicable After Default

  	
  26

  
	
  2.12

  	
  Method
  of Payment

  	
  26

  
	
  2.13

  	
  Noteless
  Agreement; Evidence of Indebtedness

  	
  27

  
	
  2.14

  	
  Telephonic
  and Facsimile Notices

  	
  28

  
	
  2.15

  	
  Interest
  Payment Dates; Interest and Fee Basis

  	
  28

  
	
  2.16

  	
  Notification
  of Advances, Interest Rates, Prepayments and Commitment Reductions

  	
  28

  
	
  2.17

  	
  Lending
  Installations

  	
  28

  
	
  2.18

  	
  Non-Receipt
  of Funds by the Agent

  	
  29

  
	
  2.19

  	
  Facility
  LCs

  	
  29

  
	
  2.20

  	
  Extension
  of Facility Termination Date

  	
  34

  
	
  2.21

  	
  Replacement
  of Lender

  	
  36

  
	
  2.22

  	
  Swing
  Line

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE III  YIELD PROTECTION; TAXES

  	
  38

  
	
   

  	
   

  
	
  3.1

  	
  Yield
  Protection

  	
  38

  
	
  3.2

  	
  Changes
  in Capital Adequacy Regulations

  	
  38

  
	
  3.3

  	
  Availability
  of Types of Advances

  	
  39

  
	
  3.4

  	
  Funding
  Indemnification

  	
  39

  
	
  3.5

  	
  Taxes

  	
  39

  
	
  3.6

  	
  Lender
  Statements; Survival of Indemnity

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV  CONDITIONS PRECEDENT

  	
  41

  
	
   

  	
   

  
	
  4.1

  	
  Initial
  Credit Extension

  	
  41

  
	
  4.2

  	
  Each
  Credit Extension

  	
  42

  



 


i













 


	
  ARTICLE V  REPRESENTATIONS AND WARRANTIES

  	
  43

  
	
   

  	
   

  
	
  5.1

  	
  Incorporation,
  Qualification, Powers and Capital Stock

  	
  43

  
	
  5.2

  	
  Execution,
  Delivery and Performance of Loan Documents

  	
  43

  
	
  5.3

  	
  Compliance
  with Laws and Other Requirements

  	
  44

  
	
  5.4

  	
  Subsidiaries

  	
  44

  
	
  5.5

  	
  Financial
  Statements of the Borrower and its Consolidated Subsidiaries

  	
  45

  
	
  5.6

  	
  No
  Material Adverse Change

  	
  45

  
	
  5.7

  	
  Tax
  Liability

  	
  46

  
	
  5.8

  	
  Litigation

  	
  46

  
	
  5.9

  	
  ERISA

  	
  46

  
	
  5.10

  	
  Regulations
  U and X

  	
  47

  
	
  5.11

  	
  No
  Default or Unmatured Default

  	
  47

  
	
  5.12

  	
  Ownership
  of Property; Liens

  	
  47

  
	
  5.13

  	
  Environmental
  Matters

  	
  47

  
	
  5.14

  	
  Investment
  Company Act

  	
  48

  
	
  5.15

  	
  Public
  Utility Holding Company Act

  	
  48

  
	
  5.16

  	
  Subordinated
  Indebtedness

  	
  48

  
	
  5.17

  	
  Accuracy
  of Information

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI  COVENANTS

  	
  49

  
	
   

  	
   

  
	
  6.1

  	
  Financial
  Statements

  	
  49

  
	
  6.2

  	
  Certificates;
  Other Information

  	
  49

  
	
  6.3

  	
  Payment
  of Obligations

  	
  51

  
	
  6.4

  	
  Conduct
  of Business and Maintenance of Existence

  	
  51

  
	
  6.5

  	
  Maintenance
  of Property; Insurance

  	
  51

  
	
  6.6

  	
  Inspection
  of Property; Books and Records; Discussions

  	
  52

  
	
  6.7

  	
  Notices

  	
  52

  
	
  6.8

  	
  Environmental
  Laws

  	
  53

  
	
  6.9

  	
  Guaranties
  from Future Subsidiaries; Release of Guarantors

  	
  53

  
	
  6.10

  	
  Use of
  Proceeds

  	
  54

  
	
  6.11

  	
  Taxes

  	
  54

  
	
  6.12

  	
  Limitation
  on Liens

  	
  54

  
	
  6.13

  	
  Limitation
  on Guarantee Obligations

  	
  55

  
	
  6.14

  	
  Limitations
  on Fundamental Changes

  	
  56

  
	
  6.15

  	
  Limitations
  on Sales of Assets

  	
  56

  
	
  6.16

  	
  Limitation
  on Dividends

  	
  57

  
	
  6.17

  	
  Limitation
  on Investments

  	
  57

  
	
  6.18

  	
  Limitation
  on Optional Payments and Modification of Debt Instruments

  	
  58

  
	
  6.19

  	
  Transactions
  with Affiliates

  	
  59

  
	
  6.20

  	
  Fiscal
  Year

  	
  59

  
	
  6.21

  	
  Compliance
  with ERISA

  	
  59

  
	
  6.22

  	
  Preferred
  Stock

  	
  60

  
	
  6.23

  	
  No
  Other Negative Pledges

  	
  60

  
	
  6.24

  	
  Consolidated
  Tangible Net Worth

  	
  60

  
	
  6.25

  	
  Leverage
  Ratio

  	
  60

  
				



 


ii













 


	
  6.26

  	
  Minimum
  Interest Coverage

  	
  60

  
	
  6.27

  	
  Senior
  Permitted Debt Not to Exceed Borrowing Base

  	
  60

  
	
  6.28

  	
  Limitation
  on Housing Inventory

  	
  60

  
	
  6.29

  	
  Limitations
  on Land Inventory

  	
  61

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII  DEFAULTS

  	
  61

  
	
   

  	
   

  
	
  ARTICLE VIII  ACCELERATION, WAIVERS, AMENDMENTS AND
  REMEDIES

  	
  63

  
	
   

  	
   

  
	
  8.1

  	
  Acceleration;
  Facility LC Collateral Account

  	
  63

  
	
  8.2

  	
  Amendments

  	
  64

  
	
  8.3

  	
  Preservation
  of Rights

  	
  65

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX  GENERAL PROVISIONS

  	
  65

  
	
   

  	
   

  
	
  9.1

  	
  Survival
  of Representations

  	
  65

  
	
  9.2

  	
  Governmental
  Regulation

  	
  65

  
	
  9.3

  	
  Headings

  	
  65

  
	
  9.4

  	
  Entire
  Agreement

  	
  65

  
	
  9.5

  	
  Several
  Obligations; Benefits of this Agreement

  	
  66

  
	
  9.6

  	
  Expenses;
  Indemnification

  	
  66

  
	
  9.7

  	
  Numbers
  of Documents

  	
  66

  
	
  9.8

  	
  Accounting

  	
  67

  
	
  9.9

  	
  Severability
  of Provisions

  	
  67

  
	
  9.10

  	
  Nonliability
  of Lenders

  	
  67

  
	
  9.11

  	
  Confidentiality

  	
  67

  
	
  9.12

  	
  Nonreliance

  	
  68

  
	
  9.13

  	
  Disclosure

  	
  68

  
	
  9.14

  	
  USA
  PATRIOT Act

  	
  68

  
	
   

  	
   

  	
   

  
	
  ARTICLE X  THE AGENT

  	
  68

  
	
   

  	
   

  
	
  10.1

  	
  Appointment;
  Nature of Relationship

  	
  68

  
	
  10.2

  	
  Powers

  	
  69

  
	
  10.3

  	
  General
  Immunity

  	
  69

  
	
  10.4

  	
  No
  Responsibility for Loans, Recitals, etc.

  	
  69

  
	
  10.5

  	
  Action
  on Instructions of Lenders

  	
  69

  
	
  10.6

  	
  Employment
  of Agents and Counsel

  	
  69

  
	
  10.7

  	
  Reliance
  on Documents; Counsel

  	
  70

  
	
  10.8

  	
  Agent’s
  Reimbursement and Indemnification

  	
  70

  
	
  10.9

  	
  Notice
  of Default

  	
  70

  
	
  10.10

  	
  Rights
  as a Lender

  	
  71

  
	
  10.11

  	
  Lender
  Credit Decision

  	
  71

  
	
  10.12

  	
  Successor
  Agent

  	
  71

  
	
  10.13

  	
  Agent
  and Arranger Fees

  	
  72

  
	
  10.14

  	
  Delegation
  to Affiliates

  	
  72

  



 


iii













 


	
  10.15

  	
  Co-Agent,
  Documentation Agent, Managing Agent, Syndication Agent, etc.

  	
  72

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI  SETOFF; RATABLE PAYMENTS

  	
  72

  
	
   

  	
   

  
	
  11.1

  	
  Setoff

  	
  72

  
	
  11.2

  	
  Ratable
  Payments

  	
  72

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII  BENEFIT OF AGREEMENT; ASSIGNMENTS;
  PARTICIPATIONS

  	
  73

  
	
   

  	
   

  
	
  12.1

  	
  Successors
  and Assigns

  	
  73

  
	
  12.2

  	
  Participations

  	
  75

  
	
  12.3

  	
  Pledge
  to Federal Reserve Bank

  	
  75

  
	
  12.4

  	
  Dissemination
  of Information

  	
  76

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII  NOTICES

  	
  76

  
	
   

  	
   

  
	
  13.1

  	
  Notices;
  Effectiveness; Electronic Communication

  	
  76

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV  COUNTERPARTS; INTEGRATION; EFFECTIVENESS;
  ELECTRONIC EXECUTION

  	
  77

  
	
   

  	
   

  
	
  14.1

  	
  Counterparts;
  Effectiveness

  	
  77

  
	
  14.2

  	
  Electronic
  Execution of Assignments

  	
  77

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV  CHOICE OF LAW; CONSENT TO JURISDICTION;
  WAIVER OF JURY TRIAL

  	
  77

  
	
   

  	
   

  
	
  15.1

  	
  CHOICE OF LAW

  	
  77

  
	
  15.2

  	
  CONSENT TO
  JURISDICTION

  	
  78

  
	
  15.3

  	
  WAIVER OF JURY TRIAL

  	
  78

  



 


	
  PRICING SCHEDULE

  
	
   

  
	
  EXHIBIT A – BORROWING BASE
  CERTIFICATE

  
	
  EXHIBIT B – GUARANTY

  
	
  EXHIBIT C – COMMITMENT AND
  ACCEPTANCE

  
	
  EXHIBIT D – NOTE

  
	
  EXHIBIT E – ASSIGNMENT AND
  ASSUMPTION AGREEMENT

  
	
  EXHIBIT F – SWING LINE NOTE

  
	
  EXHIBIT G-1 – OPINIONS OF
  TIMOTHY J. GECKLE, GENERAL COUNSEL

  
	
  EXHIBIT G-2 – OPINION OF DLA
  PIPER RUDNICK GRAY CARY LLP

  
	
  EXHIBIT H – COMPLIANCE
  CERTIFICATE

  
	
   

  
	
  SCHEDULE 1 – LENDERS AND
  COMMITMENTS

  
	
  SCHEDULE 2 – EXISTING LCs

  
	
  SCHEDULE 3 – GUARANTORS

  
	
  SCHEDULE 5.4 – SUBSIDIARIES

  



 


iv













 


	
  SCHEDULE 6.9 – SUBSIDIARIES
  THAT ARE NOT REQUIRED TO BE GUARANTORS

  



 


v












 


CREDIT AGREEMENT


 


This Agreement, dated as of January 12, 2006, is
among The Ryland Group, Inc., a Maryland corporation, the Lenders and
JPMorgan Chase Bank, N.A., as Agent.  The
parties hereto agree as follows:


 


ARTICLE I


 


DEFINITIONS


 


1.1           Definitions.  As used in this Agreement:


 


“ABR”, when used in reference to any Loan or Advance,
refers to whether such Loan, or the Loans comprising such Advance, are bearing
interest at a rate determined by reference to the Alternate Base Rate.


 


“Acquisition” means any transaction, or any series of
related transactions, consummated on or after the date of this Agreement, by
which the Borrower or any of its Subsidiaries (i) acquires any going
business or all or substantially all of the assets of any firm, corporation or limited
liability company, or division thereof, whether through purchase of assets,
merger or otherwise or (ii) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of transactions) at
least a majority (in number of votes) of the securities of a corporation which
have ordinary voting power for the election of directors (other than securities
having such power only by reason of the happening of a contingency) or a
majority (by percentage or voting power) of the outstanding ownership interests
of a partnership or limited liability company.


 


“Additional Lender” is defined in Section 2.5.3(i).


 


“Administrative Questionnaire” means an Administrative
Questionnaire in a form supplied by the Agent.


 


“Adjusted LIBO Rate” means, with respect to any
Eurodollar Advance for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate
for such Interest Period multiplied by (b) the Statutory Reserve Rate.


 


“Advance” means a borrowing hereunder consisting of
Loans (i) made by the Lenders on the same Borrowing Date, or (ii) converted
or continued by the Lenders on the same date of conversion or continuation,
consisting, in either case, of the aggregate amount of the several Loans of the
same Type and, in the case of Eurodollar Loans, for the same Interest Period.


 


“Affected Lender” is defined in Section 2.21(a).


 


“Affiliate” of any Person means any other Person
directly or indirectly controlling, controlled by or under common control with
such Person.  A Person shall be deemed to
control another Person if the controlling Person owns 25% or more of any class
of voting securities (or other ownership interests) of the controlled Person or
possesses, directly or indirectly, the power 


 













 


to direct or cause the direction of the management or
policies of the controlled Person, whether through ownership of stock, by
contract or otherwise.


 


“Agent” means JPMorgan Chase Bank, N.A., in its
capacity as agent for the Lenders hereunder and any successor agent appointed
pursuant to Section 10.12.


 


“Aggregate Commitment” means the aggregate of the
Commitments of all the Lenders, as reduced or increased from time to time
pursuant to the terms hereof.  As of the
date of this Agreement, the Aggregate Commitment is $750,000,000.


 


“Aggregate Credit Exposure” means, at any time, the
sum of the Revolving Credit Exposure of all the Lenders.


 


“Agreement” means this credit agreement, as it may be
amended or modified and in effect from time to time.


 


“Alternate Base Rate” means, for any day, a rate per
annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the
Base CD Rate in effect on such day plus 1% and (c) the Federal Funds
Effective Rate in effect on such day plus 1⁄2 of 1%.  Any change in the Alternate Base Rate due to
a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective from and including the effective date of such change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively.


 


“Applicable Fee Rate” means, at any time, the
percentage rate per annum at which the Commitment Fee is accruing on the unused
portion of the Aggregate Commitment at such time as set forth in the Pricing
Schedule.


 


“Applicable Margin” means, with respect to Eurodollar
Advances at any time, the percentage rate per annum which is applicable at such
time with respect to Eurodollar Advances as set forth in the Pricing Schedule.


 


“Approved Fund” means any Person (other than a natural
person) that is engaged in making, purchasing, holding or investing in bank
loans and similar extensions of credit in the ordinary course of business and
that is administered or managed by (a) a Lender, (b) an Affiliate of
a Lender or (c) an entity or Affiliate of an entity that administers or
manages a Lender.


 


“Arranger” means J.P. Morgan Securities Inc., a
Delaware corporation, and its successors, in its capacity as Lead Arranger and
Sole Book Runner.


 


“Article” means an article of this Agreement unless
another document is specifically referenced.


 


“Assessment Rate” means, for any day, the annual
assessment rate in effect on such day that is payable by a member of the Bank
Insurance Fund classified as “well-capitalized” and within supervisory subgroup
“B” (or a comparable successor risk classification) within the meaning of 12
C.F.R. Part 327 (or any successor provision) to the Federal Deposit
Insurance Corporation for insurance by such corporation of time deposits made
in dollars at the offices of such member in the United States; provided that if, as a result of any change in
any law, rule or 


 


2













 


regulation, it is no longer possible to determine the
Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Agent to be representative of the cost of
such insurance to the Lenders.


 


“Assignment and Assumption” means an assignment and
assumption entered into by a Lender and an assignee (with the consent of any
party whose consent is required by Section 12.1(b)), and accepted by the
Agent, in the form of Exhibit E or any other form approved by the
Agent.


 


“Authorized Person” means any Responsible Official of
the Borrower or any Person designated, by written notice from any such
Responsible Official to the Agent from time to time, as an “Authorized Person,”
provided, however, that, for purposes of each Borrowing Base
Certificate and the certificates provided for in Sections 6.1(b), 6.2(b), 6.2(c) and
6.17(c), such Authorized Person must be an officer of the Borrower.


 


“Available Aggregate Commitment” means, at any time,
the Aggregate Commitment then in effect minus the Aggregate Credit Exposure at
such time.


 


“Base CD Rate” means the sum of (a) the Three-Month
Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the
Assessment Rate.


 


“Borrower” means The Ryland Group, Inc., a
Maryland corporation, and its successors and assigns.


 


“Borrowing Base” means, except as set forth below, an
amount equal to the sum of the following Unencumbered Real Estate Inventory
owned by the Borrower or any Guarantor and Home Proceeds Receivable owned by
the Borrower or any Guarantor:


 


(a)                                  90% of the amount of Home Proceeds
Receivable; plus


 


(b)                                 90% of the book value of Sold
Construction in Progress and Sold Completed Units; plus


 


(c)                                  80% of the book value of Unsold
Construction in Progress and Unsold Completed Units; plus


 


(d)                                 70% of the book value of Finished Lots; plus


 


(e)                                  50% of the book value of the Land Under
Development; plus


 


(f)                                    25% of the book value of the Raw Land —
Entitled;


 


provided,
however, that the amount set forth in clause (f) shall
not exceed 10% of the Borrowing Base; and provided
further that the sum of the
amounts set forth in clauses (d), (e) and (f) shall not exceed 40% of
the Borrowing Base.


 


“Borrowing Base Certificate” means a written
calculation of the Borrowing Base, substantially in the form of Exhibit A
attached hereto and made a part hereof, signed by an 


 


3













 


Authorized Person and properly completed to provide
all information required to be included thereon.


 


“Borrowing Date” means a date on which an Advance or
Swing Line Loan is made hereunder.


 


“Borrowing Notice” is defined in Section 2.8.


 


“Business” is defined in Section 5.13(b).


 


“Business Day” means any day that is not a Saturday,
Sunday or other day on which commercial banks in Houston, Texas, Los Angeles,
California or New York, New York are authorized or required by law to remain closed;
provided that, when used in connection with
a Eurodollar Advance or Eurodollar Loan, the term “Business
Day” shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.


 


“Capitalized Lease” of a Person means any lease of
Property by such Person as lessee which would be capitalized on a balance sheet
of such Person prepared in accordance with GAAP.


 


“Capitalized Lease Obligations” of a Person means the
amount of the obligations of such Person under Capitalized Leases which would
be shown as a liability on a balance sheet of such Person prepared in
accordance with GAAP.


 


“Cash Equivalents” means: (a) securities issued
or directly and fully guaranteed or insured by the United States Government or
any agency or instrumentality thereof having maturities of not more than 90
days from the date of acquisition; (b) time deposits and certificates of
deposit of any of the Lenders, or of any domestic or foreign commercial banks
which has capital and surplus in excess of $500,000,000 or which has a
commercial paper rating meeting the requirements specified in clause (d) below,
having maturities of not more than 90 days from the date of acquisition; (c) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clauses (a) and (b) above entered into with
any bank meeting the qualifications specified in clause (b) above; and (d) commercial
paper of any Person rated at least A-2 or the equivalent thereof by S&P or
P-2 or the equivalent thereof by Moody’s and in either case maturing within 90
days after the date of acquisition.


 


“Change in Control” means the acquisition by any
Person, or two or more Persons acting in concert, of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 30% or more of the
outstanding shares of voting stock of the Borrower.


 


“Change in Law” means (a) the adoption of any
Requirement of Law after the date of this Agreement, (b) any change in any
Requirement of Law, or in the interpretation, administration or application
thereof by any Governmental Authority after the date of this Agreement or (c) compliance
by any Lender or LC Issuer (or, for purposes of Section 3.1 and 3.2, by
any Lending Installation of such Lender or by such Lender’s or LC Issuer’s
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after
the date of this Agreement.


 


4













 


“Class”, when used in reference to any Loan or
Advance, refers to whether such Loan, or the Loans comprising such Advance, are
Revolving Loans or Swing Line Loans.


 


“Closing Date” means the date on which the conditions
set forth in Section 4.1 are satisfied.


 


“Code” means the Internal Revenue Code of 1986, as
amended, reformed or otherwise modified from time to time.


 


“Commitment” means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans and to acquire participations
in Facility LCs and Swing Line Loans hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender’s potential Revolving
Credit Exposure hereunder, as such commitment may be reduced or increased from
time to time pursuant to the terms hereof. 
The initial amount of each Lender’s Commitment is set forth on Schedule
1.


 


“Commitment and Acceptance” is defined in Section 2.5.3(i).


 


“Commitment Fee” is defined in Section 2.5.1.


 


“Commonly Controlled Entity” means an entity, whether
or not incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Borrower and which is treated as a single employer under Section 414 of
the Code.


 


“Completed Unit” means a Unit as to which either (or
both) of the following has occurred: (a) a notice of completion has been
filed or recorded in the appropriate real estate records, or (b) all necessary
construction has been completed in order to obtain a certificate of occupancy
(whether or not such certificate of occupancy has actually been obtained).


 


“Consolidated Indebtedness” means at any time the
Indebtedness of the Borrower and the Guarantors (specifically excluding the
Indebtedness of any Subsidiaries that are not Guarantors but including the pro
rata share of the Indebtedness of Joint Ventures to the extent provided for in
the definition of “Indebtedness”).


 


“Consolidated Intangible Assets” means, with respect
to any Person at any date, all amounts, determined in accordance with GAAP,
included in the Consolidated Net Worth of such Person and attributable to
intangibles including (a)  goodwill,
including any amounts (however designated on the balance sheet) representing
the cost of acquisitions of Subsidiaries in excess of underlying tangible
assets or (b) patents, trademarks and copyrights.


 


“Consolidated Interest Incurred” means for any period,
for the Borrower and the Guarantors (specifically excluding any Subsidiaries
that are not Guarantors) on a consolidated basis, interest expense plus
interest capitalized into inventory in such period.


 


“Consolidated Net Income” means, for any period, the
consolidated net income (or loss) of the Borrower and the Guarantors
(specifically excluding any Subsidiaries, joint ventures and partnerships that
are not Guarantors) for such period (taken as a cumulative whole).


 


5













 


“Consolidated Net Worth” means, with respect to a
Person, all amounts which would, in accordance with GAAP, be included under
shareholders’ equity on a consolidated balance sheet for such Person and its
consolidated Subsidiaries.


 


“Consolidated Tangible Net Worth” means (a) Consolidated
Net Worth of the Borrower and the Guarantors (specifically excluding any
Subsidiaries that are not Guarantors but specifically including the investment
of the Borrower or any Guarantor in any Joint Venture) less
(b) all Consolidated Intangible Assets included in such Consolidated Net
Worth.


 


“Construction in Progress” means Finished Lots (a) for
which a final subdivision map has been recorded and (b) upon which
construction has commenced, as evidenced by the commencement of excavation for
foundations, but has not been completed.


 


“Contingent Obligation” of a Person means any
agreement, undertaking or arrangement by which such Person assumes, guarantees,
endorses, contingently agrees to purchase or provide funds for the payment of,
or otherwise becomes or is contingently liable upon, the obligation or
liability of any other Person, or agrees to maintain the net worth or working
capital or other financial condition of any other Person, or otherwise assures
any creditor of such other Person against loss, including, without limitation,
any comfort letter, operating agreement, take-or-pay contract or the
obligations of any such Person as general partner of a partnership with respect
to the liabilities of the partnership.


 


“Contractual Obligation” means, with respect to any
Person, any provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its Property is bound.


 


“Controlled Group” means all members of a controlled
group of corporations or other business entities and all trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower or any of its Subsidiaries, are treated as a single employer under Section 414
of the Code.


 


“Conversion/Continuation Notice” is defined in Section 2.9.


 


“Countrywide” means Countrywide Home Loans, Inc.


 


“Countrywide Loan Purchase Agreement” means the Loan
Purchase Agreement by and between Ryland Mortgage Company and Countrywide dated
as of June 26, 1995, as supplemented, modified, amended, restated or
extended from time to time.


 


“Credit Advance” means any advance, loan or extension
of credit to any Person or the purchase of any bonds, notes, debentures or
other debt securities of any Person.


 


“Credit Extension” means the making of an Advance or
Swing Line Loan or the issuance or Modification (other than a Modification that
does not increase the amount or extend the expiry date)  of a Facility LC hereunder, but not the conversion
or continuation of an Advance.


 


“Credit Extension Date” means the Borrowing Date for
an Advance or the issuance date for a Facility LC.


 


6













 


“Default” means an event described in Article VII.


 


“EBITDA” means, for any period, (i) the sum of
the following amounts:  (a) Consolidated
Net Income for such period; (b) cash distributions received by Borrower
from the Financial Services Segment not otherwise included in the determination
of such Consolidated Net Income; (c) income and franchise taxes deducted
from revenues in determining such Consolidated Net Income; (d) depreciation
and amortization deducted from revenues in determining such Consolidated Net
Income; (e) interest expense deducted from revenues in determining such
Consolidated Net Income (including, without duplication, previously capitalized
interest expense which would be included in “Cost of Goods Sold” and deducted
from revenues in determining such Consolidated Net Income on a combined income
statement of the Borrower and the Guarantors); (f) other non-cash charges
and expenses (including net realizable value write-down charges) deducted from
revenues in determining such Consolidated Net Income; and (g) any losses
arising outside of the ordinary course of business which have been included in
the determination of such Consolidated Net Income; less (ii) the sum of (x) any
non-cash credits included in revenues in determining such Consolidated Net
Income and (y) any gains arising outside of the ordinary course of
business included in the determination of such Consolidated Net Income.


 


“Entitled Land” means (a) land where all
requisite zoning requirements and land use requirements have been satisfied,
and all requisite approvals have been obtained (on a final and unconditional
basis) from all applicable governmental authorities (other than approvals which
are simply ministerial and non-discretionary in nature), in order to develop
the land as a residential housing project and construct Units thereon; and (b) as
to land located in California, land which satisfies the requirements of clause (a) immediately
above, and which is subject to a currently effective vesting, tentative map
(unless a county or city where the land is located does not grant vesting
tentative maps) which has received all necessary approvals (on a final and
unconditional basis) by all applicable Governmental Authorities.


 


“Environmental Laws” means any and all foreign,
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority or other
Requirements of Law (including common law) as now or may at any time hereafter
be in effect regulating, relating to or imposing liability or standards to
conduct concerning (i) pollution or protection of the environment, (ii) the
effect of the environment on human health, (iii) emissions, discharges or
releases of pollutants, contaminants, hazardous substances or wastes into
surface water, ground water or land, or (iv) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, hazardous substances or wastes or the clean-up or
other remediation thereof.


 


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


 


7













 


“ERISA” means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and any rule or regulation
issued thereunder.


 


“Eurodollar”, when used in reference to any Loan or
Advance, refers to whether such Loan, or the Loans comprising such Advance, are
bearing interest at a rate determined by reference to the Adjusted LIBO Rate.


 


“Excluded Taxes” means, in the case of each Lender or
applicable Lending Installation and the Agent, taxes (including income taxes
and franchise taxes) as are measured by or imposed on its net income.


 


“Exhibit” refers to an exhibit to this Agreement,
unless another document is specifically referenced.


 


“Existing Credit Agreement” means that certain Credit
Agreement dated as of June 16, 2004 among the Borrower, JPMorgan Chase
Bank (successor by merger to Bank One, NA) as Agent, and a syndicate of
lenders.


 


“Existing LCs” means those Letters of Credit issued
for the account of the Borrower prior to the date hereof and listed on Schedule
2 hereto.


 


“Extension Request” is defined in Section 2.20(a).


 


“Facility Increase Request” is defined in Section 2.5.3(i).


 


“Facility LC” is defined in Section 2.19.1.


 


“Facility LC Application” is defined in Section 2.19.3.


 


“Facility LC Collateral Account” is defined in Section 2.19.12.


 


“Facility Termination Date” means January 11,
2011 or any later date as may be specified as the Facility Termination Date in
accordance with Section 2.20 or any earlier date on which the Aggregate
Commitment is reduced to zero or otherwise terminated pursuant to the terms
hereof.


 


“Fed. Board” means the Board of Governors of the
Federal Reserve System of the United States of America.


 


“Federal Funds Effective Rate” means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it.


 


8













 


“Financial LC” means any Letter of Credit (other than
a Performance LC) that represents an irrevocable obligation on the part of the
issuer (a) to repay money borrowed by or advanced to or for the account of
the Borrower or a Subsidiary or (b) to make payment on account of any
Indebtedness undertaken by the Borrower or a Subsidiary, in the event that the
Borrower or Subsidiary fails to fulfill its obligation to the beneficiary.


 


“Financial Services Segment” means the business
segment of the Borrower and its Subsidiaries engaged in mortgage banking
(including the title and escrow business), homeowners’ insurance, mortgage
servicing, securities issuance, bond administration and management services and
related activities, which segment currently consists principally of the
activities of Ryland Mortgage Company and its Subsidiaries but excludes the
Limited-Purpose Subsidiaries.


 


“Finished Lots” means lots of Entitled Land as to
which (a) a final subdivision map has been recorded; (b) all major
off-site construction and infrastructure necessary to permit construction of
Units has been completed to local governmental requirements; (c) utilities
have been installed to local government requirements; and (d) building
permits may be pulled and construction commenced without the satisfaction of
any further material conditions.


 


“GAAP” means generally accepted accounting principles
as in effect from time to time in the United States, applied in a manner
consistent with that used in preparing the financial statements referred to in Section 5.5.


 


“Governmental Authority” means any nation or
government, any state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.


 


“Guarantee Obligations” means, as to any Person (the “guaranteeing
person”), any obligation of the guaranteeing person or another Person
(including any bank under any letter of credit) to induce the creation of which
the guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
indebtedness, leases, dividends or other obligations (the “primary obligations”)
of any third Person (the “primary obligor”) in any manner, whether directly or
indirectly, including any obligation of the guaranteeing person, whether or not
contingent, (1) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (2) to advance or
supply funds (A) for the purchase or payment of any such primary obligations
or (B) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor or (C) to purchase property, securities or services for the
purpose of assuring the owner of such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (D) otherwise
to assure or hold harmless the owner of such primary obligation against loss in
respect thereof; provided, however, that the term Guarantee
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. 
The amount of any Guarantee Obligation shall be deemed to be the maximum
or stated amount of the primary obligation relating to such Guarantee
Obligation (or, if less, the maximum stated liability set forth in the
instrument 


 


9













 


embodying such Guarantee Obligation), provided,
however, that in the absence of any such stated amount or stated
liability, the amount of such Guarantee Obligation shall be such guaranteeing
person’s maximum reasonably anticipated liability in respect thereof as
reasonably determined by the Borrower in good faith.


 


“Guarantor” means (a) the Subsidiaries of
Borrower identified on Schedule 3 hereto and (b) any Subsidiary
that hereafter guarantees the Obligations, subject, in the case of either (a) or
(b) to release of an entity as a Guarantor as provided in Section 6.9(b).


 


“Guaranty” means that certain Guaranty of even date
herewith in the form of Exhibit B hereto executed by the Guarantors
in favor of the Agent, for the ratable benefit of the Lenders, as it may be
amended, modified or supplemented (including by delivery of a Supplemental
Guaranty) and in effect from time to time.


 


“Hedge Agreement” means, as to any Person, any swap,
cap, collar or similar arrangement entered into by such Person providing for
protection against fluctuations in interest rates or currency exchange rates or
the exchange of nominal interest obligations, either generally or under
specific contingencies.


 


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


 


“Homebuilding Segment” means the business segment of
the Borrower and its Subsidiaries engaged in the construction and sale of
single-family attached and unattached dwellings and related activities,
including all activities of the Borrower outside the Financial Services Segment
but excluding the Limited-Purpose Subsidiaries.


 


“Home Proceeds Receivable” means, with respect to the
Borrower or a Guarantor, funds due to the Borrower or such Guarantor held at an
escrow or title company (including an escrow or title company which is a
Subsidiary of the Borrower) following the sale and conveyance of title of a
Unit to a buyer.


 


“Improvements” means on and off-site development work,
including but not limited to filling to grade, main water distribution and
sewer collection systems and drainage system installation, paving, and other
improvements necessary for the use of residential dwelling units and as
required pursuant to development agreements which may have been entered into
with Governmental Authorities.


 


“Increase Date” is defined in Section 2.5.3(ii).


 


“Indebtedness” of any Person means all of the
following, whether or not included as indebtedness or liabilities in accordance
with GAAP:  (a) all obligations of
such Person for


 


10


 












 


borrowed money; (b) all obligations of such
Person for the deferred purchase price of Property or services (other than
trade liabilities due 90 days or less from invoice and accrued expenses
incurred in the ordinary course of business and payable in accordance with
customary practices); (c) all net obligations of such Person under any
Hedge Agreement (measured as the Hedge Agreement Termination Value thereof); (d) any
other obligations of such Person evidenced by a note, bond, debenture or
similar instrument; (e) all Capitalized Lease Obligations of such Person; (f) all
obligations, contingent or otherwise, of such Person in respect of Letters of
Credit (excluding Performance LCs not yet drawn upon) and acceptances issued or
created for the account of such Person; (g) all liabilities secured by any
lien on any Property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof; (h) all
Guarantee Obligations of such Person; (i) such Person’s Unfunded Liabilities;
and (j) any other obligation for borrowed money or other financial
accommodations which in accordance with GAAP would be shown as a liability on
the consolidated balance sheet of such Person. 
For all purposes hereof, the Indebtedness of any Person shall include
its pro rata share of the Indebtedness of any Joint Venture in which such
Person holds an interest.


 


“Indemnified Taxes” means Taxes other than Excluded Taxes.


 


“Insolvency” or “Insolvent” means, with respect to any Multiemployer
Plan, the condition that such Plan is insolvent within the meaning of Section 4245
of ERISA.


 


“Interest Period” means with respect to any Eurodollar Advance, the
period commencing on the date of such Advance and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided,
that (i) if any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business Day
and (ii) any Interest Period that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period.  For purposes hereof, the date of an Advance
initially shall be the date on which such Advance is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Advance.


 


“Investment” of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any deposit accounts and certificate of deposit owned by such Person;
and structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.


 


“Investment Grade Rating” means a rating of the Borrower’s unsecured
senior public debt of BBB- or higher from S&P or Baa3 or higher from Moody’s.


 


11













 


“Joint Venture” means an entity (whether a partnership, joint venture,
limited liability company or other form of business organization) in which the
Borrower or a Subsidiary owns an interest but which is not a Subsidiary of the
Borrower.


 


“JPMorgan Chase Bank” means JPMorgan Chase Bank, N.A., in its
individual capacity, (and its successors).


 


“Land Under Development” means Entitled Land upon which a final
subdivision map has been recorded and upon which construction of Improvements
has commenced and is being diligently pursued but has not been completed.


 


“Laws” means, collectively, all international, foreign, federal, state
and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents.


 


“LC Exposure” means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Facility LCs at such time plus (b) the
aggregate amount of all Reimbursement Obligations that have not yet been
reimbursed by or on behalf of the Borrower at such time.  The LC Exposure of any Lender at any time shall
be its Pro Rata Share of the total LC Exposure at such time.


 


“LC Fee” is defined in Section 2.19.4.


 


“LC Issuer” means JPMorgan Chase Bank (or any subsidiary or affiliate
of JPMorgan Chase Bank designated by JPMorgan Chase Bank and acceptable to the
Borrower), any other Lender that is the issuer of an Existing LC and any other
Lender that, at the request of the Borrower and with the approval of the Agent,
shall agree to issue Facility LCs, each in its capacity as issuer of Facility
LCs hereunder.


 


“LC Payment Date” is defined in Section 2.19.6.


 


“Lenders” means the Persons listed on Schedule
1 and any other Person that shall have become a party hereto
pursuant to a Commitment and Acceptance or an Assignment and Assumption, other
than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption.  Unless the context
otherwise requires, the term “Lenders” includes the Swing Line Lender.


 


“Lending Installation” means, with respect to a Lender or the Agent,
the office, branch, subsidiary or affiliate of such Lender or the Agent listed
on the signature pages hereof or on a Schedule or otherwise selected by
such Lender or the Agent pursuant to Section 2.17.


 


“Letter of Credit” of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.


 


“Leverage Ratio” means, at any date, the ratio of (a) Consolidated
Indebtedness at such date to (b) the sum of Consolidated Indebtedness and
Consolidated Tangible Net Worth at such date.


 


12













 


“LIBO Rate” means, with respect to any Eurodollar Advance for any
Interest Period, the rate appearing on Telerate Page 3750 (formerly the
Dow Jones Market Service) or on any successor or substitute page of such
Service, or any successor to or substitute for such Service, providing rate
quotations comparable to those currently provided on such page of such
Service, as determined by the Agent from time to time for purposes of providing
quotations of interest rates applicable to dollar deposits in the London
interbank market, at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period.  In the event that such rate is not available
at such time for any reason, then the “LIBO Rate”
with respect to such Eurodollar Advance for such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of
such Interest Period.


 


“Lien” means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).


 


“Limited-Purpose Subsidiaries” means subsidiaries of the Borrower
included within the Limited-Purpose Subsidiaries Segment.


 


“Limited-Purpose Subsidiaries Segment” means the business segment of
the Borrower and its Subsidiaries which facilitates, through special-purpose
entities created or existing solely for such purpose, the financing of mortgage
loans and mortgage-backed securities and the securitization of mortgage loans
and other related activities.


 


“Loan Documents” means this Agreement, the Facility LC Applications,
the Swing Line Note, any Notes issued pursuant to Section 2.13 and the
Guaranty.


 


“Loans” means, the loans made by the Lenders or Swing Line Lender
pursuant to this Agreement (including any conversion or continuation of a
Eurodollar Loan).


 


“Material Adverse Effect” means a material adverse effect on (i) the
business or financial condition of the Borrower and its Restricted Subsidiaries
taken as a whole, (ii) the ability of the Borrower to perform its
obligations under the Loan Documents to which it is a party, or (iii) the
validity or enforceability of any of the Loan Documents or the rights or
remedies of the Agent, the LC Issuers or the Lenders thereunder.


 


“Material Indebtedness” means Indebtedness in an outstanding principal
amount of $10,000,000 or more in the aggregate.


 


“Material Indebtedness Agreement” means any agreement to which the
Borrower or any Guarantor is a party (or is otherwise obligated in respect
thereof) under which any Indebtedness was created or is governed, which
Indebtedness has an outstanding principal balance of $10,000,000 or more or
which provides for the incurrence of Indebtedness on a revolving basis 


 


13













 


in an amount which would constitute Material
Indebtedness (whether or not an amount of Indebtedness constituting Material
Indebtedness is outstanding thereunder).


 


“Materials of Environmental Concern” means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including asbestos, polychlorinated
biphenyls, urea-formaldehyde insulation and mold.


 


“Model Unit” means a Completed Unit to be used as a model home in
connection with the sale of Units in a residential housing project.


 


“Modify” and “Modification” are defined in Section 2.19.1.


 


“Moody’s” means Moody’s Investors Service, Inc.


 


“Multiemployer Plan” means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.


 


“New Lender” is defined in Section 2.5.3(i).


 


“Non-Recourse Indebtedness” means, with respect to any Person, any
Indebtedness of such Person for which the owner of such Indebtedness has no
recourse, directly or indirectly, to such Person for the principal of, premium,
if any, and interest on such Indebtedness, and for which such Person is not
directly or indirectly obligated or otherwise liable for the principal of,
premium, if any, and interest on such Indebtedness, except pursuant to Liens on
Property to which such Indebtedness relates, provided that recourse
obligations or liabilities solely for fraud, environmental matters and other
customary “non-recourse carve-outs” in respect of any Indebtedness will not
prevent Indebtedness from being classified as Non-Recourse Indebtedness.


 


“Non-U.S. Lender” means any Lender that is organized under the laws of
a jurisdiction other than that the United States of America, any State thereof
or the District of Columbia.


 


“Note” is defined in Section 2.13(iv).


 


“Obligations” means all unpaid principal of and accrued and unpaid
interest on the Loans, all Reimbursement Obligations, all accrued and unpaid
fees and all expenses, reimbursements, indemnities and other obligations of the
Borrower to the Lenders or to any Lender, the Agent, any LC Issuer, the Swing
Line Lender or any indemnified party arising under the Loan Documents.


 


“Other Taxes” is defined in Section 3.5(ii).


 


“Participant” is defined in Section 12.2(a).


 


“Payment Date” means the first day of each calendar month.


 


“PBGC” means the Pension Benefit Guaranty Corporation, or any successor
thereto.


 


14













 


“Performance LC” means a Letter of Credit issued by a Lender or other
Person for the account of the Borrower or a Subsidiary to a party, as
beneficiary, to which the Borrower, or such Subsidiary owes certain performance
obligations in connection with its real estate development and homebuilding
activity in the ordinary course of business (for example, to a municipality, as
beneficiary, to support the Borrower’s or a Subsidiary’s obligation to widen
public streets in connection with a residential development project).  A direct pay Letter of Credit to support
community improvement bonds associated with the Borrower’s residential
development operations is a Financial LC and not a Performance LC.


 


“Person” means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.


 


“Plan” means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412
of the Code as to which the Borrower or any member of the Controlled Group may
have any liability.


 


“Pricing Schedule” means the Schedule attached hereto identified as
such.


 


“Prime Rate” means the rate of interest per annum publicly announced
from time to time by JPMorgan Chase Bank, as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be effective
from and including the date such change is publicly announced as being
effective.


 


“Property” of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.


 


“Pro Rata Share” means, with respect to a Lender, a portion equal to a
fraction the numerator of which is such Lender’s Commitment and the denominator
of which is the Aggregate Commitment.


 


“Quarterly Payment Date” is defined in Section 2.19.4.


 


“Raw Land” means Raw Land — Entitled and Raw Land — Unentitled.


 


“Raw Land — Entitled” means land not under development which is
Entitled Land.


 


“Raw Land — Unentitled” means land not under development which is not
Entitled Land but which the Borrower in its reasonable commercial judgment
believes it will be able to develop as residential property for its own use and
not to be held speculatively.


 


“Real Estate Inventory” means Construction in Progress, Completed Units
(including Model Units), Finished Lots, Land Under Development, Raw Land —
Entitled, and Raw Land — Unentitled.


 


“Refinancing Indebtedness” means, with respect to any specified
Indebtedness, Indebtedness that refinances such specified Indebtedness but does
not increase the amount thereof.


 


15













 


“Register” has the meaning set forth in Section 12.1(b)(iv).


 


“Regulation D” means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.


 


“Regulation U” means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors relating
to the extension of credit by banks for the purpose of purchasing or carrying
margin stocks applicable to member banks of the Federal Reserve System.


 


“Regulation X” means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors relating
to the extension of credit by foreign lenders for the purpose of purchasing or
carrying margin stock.


 


“Reimbursement Obligations” means, at any time, the aggregate of all
obligations of the Borrower then outstanding under Section 2.19 to
reimburse the LC Issuers for amounts paid by the LC Issuers in respect of any
one or more drawings under Facility LCs.


 


“Rejecting Lender” is defined in Section 2.20(a).


 


“Rejecting Lender’s Facility Termination Date” is defined in Section 2.20(a).


 


“Related Parties” means, with respect to any specified Person, such
Person’s Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person’s Affiliates.


 


“Reorganization” means, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of Section 241
of ERISA.


 


“Replacement Lender” is defined in Section 2.21(a).


 


“Reportable Event” means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event, provided,
however, that a failure to meet
the minimum funding standard of Section 412 of the Code and of Section 302
of ERISA shall be a Reportable Event regardless of the issuance of any such
waiver of the notice requirement in accordance with either Section 4043(a) of
ERISA or Section 412(d) of the Code.


 


“Reports” is defined in Section 9.6.


 


“Required Lenders” means Lenders in the aggregate having at least 66
2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the 


 


16













 


aggregate holding at least 66-2/3% of the aggregate
unpaid principal amount of the Aggregate Credit Exposure.


 


“Requirement of Law” means, as to any Person, any Law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or
of a Governmental Authority, in each case applicable to or binding upon such
Person or any of its Property or to which such Person or any of its Property is
subject.


 


“Responsible Official” means (a) with respect to the Borrower, any
of the chief executive officer, president or chief financial officer of the
Borrower or, with respect to financial matters, the chief accounting officer or
the treasurer of the Borrower and (b) with respect to a Guarantor, any of
the chief executive officer, the president, any vice president or the treasurer
of such Guarantor.


 


“Restricted Payments” is defined in Section 6.16.


 


“Restricted Subsidiary” means any Subsidiary of the Borrower other than
(a) Limited-Purpose Subsidiaries, (b) those Subsidiaries identified
on Schedule 5.4 as not being Restricted Subsidiaries and (c) any
Subsidiary that the Required Lenders agree in writing is not to be deemed a
Restricted Subsidiary.


 


“Revolving Credit Exposure” means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender’s Revolving
Loans and its LC Exposure and Swing Line Exposure at such time.


 


“Revolving Loan” means a Loan made pursuant to Section 2.1.


 


“Ryland Financial Division” means all Subsidiaries and operations of the
Borrower and its Subsidiaries other than the Homebuilding Segment.


 


“Ryland Mortgage Company” means Ryland Mortgage Company, an Ohio
corporation.


 


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


 


“Schedule” refers to a specific schedule to this Agreement, unless
another document is specifically referenced.


 


“Section” means a numbered section of this Agreement, unless another
document is specifically referenced.


 


“Senior Permitted Debt” means (without duplication) the Obligations,
the LC Exposure and all Indebtedness of the Borrower or the Guarantors
(specifically excluding the Indebtedness of any Subsidiary that is not a
Guarantor) senior to or ranking in equal priority to the Obligations, other
than (a) Indebtedness that is secured by any Property that would have been
included in the Borrowing Base if such asset were not subject to or encumbered
by a Lien, (b) Indebtedness which is Non-Recourse Indebtedness of the
Borrower and its Subsidiaries and (c) 


 


17













 


with respect to purchase money Indebtedness, such
Indebtedness for which recourse is limited solely to the Property financed with
the proceeds of such Indebtedness.


 


“Single Employer Plan” means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.


 


“Sold” means, with respect to any item of Real Estate Inventory, that (a) a
third party purchase contract has been executed for such item of Real Estate
Inventory; (b) the third party purchaser for such item of Real Estate
Inventory has made a cash deposit for such item (except that up to 1% of Real
Estate Inventory at any time may be deemed “Sold” even if such deposit has not
been made); and (c) such third party purchaser’s obligation to purchase
such item of Real Estate Inventory pursuant to such third party purchase
contract is not subject to any contingencies other than the contingency that it
shall have obtained mortgage financing or that it shall have sold other
identified property.


 


“Specified Debt” means the Borrower’s senior debt securities issued
pursuant to the Borrower’s Registration Statements on Form S-3
(Registration Nos. 333-03791, 333-58208, 333-100167, 333-121469 and 333-12400)
or any subsequent registration statement and whether outstanding on the date of
this Agreement or hereafter incurred.


 


“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Fed. Board to which the Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months
and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of the
Fed. Board).  Such reserve percentages
shall include those imposed pursuant to Regulation D.  Eurodollar Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under Regulation D or any comparable
regulation.  The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change
in any reserve percentage.


 


“Subordinated Debt” means (a) Indebtedness of the Borrower
outstanding on the date hereof issued pursuant to the Subordinated Debt
Indentures and (b) any other unsecured Indebtedness of the Company that is
contractually subordinated in right of payment and otherwise to the Obligations
upon terms and conditions that, in the reasonable determination of the Agent,
are consistent with those set forth in the Subordinated Debt Indentures or upon
other terms and conditions satisfactory to the Required Lenders.


 


“Subordinated Debt Indenture” means the Indenture, dated as of June 12,
2001, between the Borrower and SunTrust Bank, as trustee, pursuant to which the
Borrower’s 9-1/8% Senior Subordinated Notes due June, 2011 were issued.


 


“Subsidiary” of a Person means (i) any corporation more than 50%
of the outstanding securities having ordinary voting power of which shall at
the time be owned or controlled, 


 


18













 


directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (ii) any partnership, limited liability company, association, joint
venture or similar business organization more than 50% of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled.  Unless otherwise expressly
provided, all references herein to a “Subsidiary” shall mean a Subsidiary of
the Borrower.


 


“Substantial Portion” means, with respect to the Property of the
Borrower and its Subsidiaries, Property which represents more than 10% of the
consolidated assets of the Borrower and its Subsidiaries or property which is
responsible for more than 10% of the consolidated net sales or of the consolidated
net income of the Borrower and its Subsidiaries, in each case, as would be
shown in the consolidated financial statements of the Borrower and its
Subsidiaries as at the beginning of the twelve-month period ending with the
month in which such determination is made (or if financial statements have not
been delivered hereunder for that month which begins the twelve-month period,
then the financial statements delivered hereunder for the quarter ending
immediately prior to that month).


 


“Supplemental Guaranty” means a Supplemental Guaranty in the form
provided for in, and attached to, the Guaranty.


 


“Swing Line Commitment” means the commitment of the Swing Line Lender
to make Swing Line Loans pursuant to Section 2.22(a) hereof.  The Swing Line Commitment is in the amount of
$75,000,000.


 


“Swing Line Exposure” means, at any time, the aggregate principal
amount of all Swing Line Loans outstanding at such time.  The Swing Line Exposure of any Lender at any
time shall be its Pro Rata Share of the total Swing Line Exposure at such time.


 


“Swing Line Lender” means JPMorgan Chase Bank or any assignee to which
JPMorgan Chase Bank assigns the Swing Line Commitment in accordance with Section 12.1
hereof.


 


“Swing Line Loan” is defined in Section 2.22(a).


 


“Swing Line Note” is defined in Section 2.22(a).


 


“Taxes” means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes and Other Taxes.


 


“Third Party LC” means a Letter of Credit issued for the account of the
Borrower or a Subsidiary (other than a Facility LC).  A Third Party LC may be either a Financial LC
or a Performance LC.


 


“Three-Month Secondary CD Rate” means, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Fed. Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519) 


 


19













 


during the week following such day) or, if such rate
is not so reported on such day or such next preceding Business Day, the average
of the secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately 10:00 a.m.,
New York City time, on such day (or, if such day is not a Business Day, on the
next preceding Business Day) by the Agent from three negotiable certificate of
deposit dealers of recognized standing selected by it.


 


“Transferee” is defined in Section 12.4.


 


“Type”, when used in reference to any Loan or Advance, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Advance, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.


 


“Unencumbered Real Estate Inventory” means Real Estate Inventory which
is not subject to or encumbered by any deed of trust, mortgage, judgment lien,
attachment lien or any other Lien (other than (a) liens which have been
bonded over so as to remove such liens as encumbrances against the Real Estate
Inventory, (b) liens for taxes not yet due or which are being contested,
provided that adequate reserves are maintained, (c) mechanic’s liens and
similar liens arising in the ordinary course of business that are not overdue
for a period of more than 60 days or that are being contested in good faith and
(d) easements, rights of way, restrictions and other similar encumbrances
incurred during the ordinary course of business which, in the aggregate, are
not substantial in amount and which do not in any case materially detract from
the value of the applicable Property or materially interfere with the ordinary
conduct of the business of the Borrower or Guarantor that owns the applicable
Property.


 


“Unfunded Liabilities” means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.


 


“Unit” means a single-family residential housing unit available for
sale.


 


“Unmatured Default” means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.


 


“Unsold” means, with respect to any item of Real Estate Inventory, that
such item of Real Estate Inventory is not Sold.


 


“Unsold Housing Inventory” means, collectively, Unsold Construction in
Progress, Unsold Units and Unsold Model Units.


 


“Wholly-Owned Subsidiary” of a Person means (i) any Subsidiary all
of the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability
company, association, joint venture or similar business organization 100% of
the ownership interests having ordinary voting power of which shall at the time
be so owned or controlled.


 


20












 


1.2           Classification
of Loans and Advances.  For purposes
of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and
Type (e.g., a “Eurodollar Revolving Loan”).  Advances also may be classified and referred
to by Class (e.g., a “Revolving
Advance”) or by Type (e.g., a “Eurodollar
Advance”) or by Class and Type (e.g.,
a “Eurodollar Revolving Advance”).


 


1.3           Terms Generally. 
The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. 
Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to
any restrictions on such amendments, supplements or modifications set forth
herein), (b) any reference herein to any Person shall be construed to
include such Person’s successors and assigns, (c) the words “herein”, “hereof”
and “hereunder”, and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words “asset” and “property” shall be construed
to have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.


 


ARTICLE II


 


THE CREDITS


 


2.1           Commitment. 
From and including the date of this Agreement and prior to the Facility
Termination Date, each Lender severally agrees, on the terms and conditions set
forth in this Agreement, to (i) make Revolving Loans to the Borrower and (ii) participate
in Facility LCs issued upon the request of the Borrower (including the Existing
LCs) and in Swing Line Loans, provided
that, after giving effect to the making of each such Revolving Loan and each
Swing Line Loan and the issuance of each such Facility LC (including the
participations in the Existing LCs), (a) such Lender’s Revolving Credit
Exposure shall not exceed its Commitment and (b) the Aggregate Credit
Exposure does not exceed the Aggregate Commitment.  Subject to the terms of this Agreement, the
Borrower may borrow, repay and reborrow the Loans at any time prior to the
Facility Termination Date.  The
Commitments to extend credit hereunder shall expire on the Facility Termination
Date.  The LC Issuers will issue Facility
LCs hereunder on the terms and conditions set forth in Section 2.19.


 


2.2           Required Payments;
Termination.  The Aggregate Credit Exposure and all other
unpaid Obligations shall be paid in full by the Borrower on the Facility
Termination Date.


 


2.3           Ratable
Revolving Loans.  Each Advance hereunder shall
consist of Revolving Loans made from the several Lenders ratably in proportion
to the ratio that their respective Commitments bear to the Aggregate
Commitment.


 


21













 


2.4           Types of
Advances.  The Advances may be ABR Advances or
Eurodollar Advances, or a combination thereof, selected by the Borrower in
accordance with Sections 2.8 and 2.9.


 


2.5           Commitment Fee;
Reductions and Increases in Aggregate Commitment.


 


2.5.1        Commitment Fee. 
The Borrower agrees to pay to the Agent for the account of each Lender a
commitment fee (the “Commitment Fee”) at a per annum rate equal to the
Applicable Fee Rate on the daily unused portion of such Lender’s Commitment
from the date hereof to and including the Facility Termination Date, payable in
arrears on each Quarterly Payment Date hereafter and on the Facility
Termination Date.  For purposes of
determining the Commitment Fee payable to the Swing Line Lender, its Swing Line
Loans shall be treated as usage of its Commitment.


 


2.5.2        Reduction in Aggregate Commitment. 
The Borrower may permanently reduce the Aggregate Commitment in whole,
or in part ratably among the Lenders in the minimum amount of $10,000,000 (and
in multiples of $1,000,000 in excess thereof), upon at least five Business Days’
written notice to the Agent, which notice shall specify the amount of any such
reduction, provided, however, that the amount of the
Aggregate Commitment may not be reduced below the Aggregate Credit
Exposure.  All accrued Commitment Fees
and LC Fees shall be payable on the effective date of any termination of the
obligations of the Lenders to make Credit Extensions hereunder.


 


2.5.3        Increases in Aggregate Commitment.


 


(i)            Subject to the provisions of this Section 2.5.3,
the Borrower may, at any time and from time to time, make a request (a “Facility
Increase Request”), by notice to the Agent, for the Agent’s approval of an
increase of the Aggregate Commitment within the limitations hereinafter set
forth, which Facility Increase Request shall set forth the amount of such
requested increase.  Within twenty (20)
days of such Facility Increase Request, Agent shall advise Borrower of its
approval or disapproval thereof; failure to so advise Borrower shall constitute
disapproval.  Upon approval of the Agent,
the Aggregate Commitment may be so increased either by having one or more
financial institutions (other than the Lenders then holding a Commitment
hereunder) approved in writing by the Borrower and the Agent (each, a “New
Lender”) become Lenders hereunder and/or by having any one or more of Lenders
then holding a Commitment hereunder (at their respective election in their sole
discretion) that have been approved in writing by the Borrower and the Agent
increase the amount of their Commitments (any such Lender that elects to
increase its Commitment and any New Lender being hereinafter referred to as an “Additional
Lender”), provided that (A) on the applicable Increase Date, (1) no
Default or Unmatured Default shall then exist nor would occur immediately after
giving effect to such increase and (2) the representations and warranties
contained in Article V and in the Guaranty are true and correct except to
the extent any such representation or 


 


22













 


warranty is stated to
relate solely to an earlier date, in which case such representation or warranty
shall have been true and correct on and as of such earlier date, (B) unless
otherwise agreed by the Borrower and the Agent, the Commitment of any New
Lender shall not be less than $5,000,000 (and, if in excess thereof, in
integral multiples of $1,000,000), (C) unless otherwise agreed by the
Borrower and the Agent, the increase in the Commitment of any Lender shall be
not less than $5,000,000 (and, if in excess thereof, in integral multiples of
$1,000,000); (D) after giving effect to such increase, the Aggregate
Commitment shall not exceed $1,500,000,000; (E) the Borrower and each
Additional Lender shall have executed and delivered a commitment and acceptance
(the “Commitment and Acceptance”) substantially in the form of Exhibit C hereto, and the Agent shall have
accepted and executed the same; (F) the Borrower shall have executed and
delivered to the Agent a Note payable to the order of each Additional Lender
that requests a Note, each such Note to be in the amount of such Additional
Lender’s Commitment or increased Commitment (as applicable); (G) the
Borrower shall have delivered to the Agent opinions of counsel (substantially
similar to the forms of opinion referred to in Section 4.1(v), modified to
apply to the increase in the Aggregate Commitment and each Note and Commitment
and Acceptance executed and delivered in connection therewith); (H) each
of the Guarantors shall have consented in writing to the new Commitments or
increases in Commitments (as applicable) and shall have agreed that its
Guaranty continues in full force and effect; and (I) the Borrower and each
Additional Lender shall otherwise have executed and delivered such other
instruments and documents as the Agent shall have reasonably requested in
connection with such new Commitment or increase in the Commitment (as
applicable).  The form and substance of
the documents required under clauses (E) through (I) above shall be
fully acceptable to the Agent.  The Agent
shall promptly provide written notice to the Lenders following any such
increase in the Aggregate Commitment.


 


(ii)           On the effective date of any increase in
the Aggregate Commitment pursuant to the provisions hereof (“Increase Date”),
which Increase Date shall be mutually agreed upon by Borrower, each Additional
Lender and the Agent, each Additional Lender shall make a payment to the Agent
in an amount sufficient, upon the application of such payments by all
Additional Lenders to the reduction of the outstanding ABR Advances held by the
Lenders, to cause the principal amount outstanding under the ABR Loans made by
all Lenders (including any Additional Lender) to be in the proportion of their
respective Commitments (as of such Increase Date).  The Borrower hereby irrevocably authorizes
each Additional Lender to fund to the Agent the payment required to be made
pursuant to the immediately preceding sentence for application to the reduction
of the outstanding ABR Loans held by each Lender, and each such payment shall
constitute an ABR Loan hereunder.  Such
Additional Lender shall not participate in any Eurodollar Advance outstanding
on the Increase Date, 


 


23













 


but, if the Borrower shall at any time on or after
such Increase Date convert or continue any Eurodollar Advance outstanding on
such Increase Date, the Borrower shall be deemed to repay such Eurodollar
Advance on the date of the conversion or continuation thereof and then to
reborrow as a Eurodollar Advance a like amount on such date so that each
Additional Lender shall make a Eurodollar Loan on such date in its Pro Rata
Share of such Eurodollar Advance.  Each
Additional Lender shall also make a Revolving Loan in the amount of its Pro
Rata Share of all Advances made on or after such Increase Date and shall
otherwise have all of the rights and obligations of a Lender hereunder on and
after such Increase Date. 
Notwithstanding the foregoing, upon the occurrence of a Default prior to
the date on which an Additional Lender is holding Revolving Loans equal to its
Pro Rata Share of all Advances hereunder, such Additional Lender shall, upon
notice from the Agent, on or after the date on which the Obligations are
accelerated or become due following such Default, pay to the Agent (for the
account of the other Lenders, to which the Agent shall pay their Pro Rata
Shares upon receipt) a sum equal to such Additional Lender’s Pro Rata Share of
each Advance then outstanding with respect to which such Additional Lender does
not then hold a Revolving Loan equal to its Pro Rata Share thereof.


 


(iii)          On the Increase Date and the making of
the Loans by an Additional Lender in accordance with the provisions of the
first sentence of Section 2.5.3(ii), such Additional Lender shall also be
deemed to have irrevocably and unconditionally purchased and received, without
recourse or warranty, from the Lenders party to this Agreement immediately
prior to the Increase Date, an undivided interest and participation in any
Facility LC then outstanding, ratably, such that all Lenders (including each
Additional Lender) hold participation interests in each such Facility LC in the
proportion of their respective Commitments (as so increased).


 


(iv)          Nothing contained herein shall
constitute, or otherwise be deemed to be, a commitment or agreement on the part
of any Lender to increase its Commitment hereunder at any time or a commitment
or agreement on the part of the Borrower or the Agent to give or grant any
Lender the right to increase its Commitment hereunder at any time.


 


2.6           Minimum Amount
of Each Advance.  Each Advance shall be in the
minimum amount of $5,000,000 (and in multiples of $500,000 in excess thereof), provided, however, that any ABR Advance may
be in the amount of the unused Aggregate Commitment.


 


2.7           Optional
Principal Payments.  The Borrower may from time to
time pay, without penalty or premium, all outstanding ABR Advances, or, in a
minimum aggregate amount of $5,000,000 or any integral multiple of $500,000 in
excess thereof, any portion of the outstanding ABR Advances upon prior notice
to the Agent not later than noon (Central time) on the day of prepayment.  The Borrower may from time to time pay,
subject to the payment of any funding indemnification amounts required by Section 3.4
but without penalty or premium, all outstanding 


 


24













 


Eurodollar
Advances, or, in a minimum aggregate amount of $5,000,000 or any integral
multiple of $500,000 in excess thereof, any portion of the outstanding
Eurodollar Advances upon not less than five (5) Business Days’ prior
notice to the Agent.


 


2.8           Method of
Selecting Types and Interest Periods for New Advances. 
The Borrower shall select the Type of Advance and, in the case of each
Eurodollar Advance, the Interest Period applicable thereto from time to
time.  The Borrower shall give the Agent
irrevocable notice (a “Borrowing Notice”) from an Authorized Person not later
than noon (Central time) on the Borrowing Date of each ABR Advance and noon
(Central time) three Business Days before the Borrowing Date for each
Eurodollar Advance, specifying:


 


(i)            the Borrowing Date, which shall be a Business Day, of
such Advance,


 


(ii)           the aggregate amount of such Advance,


 


(iii)          the Type of Advance selected, and


 


(iv)          in the case of each Eurodollar Advance, the Interest
Period applicable thereto.


 


Not
later than 2:00 p.m. (Central time) on each Borrowing Date, each Lender
shall make available its Revolving Loan or Revolving Loans in funds immediately
available in Houston, Texas to the Agent at its address specified pursuant to Article XIII
(or otherwise provided by the Agent to the Lenders).  The Agent will make the funds so received
from the Lenders available to the Borrower at the Agent’s aforesaid address.


 


2.9           Conversion and
Continuation of Outstanding Advances.  ABR Advances
shall continue as ABR Advances unless and until such ABR Advances are converted
into Eurodollar Advances pursuant to this Section 2.9 or are repaid in
accordance with Section 2.7.  Each
Eurodollar Advance shall continue as a Eurodollar Advance until the end of the
then applicable Interest Period therefor, at which time such Eurodollar Advance
shall be automatically converted into an ABR Advance unless (x) such
Eurodollar Advance is or was repaid in accordance with Section 2.7 or (y) the
Borrower shall have given the Agent a Conversion/Continuation Notice (as
defined below) requesting that, at the end of such Interest Period, such
Eurodollar Advance continue as a Eurodollar Advance for the same or another
Interest Period.  Subject to the limitations
set forth in Section 2.6, the Borrower may elect from time to time to
convert all or any part of an ABR Advance into a Eurodollar Advance.  The Borrower shall give the Agent irrevocable
notice (a “Conversion/Continuation Notice”) from an Authorized Person of each
conversion of an ABR Rate Advance into a Eurodollar Advance or continuation of
a Eurodollar Advance not later than noon (Central time) at least three Business
Days prior to the date of the requested conversion or continuation, specifying:


 


(i)            the requested date, which shall be a Business Day, of
such conversion or continuation,


 


(ii)           the aggregate amount and Type of the Advance which is
to be converted or continued, and


 


25













 


(iii)          the amount of such Advance which is to be
converted into or continued as a Eurodollar Advance and the duration of the
Interest Period applicable thereto.


 


2.10         Changes in
Interest Rate, etc.  Each ABR Advance shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is automatically converted from a
Eurodollar Advance into an ABR Advance pursuant to Section 2.9, to but
excluding the date it is paid or is converted into a Eurodollar Advance pursuant
to Section 2.9 hereof, at a rate per annum equal to the Alternate Base
Rate for such day.  Each Swing Line Loan
shall bear interest on the outstanding principal amount thereof, for each day
from and including the date such Swing Line Loan is made, to but excluding the
date it is paid, at a rate per annum equal to the Alternate Base Rate for such
day.  Changes in the rate of interest on
that portion of any Advance maintained as an ABR Advance and on any Swing Line Loan
will take effect simultaneously with each change in the Alternate Base
Rate.  Each Eurodollar Advance shall bear
interest on the outstanding principal amount thereof from and including the
first day of the Interest Period applicable thereto to (but not including) the
last day of such Interest Period at a rate per annum equal to be Adjusted LIBO
Rate plus the Applicable Margin, as determined by the Agent as applicable to
such Eurodollar Advance based upon the Borrower’s selections under Sections 2.8
and 2.9 and otherwise in accordance with the terms hereof.  No Interest Period may end after the Facility
Termination Date.


 


2.11         Rates Applicable
After Default.  Notwithstanding anything to the contrary
contained in Section 2.8, 2.9 or 2.10, during the continuance of a Default
or Unmatured Default the Required Lenders may, at their option, by notice to
the Borrower (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous consent
of the Lenders to changes in interest rates), declare that no Advance may be
made as, converted into or continued as a Eurodollar Advance.  During the continuance of a Default the
Required Lenders may, at their option, by notice to the Borrower (which notice
may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 8.2 requiring unanimous consent of the Lenders to
changes in interest rates), declare that (i) each Eurodollar Advance shall
bear interest for the remainder of the applicable Interest Period at the rate
otherwise applicable to such Interest Period plus 2% per annum, and (ii) each
ABR Advance and Swing Line Loan shall bear interest at a rate per annum equal
to the Alternate Base Rate in effect from time to time plus 2% per annum, and (iii) the
LC Fee shall be increased by 2% per annum, provided
that, during the continuance of a Default under Section 7.6 or 7.7, the
interest rates set forth in clauses (i) and (ii) above and the
increase in the LC Fee set forth in clause (iii) above shall be applicable
to all Credit Extensions without any election or action on the part of the
Agent or any Lender.


 


2.12         Method of
Payment.  All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at the Agent’s address specified pursuant to Article XIII,
or at any other Lending Installation of the Agent specified in writing by the
Agent to the Borrower, by 2:00 p.m. (Central time) on the date when due
and shall be applied ratably by the Agent among the Lenders.  Each payment delivered to the Agent for the
account of any Lender shall (except in the case of Reimbursement Obligations
for which an LC Issuer has not been fully indemnified by the Lenders, or as otherwise
specifically required hereunder) be applied ratably by the Agent among the
Lenders.  


 


26













 


Each
payment delivered to the Agent for the account of any Lender shall be delivered
promptly by the Agent to such Lender in the same type of funds that the Agent
received at its address specified pursuant to Article XIII or at any
Lending Installation specified in a notice received by the Agent from such
Lender.  If the Agent receives, for the
account of a Lender, a payment from the Borrower and fails to remit such
payment to such Lender on the Business Day such payment is received (if
received by 2:00 p.m. ( Central time) by the Agent) or on the next
Business Day (if received after 2:00 p.m. (Central time) by the Agent),
the Agent shall pay to such Lender interest on such payment at a rate per annum
equal to the Federal Funds Effective Rate for each of the first three days for
which such payment is so delayed and thereafter at the rate applicable to the
relevant Loan.  The Agent is hereby
authorized to charge the account of the Borrower maintained with JPMorgan Chase
Bank for each payment of principal, interest, Reimbursement Obligations and
fees that the Borrower is obligated to pay as such payment becomes due
hereunder.  Each reference to the Agent
in this Section 2.12 shall also be deemed to refer, and shall apply
equally, to the LC Issuers, in the case of payments required to be made by the
Borrower to the LC Issuers pursuant to Section 2.19.7.


 


2.13         Noteless
Agreement; Evidence of Indebtedness.  (i) 
Each Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower to such Lender resulting
from each Loan made by such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.


 


(i)            The Agent shall also maintain accounts in
which it will record (a) the amount of each Loan made hereunder, the Type
thereof and the Interest Period with respect thereto and the amount of each
Swing Line Loan made hereunder, (b) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender and the Swing Line Lender hereunder, (c) the original stated amount
of each Facility LC and the amount of LC Exposure at any time and (d) the
amount of any sum received by the Agent hereunder from the Borrower and each
Lender’s share thereof and the amount thereof paid to the Swing Line Lender.


 


(ii)           The entries maintained in the accounts
maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the
existence and amounts of the Obligations therein recorded; provided, however, that the failure of the
Agent or any Lender (or the Swing Line Lender) to maintain such accounts or any
error therein shall not in any manner affect the obligation of the Borrower to
repay the Obligations in accordance with their terms.


 


(iii)          Any Lender may request that its Loans be
evidenced by a promissory note in substantially the form of Exhibit D
(a “Note”).  In such event, the Borrower
shall prepare, execute and deliver to such Lender such Note payable to the
order of such Lender.  Thereafter, the
Loans evidenced by such Note and interest thereon shall at all times (prior to
any assignment pursuant to Section 12.1) be represented by one or more
Notes payable to the order of the payee named therein, except to the extent
that any such Lender subsequently returns any such Note for cancellation and
requests that such Loans once again be evidenced as described in paragraphs (i) and
(ii) above.


 


27













 


2.14         Telephonic and
Facsimile Notices.  The Borrower hereby authorizes
the Lenders and the Agent and the Swing Line Lender to extend, convert or
continue Advances and Swing Line Loans, effect selections of Types of Advances
and to transfer funds based on telephonic or facsimile notices made by any
person or persons the Agent or any Lender in good faith believes to be acting
on behalf of the Borrower, it being understood that the foregoing authorization
is specifically intended to allow Borrowing Notices and Conversion/Continuation
Notices to be given telephonically or by facsimile.  The Borrower agrees to deliver promptly to the
Agent a written confirmation, if such confirmation is requested by the Agent or
any Lender or Swing Line Lender, of each telephonic notice signed by an
Authorized Person.  If the written
confirmation differs in any material respect from the action taken by the Agent
and the Lenders or Swing Line Lender, the records of the Agent and the Lenders
or Swing Line Lender shall govern absent manifest error.


 


2.15         Interest Payment
Dates; Interest and Fee Basis.  Interest
accrued on each ABR Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, on any date on which
the ABR Advance is prepaid, whether due to acceleration or otherwise, and on
the Facility Termination Date.  Interest
accrued on that portion of the outstanding principal amount of any ABR Advance
converted into a Eurodollar Advance on a day other than a Payment Date shall be
payable on the Payment Date following the date of such conversion.  Interest accrued on each Eurodollar Advance
shall be payable on the last day of its applicable Interest Period, on any date
on which the Eurodollar Advance is prepaid, whether by acceleration or
otherwise, and at maturity.  Interest
accrued on each Eurodollar Advance having an Interest Period longer than three
months shall also be payable on the last day of each three-month interval
during such Interest Period.  Commitment
Fees and LC Fees and interest on Eurodollar Loans shall be calculated for
actual days elapsed on the basis of a 360-day year; interest on ABR Loans and
Swing Line Loans shall be calculated for actual days elapsed on the basis of a
365-day (or, if applicable, 366-day) year. 
Interest shall be payable for the day an Advance is made but not for the
day of any payment on the amount paid if payment is received prior to 2:00 p.m.
(Central time) in accordance with Section 2.12.  If any payment of principal of or interest on
an Advance or Swing Line Loan shall become due on a day which is not a Business
Day, such payment shall be made on the next succeeding Business Day and, in the
case of a principal payment, such extension of time shall be included in
computing interest in connection with such payment.


 


2.16         Notification of
Advances, Interest Rates, Prepayments and Commitment Reductions. 
Promptly after receipt thereof, the Agent will notify each Lender of the
contents of each Aggregate Commitment reduction notice, Borrowing Notice,
Conversion/Continuation Notice, and repayment notice received by it
hereunder.  Promptly after notice from an
LC Issuer of the issuance or Modification of a Facility LC, the Agent will
notify each Lender of the issuance or Modification of such Facility LC.  The Agent will notify each Lender of the
interest rate applicable to each Eurodollar Advance promptly upon determination
of such interest rate and will give each Lender prompt notice of each change in
the Alternate Base Rate.


 


2.17         Lending
Installations.  Each Lender may book its Revolving Loans and
its participation in any Facility LC, the Swing Line Lender may book the Swing
Line Loans and each LC Issuer may book the Facility LCs at any Lending
Installation selected by such Lender, Swing Line Lender or LC Issuer, as the
case may be, and may change its Lending Installation 


 


28













 


from
time to time.  All terms of this
Agreement shall apply to any such Lending Installation and the Loans, Swing
Line Loans, Facility LCs, participations in Facility LCs and any Notes and the
Swing Line Note issued hereunder shall be deemed held by each Lender, Swing
Line Lender or LC Issuer, as the case may be, for the benefit of any such
Lending Installation.  Each Lender, Swing
Line Lender and LC Issuer may, by written notice to the Agent and the Borrower
in accordance with Article XIII, designate replacement or additional
Lending Installations through which Revolving Loans and Swing Line Loans will
be made by it or Facility LCs will be issued by it and for whose account Loan
payments or payments with respect to Facility LCs are to be made.


 


2.18         Non-Receipt of
Funds by the Agent.  Unless the Borrower or a
Lender, as the case may be, notifies the Agent (i) in the case of the
Borrower, prior to the date on which it is scheduled to make a payment of
principal, interest or fees to the Agent for the account of the Lenders or (ii) in
the case of a Lender, prior to the date on which it is scheduled to make a
Eurodollar Loan or 30 minutes prior to the time at which it is scheduled to
make an ABR Loan, that it does not intend to make such payment, the Agent may
assume that such payment has been made. 
The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such
assumption.  If such Lender or the Borrower,
as the case may be, has not in fact made such payment to the Agent, the
recipient of such payment shall, on demand by the Agent, repay to the Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made available by
the Agent until the date the Agent recovers such amount at a rate per annum
equal to (x) in the case of payment by a Lender, the Federal Funds
Effective Rate for such day for the first three days and, thereafter, the
interest rate applicable to the relevant Loan or (y) in the case of
payment by the Borrower, the interest rate applicable to the relevant Loan.


 


2.19         Facility LCs.


 


2.19.1      Issuance. 
Each LC Issuer hereby agrees, on the terms and conditions set forth in
this Agreement, to issue standby Letters of Credit (each such Letter of Credit
and each Existing LC, a “Facility LC”) and to renew, extend, increase, decrease
or otherwise modify each Facility LC (“Modify,” and each such action a “Modification”),
from time to time from and including the date of this Agreement and prior to
the Facility Termination Date upon the request of the Borrower; provided that immediately after each such
Facility LC is issued or Modified, (i) the aggregate amount of the LC
Exposure shall not exceed $600,000,000, (ii) the Aggregate Credit Exposure
shall not exceed the Aggregate Commitment and (iii) if the Facility
Termination Date shall have been extended pursuant to Section 2.20 with
respect to some but not all of the Lenders, (A) the Aggregate Credit
Exposure, less the portion of the LC Exposure attributable to Facility LCs
expiring after the applicable Rejecting Lender’s Facility Termination Date,
shall not exceed (B) the amount to which the Aggregate Commitment would be
reduced upon such Rejecting Lender’s Facility Termination Date and provided, further, that with
respect to each Modification (other than an increase or extension), the
beneficiary under such Facility LC shall have consented in writing
thereto.  No Facility LC shall have an
expiry date later than the Facility Termination Date.


 


29












 


2.19.2      Participations.  Upon the issuance or Modification by the LC
Issuer of a Facility LC in accordance with this Section 2.19 (or, in the
case of the Existing LC, on the Closing Date), the applicable LC Issuer shall
be deemed, without further action by any party hereto, to have unconditionally
and irrevocably sold to each Lender, and each Lender shall be deemed, without
further action by any party hereto, to have unconditionally and irrevocably
purchased from such LC Issuer, a participation in such Facility LC (and each
Modification thereof) and the related LC Exposure in proportion to its Pro Rata
Share.


 


2.19.3      Notice.  Subject to Section 2.19.1, the Borrower
shall give the applicable LC Issuer notice from an Authorized Person prior to
noon (Central time) at least two (2) Business Days (or such lesser period
to which an LC Issuer may agree) prior to the proposed date of issuance or
Modification of each Facility LC, specifying the beneficiary, the proposed date
of issuance (or Modification) and the expiry date of such Facility LC, and
describing the proposed terms of such Facility LC and the nature of the
transactions proposed to be supported thereby. 
Upon receipt of such notice, such LC Issuer shall promptly notify the
Agent.  Upon issuance of such Facility
LC, the LC Issuer shall promptly notify the Agent and the Agent shall promptly
notify each Lender of the issuance of such Facility LC and of the amount of
such Lender’s participation in such Facility LC.  The issuance, renewal, extension or increase
by an LC Issuer of any Facility LC shall be subject to the conditions precedent
set forth in Article IV (the satisfaction of which the LC Issuer shall
have no duty to ascertain).  The issuance
or Modification by an LC Issuer of any Facility LC shall also be subject to the
conditions precedent that such Facility LC shall be satisfactory to the LC
Issuer and that the Borrower shall have executed and delivered such application
agreement and/or such other instruments and agreements relating to such
Facility LC as the LC Issuer shall have reasonably requested (each, a “Facility
LC Application”).  In the event of any
conflict between the terms of this Agreement and the terms of any Facility LC
Application, the terms of this Agreement shall control.  The LC Issuer shall not issue, renew, extend
or increase any Facility LC hereunder if it has received written notice from
the Agent, the Borrower or the Required Lenders, prior to the requested date of
issuance, renewal, extension or increase of the applicable Facility LC, that
one or more applicable conditions contained in Section 4.2 shall not be
satisfied.


 


2.19.4      Compensation for
Facility LCs.  The Borrower
agrees to pay to the Agent, in the case of each Facility LC, a fee (the “LC Fee”)
therefor, in an amount per annum equal to the Applicable Margin on the amount
of such Facility LC, payable quarterly in arrears not later than five (5) Business
Days following the Agent’s delivery to Borrower of the quarterly statement
specifying the amount of the LC Fees properly due and payable hereunder with
respect to the preceding calendar quarter (each date on which such payment is
due being herein referred to as a “Quarterly Payment Date”) and on the Facility
Termination Date (which payment shall be in the amount of all accrued and
unpaid Facility LC Fees).  LC Fees shall
be calculated, on a pro rata basis for the period to which such payment
applies, for actual days on which such Facility LC was outstanding during such
period, on the basis of a 360-day year. 
The Agent shall, with reasonable promptness following receipt from all
LC Issuers of the reports provided for in Section 2.19.5 for the months of
March, June, September and December, respectively, 


 


30













 


deliver to the Borrower a
quarterly statement of the LC Fees then due and payable.  The Agent shall promptly remit such LC Fees,
when received by the Agent, as follows:  (i) to
each LC Issuer, solely for its own account, with respect to each Facility LC
issued by such LC Issuer, an amount per annum equal to the product of (A) 0.125%
per annum and (B) the face amount of such Facility LC and (ii) to all
Lenders, ratably, the balance of such LC Fees. 
LC Fees shall be payable hereunder with respect to the Existing LCs from
and after the Closing Date.  Each LC
Issuer shall also have the right to charge the Borrower, solely for such LC
Issuer’s own account, customary processing fees, charges and expenses of
issuing and servicing Facility LCs.


 


2.19.5      LC Issuer
Reporting Requirements.  Each
LC Issuer shall, no later than the third (3rd)
Business Day following the last day of each month, provide to the Agent a
schedule of the Facility LCs issued by it showing the issuance date, account
party, original face amount, amount (if any) paid thereunder, expiration date
and the reference number of each Facility LC outstanding at any time during
such month (and indicating, with respect to each Facility LC, whether it is a
Financial LC or a Performance LC) and the aggregate amount (if any) payable by
the Borrower to such LC Issuer during the month pursuant to Sections 3.1 and
3.2.  Copies of such reports shall be
provided promptly to each Lender by the Agent. 
The reporting requirements hereunder are in addition to those set forth
in Section 2.19.3.


 


2.19.6      Administration;
Reimbursement by Lenders. 
Upon receipt by an LC Issuer from the beneficiary of any Facility LC of
any demand for payment under such Facility LC, such LC Issuer shall notify the
Agent and the Agent shall promptly notify the Borrower and each other Lender as
to the amount to be paid by such LC Issuer as a result of such demand and the
proposed payment date (the “LC Payment Date”). 
The responsibility of the LC Issuer to the Borrower and each Lender
shall be only to determine that the documents (including each demand for
payment) delivered under each Facility LC in connection with such presentment
shall be in conformity in all material respects with such Facility LC.  Each LC Issuer shall endeavor to exercise the
same care in the issuance and administration of the Facility LCs issued by it
as it does with respect to letters of credit in which no participations are
granted, it being understood that in the absence of any gross negligence or
willful misconduct by an LC Issuer, each Lender shall be unconditionally and
irrevocably liable without regard to the occurrence of any Default or any
condition precedent whatsoever, to reimburse such LC Issuer on demand for (i) such
Lender’s Pro Rata Share of the amount of each payment made by such LC Issuer
under each Facility LC to the extent such amount is not reimbursed by the
Borrower pursuant to Section 2.19.7 below, plus (ii) interest on the
foregoing amount to be reimbursed by such Lender, for each day from the date of
such LC Issuer’s demand for such reimbursement (or, if such demand is made
after 11:00 a.m. (Central time) on such date, from the next succeeding
Business Day) to the date on which such Lender pays the amount to be reimbursed
by it, at a rate of interest per annum equal to the Federal Funds Effective
Rate for the first three days and, thereafter, at the Alternate Base Rate.


 


2.19.7      Reimbursement by
Borrower.  The Borrower shall
be irrevocably and unconditionally obligated to reimburse each LC Issuer on or
before the applicable LC Payment Date for any amounts to be paid by such LC
Issuer upon any drawing under any 


 


31













 


Facility LC, without
presentment, demand, protest or other formalities of any kind; provided that neither the
Borrower nor any Lender shall hereby be precluded from asserting any claim for
direct (but not consequential) damages suffered by the Borrower or such Lender
to the extent, but only to the extent, caused by (i) the willful
misconduct or gross negligence of such LC Issuer in determining whether a
request presented under any Facility LC issued by it complied with the terms of
such Facility LC or (ii) such LC Issuer’s failure to pay under any
Facility LC issued by it after the presentation to it of a request strictly complying
with the terms and conditions of such Facility LC.  All such amounts paid by an LC Issuer and
remaining unpaid by the Borrower shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to (x) the Alternate Base
Rate for such day if such day falls on or before the applicable LC Payment Date
and (y) the sum of 2% plus the Alternate Base Rate for such day if such
day falls after such LC Payment Date. 
Each LC Issuer will pay to each Lender ratably in accordance with its Pro
Rata Share all amounts received by it from the Borrower for application in
payment, in whole or in part, of the Reimbursement Obligation in respect of any
Facility LC issued by such LC Issuer, but only to the extent such Lender has
made payment to such LC Issuer in respect of such Facility LC pursuant to Section 2.19.6.  Subject to the terms and conditions of this
Agreement (including without limitation the submission of a Borrowing Notice in
compliance with Section 2.8 and the satisfaction of the applicable
conditions precedent set forth in Article IV), the Borrower may request an
Advance hereunder for the purpose of satisfying any Reimbursement Obligation.


 


2.19.8      Obligations
Absolute.  The Borrower’s
obligations under this Section 2.19 shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against any LC
Issuer, any Lender or any beneficiary of a Facility LC.  The Borrower further agrees with each LC
Issuer and each Lender that the LC Issuers and the Lenders shall not be
responsible for, and the Borrower’s Reimbursement Obligation in respect of any
Facility LC shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even if such documents
should in fact prove to be in any or all respects invalid, fraudulent or
forged, or any dispute between or among the Borrower, any of its Affiliates,
the beneficiary of any Facility LC or any financing institution or other party
to whom any Facility LC may be transferred or any claims or defenses whatsoever
of the Borrower or of any of its Affiliates against the beneficiary of any
Facility LC or any such transferee.  No
LC Issuer shall be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Facility LC.  The Borrower agrees that any action taken or
omitted by any LC Issuer or Lender under or in connection with each Facility LC
and the related drafts and documents, if done without gross negligence or
willful misconduct, shall be binding upon the Borrower and shall not put any LC
Issuer or Lender under any liability to the Borrower.  Nothing in this Section 2.19.8 is
intended to limit the right of the Borrower to make a claim against an LC
Issuer for damages as contemplated by the proviso to the first sentence of Section 2.19.7.


 


2.19.9      Actions of LC
Issuer.  Each LC Issuer shall
be entitled to rely, and shall be fully protected in relying, upon any Facility
LC, draft, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype 


 


32













 


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
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 any such action. 
Notwithstanding any other provision of this Section 2.19, 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 LC.


 


2.19.10        Indemnification.  The Borrower hereby agrees to indemnify and
hold harmless each Lender, each LC Issuer and the Agent, and their respective
directors, officers, agents and employees from and against any and all claims
and damages, losses, liabilities, costs or expenses which such Lender, such LC
Issuer or the Agent may incur (or which may be claimed against such Lender,
such LC Issuer or the Agent by any Person whatsoever) by reason of or in
connection with the issuance, execution and delivery or transfer of or payment
or failure to pay under any Facility LC or any actual or proposed use of any
Facility LC, including, without limitation, any claims, damages, losses, liabilities,
costs or expenses which such LC Issuer may incur by reason of or in connection
with (i) the failure of any other Lender to fulfill or comply with its
obligations to such LC Issuer hereunder (but nothing herein contained shall
affect any rights the Borrower may have against any defaulting Lender) or (ii) by
reason of or on account of such LC Issuer issuing any Facility LC which
specifies that the term “Beneficiary” included therein includes any successor
by operation of law of the named Beneficiary, but which Facility LC does not
require that any drawing by any such successor Beneficiary be accompanied by a
copy of a legal document, satisfactory to such LC Issuer, evidencing the
appointment of such successor Beneficiary; provided
that the Borrower shall not be required to indemnify any Lender, LC Issuer or
the Agent for any claims, damages, losses, liabilities, costs or expenses to
the extent, but only to the extent, caused by (x) the willful misconduct
or gross negligence of such LC Issuer in determining whether a request
presented under any Facility LC complied with the terms of such Facility LC or (y) such
LC Issuer’s failure to pay under any Facility LC after the presentation to it
of a request strictly complying with the terms and conditions of such Facility
LC.  Nothing in this Section 2.19.10
is intended to limit the obligations of the Borrower under any other provision
of this Agreement.


 


2.19.11    Lenders’
Indemnification.  Each Lender
shall, ratably in accordance with its Pro Rata Share, indemnify each LC Issuer,
its affiliates and their respective directors, officers, agents and employees
(to the extent not reimbursed by the Borrower but without limiting any
obligation of the Borrower to do so) against any cost, expense (including
reasonable counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees’ gross negligence or
willful misconduct or such LC Issuer’s failure to pay under any Facility LC
after the presentation 


 


33













 


to it of a request
strictly complying with the terms and conditions of the Facility LC) that such
indemnitees may suffer or incur in connection with this Section 2.19 or
any action taken or omitted by such indemnitees hereunder.


 


2.19.12    Cash Collateralization.  If any Default shall have occurred and be
continuing, on the Business Day that the Borrower receives written notice from
the Agent or the Required Lenders demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account (the “Facility
LC Collateral Account”) with the Agent, in the name of the Agent and for the
ratable benefit of the Lenders and the benefit of the LC Issuers (as
applicable), an amount in cash equal to the LC Exposure as of such date plus
any accrued and unpaid interest thereon; provided that the obligation to
deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other notice
of any kind, upon the occurrence of a Default with respect to the Borrower
described in Section 7.6 or 7.7. 
Such deposit shall be held by the Agent as collateral for the payment
and performance of the Obligations.  The
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over the Facility LC Collateral Account.  The Agent will invest any funds on deposit
from time to time in the Facility LC Collateral Account in certificates of
deposit of JPMorgan Chase Bank having a maturity not exceeding 30 days.  Interest or profits, if any, on such
investments shall accumulate in such account. 
Moneys in the Facility LC Collateral Account shall be applied by the
Agent to reimburse each LC Issuer for Reimbursement Obligations for which it
has not been reimbursed and, to the extent not so applied, shall be held for
the satisfaction of the LC Exposure at such time or, if the maturity of the
Loans has been accelerated, be applied to satisfy other obligations of the
Borrower under this Agreement.  If the
Borrower is required to provide an amount of cash collateral hereunder as a
result of the occurrence of a Default, such amount (to the extent not applied
as aforesaid) shall be returned to the Borrower within three Business Days
after all Defaults have been cured or waived.


 


2.19.13    Rights as a Lender.  In its capacity as a Lender, each LC Issuer
shall have the same rights and obligations as any other Lender.


 


2.20         Extension of Facility Termination Date.  (a)  Not more than once in any fiscal
year of the Borrower, the Borrower may request an extension of the Facility
Termination Date to a date not later than the fifth (5th) anniversary of the date of such request by
submitting a request for an extension (the “Extension Request”) to the Agent
not less than 180 days prior to the then scheduled Facility Termination
Date.  Promptly upon (but not later than
five Business Days after) the Agent’s receipt and approval of the Extension
Request, the 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 Pro Rata Shares equal or exceed 66-2/3% in
the aggregate is received by the Agent within such 60-day period and provided
that, on the last day of such 60-day period, no Default exists and the
representations and warranties contained in Article V and in the Guaranty
are true and correct except to the extent any such representation or warranty
is stated to relate solely to an earlier date, in which case such
representation or warranty shall have been true and 


 


34













 


correct
on and as of such earlier date, then the Facility Termination Date shall be
extended as specified in the Extension Request but only with respect to the
Lenders that have given their written approval. 
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 2.21, the Loans and all interest thereon, fees and other
Obligations owed to such Rejecting Lender shall be paid in full on the Facility
Termination Date as determined prior to such Extension Request (the “Rejecting
Lender’s Facility Termination Date”), and Borrower shall make such additional
payments (if any) of the Loan as are necessary to cause the Aggregate Credit
Exposure not to exceed the Aggregate Commitment (as reduced) on any Rejecting
Lender’s Termination Date.


 


(a)           If
Lenders whose Pro Rata Shares equal or exceed 66-2/3% in the aggregate approve
the Extension Request, the Borrower, upon notice to the Agent and any Rejecting
Lender, may, subject to the provisions of the last sentence of Section 2.20(c),
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 2.21),
which termination shall occur as of a date set forth in such 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 2.20(c).


 


(b)           If
the Borrower elects to terminate a Commitment of a Rejecting Lender as provided
in Section 2.20(b), the Borrower shall pay to the Rejecting Lender 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 3.1 and
3.2 and the Reimbursement Obligations, Commitment Fees and LC Fees payable to
such Rejecting Lender.  Upon request by
the Borrower or the Agent, the Rejecting Lender will deliver to the Borrower
and the 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, the 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
2.19.10, 2.19.11, 2.19.12, 3.1, 3.2, 3.4, 3.5, 6.8(c), 9.6, 9.10 and this Section 2.20(c),
as well as to any fees accrued for its account hereunder not yet paid, and
shall continue to be obligated under Section 10.8 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
Eurodollar Loan occurs on a day which is not the last day of the applicable
Interest Period, the Borrower shall pay to the Agent for the benefit of the
Lenders (including any Rejecting Lender) any loss or cost incurred by the
Lenders (including any Rejecting Lender) resulting therefrom in accordance with
Section 3.4.  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 last
sentence of this Section 2.20(c)), without recourse or warranty, from the
Rejecting Lender, an undivided interest and participation in any Facility LC
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 


 


35













 


interest in each Facility LC in proportion to the ratio that such
Rejecting 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
Aggregate Credit Exposure would exceed the Aggregate Commitment (as reduced),
the Borrower may not terminate such Rejecting Lender’s Commitment unless the
Borrower, on or prior to the effective date of such termination, prepays, in
accordance with the provisions of this Agreement, outstanding Advances or Swing
Line Loans or causes to be canceled, released and returned to the applicable LC
Issuer outstanding Facility LCs or deposits cash into the Facility LC
Collateral Account in sufficient amounts in the aggregate such that, on the
effective date of such termination, the Aggregate Credit Exposure, less the amounts held in the
Facility LC Collateral Account, does not exceed the Aggregate Commitment (as
reduced).  In the event that the Borrower
makes such deposit into the Facility LC Collateral Account, such deposits shall
be applied by the Agent to pay to the applicable LC Issuer amounts drawn on any
Facility LC that are not reimbursed by the Borrower and, provided no Default
has occurred that is continuing, shall be returned to the Borrower when the
Aggregate Credit Exposure equals or is less than the Aggregate Commitment.


 


2.21         Replacement of
Lender.  (a)  If the Borrower is
required pursuant to Section 3.1, 3.2 or 3.5 to make any additional
payment to any Lender or if any Lender’s obligation to make or continue, or to
convert ABR Loans into, Eurodollar Loans shall be suspended pursuant to Section 3.3
or a Lender is a Rejecting Lender (any Lender so affected, an “Affected Lender”),
the Borrower may elect, if such amounts continue to be charged or such
suspension is still effective or if such Affected Lender is a Rejecting Lender,
to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or
Unmatured Default shall have occurred and be continuing at the time of such
replacement, and provided  further that, concurrently with
such replacement, (i) another bank or other entity which is reasonably
satisfactory to the Borrower and the Agent shall agree, as of such date, to
purchase for cash the Loans and other Obligations due to the Affected Lender
pursuant to an Assignment and Assumption and to become a Lender for all
purposes under this Agreement and to assume all obligations of the Affected
Lender to be terminated as of such date and to comply with the requirements of Section 12.1
applicable to assignments (such bank or other entity, a “Replacement Lender”),
and (ii) the Borrower shall pay to such Affected Lender in same day funds
on the day of such replacement (A) all interest, fees and other amounts
then accrued but unpaid to such Affected Lender by the Borrower hereunder to
and including the date of termination, including without limitation payments
due to such Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an
amount, if any, equal to the payment which would have been due to such Lender
on the day of such replacement under Section 3.4 had the Loans of such
Affected Lender been prepaid on such date rather than sold to the Replacement
Lender.  Upon replacement of such
Affected Lender and payment of the amounts provided for in the immediately
preceding sentence, the Borrower shall have no further obligations to such
Affected Lender under this Agreement and such Affected Lender shall cease to be
a Lender, provided, however, such Affected Lender shall continue to be
entitled to the benefits of Sections 2.19.10, 2.19.11, 2.19.12, 3.1, 3.2, 3.4,
3.5, 6.8(c), 9.6 and 9.10, as well as to any fees accrued for its account
hereunder and not yet paid, and shall continue to be obligated under Section 10.8
with respect to obligations and liabilities accruing prior to such Affected
Lender’s replacement.


 


36













 


(b)           In the event that the Affected Lender
is a Rejecting Lender, the Borrower may elect to have a part of the Rejecting
Lender’s rights and obligations under this Agreement and the other Loan
Documents assigned pursuant to this Section 2.21, provided that the
Borrower also elects, pursuant to Section 2.20(b) to terminate the
entire amount of such Rejecting Lender’s Commitment not so assigned, which
termination shall be effective on the date on which such assignment of the
Rejecting Lender’s rights and obligations is consummated under this Section 2.21.


 


2.22         Swing Line.  (a)  The Swing Line Lender agrees, on
the terms and conditions hereinafter set forth, to make loans (“Swing Line
Loans”) to the Borrower from time to time during the period from the date of
this Agreement, up to but not including the Facility Termination Date, in an
aggregate principal amount not to exceed at any time outstanding the lesser of (i) the
Swing Line Commitment or (ii) the amount by which the Aggregate Commitment
exceeds the Aggregate Credit Exposure. 
The Swing Line Loan shall be evidenced by a note in the form of Exhibit F
hereto (the “Swing Line Note”).  Swing
Line Loans shall bear interest at the Alternate Base Rate, which interest shall
be payable monthly on each Payment Date.


 


(b)           Each
Swing Line Loan which shall not utilize the Swing Line Commitment in full shall
be in an amount not less than One Million Dollars ($1,000,000) and, if in
excess thereof, in integral multiples of One Hundred Thousand Dollars
($100,000).  Within the limits of the
Swing Line Commitment, the Borrower may borrow, repay and reborrow under this Section 2.22.


 


(c)           The
Borrower shall give the Swing Line Lender notice of any request for a Swing
Line Loan not later than 3:00 p.m. (Central time) on the Business Day of
such Swing Line Loan, specifying the amount of such requested Swing Line
Loan.  All notices given by the Borrower
under this Section 2.22(c) shall be irrevocable.  Upon fulfillment of the applicable conditions
set forth in Article IV, the Swing Line Lender will make the Swing Line
Loan available to the Borrower in immediately available funds by crediting the
amount thereof to the Borrower’s account with the Swing Line Lender, provided, however, that the Swing Line Lender shall not make
a Swing Line Loan hereunder if it has received written notice from the Agent,
the Borrower or the Required Lenders, prior to the requested date of such Swing
Line Loan, that one or more applicable conditions contained in Section 4.2
shall not be satisfied.


 


(d)           Each
Swing Line Loan shall be paid in full on or before the fifth (5th) Business Day following the making of such Swing Line
Loan.  Payment of a Swing Line Loan may
be effected by an Advance pursuant to Section 2.8.  If such Swing Line Loan is not paid in full
by the fifth (5th) Business Day following the making of
such Swing Line Loan, it shall be paid from the proceeds of an Advance made by
the close of the next Business Day pursuant to Section 2.8, which Advance
shall be made by the Lenders upon request by the Agent without regard to
whether a Borrowing Notice is delivered or the conditions to such Advance under
Section 4.2 are satisfied (provided the conditions to the making of such
Swing Line Loan were satisfied).  If for
any reason such Advance cannot be made, the Lenders shall, upon notice from the
Agent, purchase (without recourse or warranty) participations equal to their Pro
Rata Shares of such Swing Line Loan.


 


37













 


ARTICLE III


 


YIELD PROTECTION;
TAXES


 


3.1           Yield Protection. 
If any Change in Law:


 


(i)                                     subjects any Lender or LC Issuer or any
applicable Lending Installation to any Taxes, or changes the basis of taxation
of payments (other than with respect to Excluded Taxes) to any Lender or LC
Issuer in respect of its Eurodollar Loans, Facility LCs or participations
therein, or


 


(ii)                                  imposes or increases or deems applicable
any reserve, assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender or LC Issuer or any applicable Lending Installation
(other than reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Advances or ABR Advances, as
applicable), or


 


(iii)                               imposes on such Lender or LC Issuer or
any applicable Lending Installation any other condition,


 


and
the result of any of the foregoing is to increase the cost to such Lender or LC
Issuer or applicable Lending Installation, as the case may be, of making or
maintaining its Eurodollar Loans or Commitment or of issuing or participating
in Facility LCs or to reduce the return received or receivable by such Lender
or LC Issuer or applicable Lending Installation, as the case may be, in
connection with such Eurodollar Loans, or Commitment, or Facility LCs or
participations therein, then, within 15 days of demand by such Lender or LC Issuer,
as the case may be, the Borrower shall pay such Lender or LC Issuer, as the
case may be, such additional amount or amounts as will compensate such Lender
or LC Issuer, as the case may be, for such increased cost or reduction in
amount received.


 


3.2           Changes in Capital Adequacy Regulations.  If any Lender or LC Issuer determines that
any Change in Law regarding capital requirements has or would have the effect
of reducing the rate of return on such Lender’s or LC Issuer’s capital or on
the capital of such Lender’s or LC Issuer’s holding company, if any, as a
consequence of this Agreement or the Loans made or maintained by, or
participations in Facility LCs held by, such Lender, or the Facility LCs issued
by such LC Issuer, to a level below that which such Lender or LC Issuer or such
Lender’s or LC Issuer’s holding company could have achieved but for such Change
in Law (taking into consideration such Lender’s or LC Issuer’s policies and the
policies of such Lender’s or LC Issuer’s holding company with respect to
capital adequacy), then from time to time the Borrower will pay to such Lender
or LC Issuer, as the case may be, such additional amount or amounts as will
compensate such Lender or LC Issuer or such Lender’s or LC Issuer’s holding
company for any such reduction suffered. 
The Borrower shall not be required to compensate any Lender pursuant to
this paragraph for any amounts incurred more than 90 days prior to the date
such Lender notifies the Borrower in writing of such Lender’s intention to
claim compensation therefor; provided, however, that if the circumstances giving rise to such claim have a
retroactive effect, then such 90-day period shall be extended to include the
period of such retroactive effect.


 


38












 


3.3           Availability of
Types of Advances.  If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (i) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to Eurodollar Advances does
not accurately reflect the cost of making or maintaining Eurodollar Advances,
then the Agent shall suspend the availability of Eurodollar Advances until the
Lender notifies the Agent and the Borrower that the circumstances giving rise
to such determination no longer exist, and require any affected Eurodollar Advances
to be repaid or converted to ABR Advances, subject to the payment of any
funding indemnification amounts required by Section 3.4, either on the
last day of the Interest Period thereof, if such Lender may lawfully continue
to maintain such Eurodollar Loans, or immediately, if such Lender may not
lawfully continue to maintain such Eurodollar Loans.


 


3.4           Funding Indemnification.  In the event
of (a) the payment of any principal of any Eurodollar Loan other than on
the last day of an Interest Period applicable thereto (including as a result of
a Default), (b) the conversion of any Eurodollar Loan other than on the
last day of the Interest Period applicable thereto, (c) the failure to
borrow, convert, continue or prepay any Eurodollar Loan on the date specified
in any notice delivered pursuant hereto, or (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of an election by the Borrower pursuant to Section 2.20,
then, in any such event, the Borrower shall compensate each Lender for the
loss, cost and expense attributable to such event.  Such loss, cost or expense to any Lender
shall be deemed to include an amount determined by such Lender to be the excess,
if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted LIBO
Rate that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefor (or,
in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), over (ii) the amount
of interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement
of such period, for dollar deposits of a comparable amount and period from
other banks in the eurodollar market.


 


3.5           Taxes.  (i) 
All payments by the Borrower to or for the account of any Lender, LC Issuer or
the Agent hereunder or under any Note or Facility LC Application shall be made
free and clear of and without deduction for any and all Taxes.  If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender,
LC Issuer or the Agent, (a) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 3.5) such Lender,
LC Issuer or the Agent (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (b) the Borrower
shall make such deductions, (c) the Borrower shall pay the full amount
deducted to the relevant authority in accordance with applicable law and (d) the
Borrower shall furnish to the Agent the original copy of a receipt evidencing
payment thereof within 30 days after such payment is made.


 


(i)            In addition,
the Borrower hereby agrees to pay any present or future stamp or documentary
taxes and any other excise or property taxes, charges or similar levies which
arise 


 


39













 


from any
payment made hereunder or under any Note or Facility LC Application or from the
execution or delivery of, or otherwise with respect to, this Agreement or any
Note or Facility LC Application (“Other Taxes”).


 


(ii)           The Borrower
hereby agrees to indemnify the Agent and each Lender and LC Issuer for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed on amounts payable under this Section 3.5) paid by the
Agent or such Lender or LC Issuer as a result of its Commitment, any Loans made
by it hereunder, or otherwise in connection with its participation in this
Agreement and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. 
Payments due under this indemnification shall be made within 30 days of
the date the Agent or such Lender or LC Issuer makes demand therefor pursuant
to Section 3.6.


 


(iii)          Each Lender
that is not incorporated under the laws of the United States of America or a
state thereof (each a “Non-U.S. Lender”) agrees that it will, not more than ten
Business Days after the date of this Agreement, (i) deliver to the Agent
two duly completed copies of United States Internal Revenue Service Form W-8BEN
or W-8ECI, certifying in either case that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, and (ii) deliver to the Agent a United States
Internal Revenue Form W-8 or W-9, as the case may be, and certify that it
is entitled to an exemption from United States backup withholding tax.  Each Non-U.S. Lender further undertakes to
deliver to each of the Borrower and the Agent (x) renewals or additional
copies of such form (or any successor form) on or before the date that such
form expires or becomes obsolete, and (y) after the occurrence of any
event requiring a change in the most recent forms so delivered by it, such
additional forms or amendments thereto as may be reasonably requested by the
Borrower or the Agent.  All forms or
amendments described in the preceding sentence shall certify that such Lender
is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form or amendment with
respect to it and such Lender advises the Borrower and the Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax.


 


(iv)          For any
period during which a Non-U.S. Lender has failed to provide the Borrower with
an appropriate form pursuant to clause (iv), above (unless such failure is due
to a change in treaty, law or regulation, or any change in the interpretation
or administration thereof by any governmental authority, occurring subsequent
to the date on which a form originally was required to be provided), such
Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5
with respect to Taxes imposed by the United States; provided that, should a
Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of
withholding tax become subject to Taxes because of its failure to deliver a
form required under clause (iv), above, the Borrower shall take such steps as
such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to
recover such Taxes.


 


(v)           Any Lender that
is entitled to an exemption from or reduction of withholding tax with respect
to payments under this Agreement or any Note pursuant to the law of any
relevant 


 


40













 


jurisdiction
or any treaty shall deliver to the Borrower (with a copy to the Agent), at the
time or times prescribed by applicable law, such properly completed and
executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate.


 


(vi)          If the U.S.
Internal Revenue Service or any other governmental authority of the United
States or any other country or any political subdivision thereof asserts a
claim that the Agent did not properly withhold tax from amounts paid to or for
the account of any Lender (because the appropriate form was not delivered or
properly completed, because such Lender failed to notify the Agent of a change
in circumstances which rendered its exemption from withholding ineffective, or
for any other reason), such Lender shall indemnify the Agent fully for all
amounts paid, directly or indirectly, by the Agent as tax, withholding
therefor, or otherwise, including penalties and interest, and including taxes
imposed by any jurisdiction on amounts payable to the Agent under this
subsection, together with all costs and expenses related thereto (including
attorneys fees and time charges of attorneys for the Agent, which attorneys may
be employees of the Agent).  The
obligations of the Lenders under this Section 3.5(vii) shall survive
the payment of the Obligations and termination of this Agreement.


 


3.6           Lender
Statements; Survival of Indemnity.  To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Eurodollar Loans to reduce any liability of
the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the
unavailability of Eurodollar Advances under Section 3.3, so long as such
designation is not, in the judgment of such Lender, disadvantageous to such
Lender.  Each Lender shall deliver a
written statement of such Lender to the Borrower (with a copy to the Agent) as
to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5.  Such written statement shall set forth in
reasonable detail the calculations upon which such Lender determined such
amount and shall be final, conclusive and binding on the Borrower in the
absence of manifest error.  Determination
of amounts payable under such Sections in connection with a Eurodollar Loan
shall be calculated as though each Lender funded its Eurodollar Loan through
the purchase of a deposit of the type and maturity corresponding to the deposit
used as a reference in determining the Adjusted LIBO Rate applicable to such
Loan, whether in fact that is the case or not. 
Unless otherwise provided herein, the amount specified in the written
statement of any Lender shall be payable on demand after receipt by the
Borrower of such written statement.  The
obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive
payment of the Obligations and termination of this Agreement.


 


ARTICLE IV


 


CONDITIONS
PRECEDENT


 


4.1           Initial Credit
Extension.  The Lenders shall not be required to make the
initial Credit Extension hereunder unless the Borrower has furnished to the
Agent with sufficient copies for the Lenders:


 


(i)            Copies of the articles or certificate of incorporation
of the Borrower, together with all amendments thereto, and a certificate of
good standing of the Borrower, each certified by the appropriate governmental
officer in its 


 


41













 


jurisdiction of
incorporation; any other information required by Section 326 of the USA
PATRIOT ACT or necessary for the Agent or any Lender to verify the identity of
Borrower as required by Section 326 of the USA PATRIOT ACT; and such
comparable documents as Agent may require with respect to the Guarantors.


 


(ii)           Copies, certified by the Secretary or Assistant
Secretary of the Borrower, of its by-laws and of its Board of Directors’ resolutions
and of resolutions or actions of any other body authorizing the execution of
the Loan Documents to which the Borrower is a party and copies, certified by
the Secretary, Assistant Secretary or comparable officer of each Guarantor of
the Board of Directors’ resolutions and of resolutions or actions of any other
party authorizing the execution of the Guaranty.


 


(iii)          An incumbency certificate, executed by the Secretary
or Assistant Secretary of the Borrower, which shall identify by name and title
and bear the signatures of the Responsible Officials and any other officers of
the Borrower authorized to sign the Loan Documents to which the Borrower is a
party, upon which certificate the Agent and the Lenders shall be entitled to
rely until informed of any change in writing by the Borrower; and such
comparable certificates as Agent may require with respect to the Guarantors.


 


(iv)          A certificate, signed by the chief financial officer
of the Borrower, stating that on the initial Credit Extension Date no Default
or Unmatured Default has occurred and is continuing.


 


(v)           Written opinions of the Borrower’s and Guarantor’s
counsel, addressed to the Lenders in substantially the forms of Exhibits G-1
and G-2.


 


(vi)          The Swing Line Note and any Notes requested by a Lender
pursuant to Section 2.13 payable to the order of each such requesting
Lender.


 


(vii)         Evidence satisfactory to the Agent that all
Indebtedness (other than the Existing LCs) under the Existing Credit Agreement
shall have been simultaneously paid in full and the Existing Credit Agreement
shall have been terminated.


 


(viii)        Such other documents as the Agent or its counsel may
have reasonably requested.


 


4.2           Each Credit
Extension.  The Lenders, LC Issuer and Swing Line Lender
shall not be required to make any Credit Extension unless on the applicable
Credit Extension Date:


 


(i)            There exists no Default or Unmatured Default.


 


(ii)           The representations and warranties contained in Article V
and in the Guaranty are true and correct as of such Credit Extension Date
except to 


 


42













 


the extent any such
representation or warranty is stated to relate solely to an earlier date, in
which case such representation or warranty shall have been true and correct on
and as of such earlier date.


 


Each Borrowing Notice with respect to each such
Advance or request for issuance or Modification (other than a Modification that
does not increase the amount or extend the expiry date) of a Facility LC or
request for a Swing Line Loan shall constitute a representation and warranty by
the Borrower that the conditions contained in Sections 4.2(i) and (ii) have
been satisfied.  Notwithstanding the
foregoing, in the case of a Loan (provided for in Section 2.22(d)) made to
repay a Swing Line Loan, the satisfaction of the foregoing conditions with
respect to such Swing Line Loan shall constitute satisfaction of such
conditions with respect to the Loan to be made to repay such Swing Line Loan as
provided for in Section 2.22(d).


 


ARTICLE V


 


REPRESENTATIONS
AND WARRANTIES


 


The Borrower represents and warrants to the Lenders
that:


 


5.1           Incorporation,
Qualification, Powers and Capital Stock.  The Borrower
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Maryland.  The
Borrower is duly qualified to do business as, and is in good standing as, a
foreign corporation in each jurisdiction in which the conduct of its business
or the ownership or leasing of its properties makes such qualification
necessary except where the failure to do so would not reasonably be expected to
have a Material Adverse Effect.  The
Borrower has all requisite power and authority to conduct its business and to
own and lease its properties.


 


5.2           Execution,
Delivery and Performance of Loan Documents.


 


(a)           The Borrower has all requisite corporate
power and authority to execute and deliver, and to perform all of its
obligations under, the Loan Documents to which it is a party.


 


(b)           Each Guarantor has all requisite
corporate, partnership or limited liability company power and authority to
execute and deliver, and to perform all of its obligations under, the Guaranty.


 


(c)           The execution and delivery by the
Borrower of, and the performance by the Borrower of each of its obligations
under, each Loan Document to which it is a party and the execution and delivery
by each Guarantor of, and the performance by each Guarantor of each of its
obligations under, the Guaranty, have been duly authorized by all necessary
action and do not and will not:  (1) require
any consent or approval not heretofore obtained of any stockholder, security
holder or creditor of the Borrower, any Subsidiary or any Guarantor; (2) violate
any provision of the articles or certificate of incorporation or formation or
bylaws, partnership agreement or operating agreement of the Borrower or any
Guarantor or any provision of the articles or certificate of incorporation or
formation, bylaws or partnership agreement or operating agreement of any
Subsidiary; (3) result in or require the creation or imposition of any
Lien, claim or encumbrance (except to the extent that any Lien is created under
this Agreement) upon or with 


 


43













 


respect to any Property now owned or leased or hereafter acquired by
the Borrower, any Subsidiary or any Guarantor; (4) violate any provision
of any Law, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Borrower, any Subsidiary or any
Guarantor; or (5) result in a breach of or constitute a default under, or
cause or permit the acceleration of any obligation owed under, any Material
Indebtedness Agreement.


 


(d)           Neither the Borrower nor any Subsidiary
or Guarantor is in default under any Law, order, writ, judgment, injunction,
decree, determination or award described in Section 5.2(c)(4) or
any Material Indebtedness Agreement that in either case has a Material Adverse
Effect.


 


(e)           No authorization, consent, approval,
order, license, permit or exemption from, or filing, registration or
qualification with, any Governmental Authority not heretofore obtained is or
will be required under applicable Law to authorize or permit the execution and
delivery by the Borrower or any Guarantor of, and the performance by the
Borrower or any Guarantor of all of its obligations under, the Loan Documents.


 


(f)            Each of the Loan Documents to which the
Borrower is a party, when executed and delivered, will constitute the legal,
valid and binding obligations of the Borrower, and the Guaranty, when executed
and delivered, will constitute the legal, valid and binding obligations of each
Guarantor, enforceable against the Borrower or each Guarantor, as the case may
be, in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other
similar laws relating to or affecting creditors’ rights generally or equitable
principles relating to the granting of specific performance or other equitable
remedies as a matter of judicial discretion.


 


5.3           Compliance with
Laws and Other Requirements.  The Borrower (i) is
in compliance in all material respects with all Laws and other requirements
applicable to its business and (ii) has obtained all material
authorizations, consents, approvals, orders, licenses, permits and exemptions
from, and has accomplished all material filings, registrations or
qualifications with, any Governmental Authority that is necessary for the
transaction of its business, except in the case of either (i) or (ii) where
such noncompliance would not reasonably be expected to have a Material Adverse
Effect.


 


5.4           Subsidiaries.


 


(a)           Schedule 5.4 hereto correctly sets forth the names
and jurisdictions of incorporation or formation of all Subsidiaries and joint
ventures in which the Borrower or any of its Subsidiaries has an investment as
of the date of this Agreement, and the Subsidiaries that, as of the date of
this Agreement, are Restricted Subsidiaries are designated as such on Schedule 5.4. 
Except as described in Schedule 5.4 (as
updated on a quarterly basis pursuant to a notice given at the same time as the
Compliance Certificate pursuant to Section 6.2(b)), the
Borrower does not own any capital stock or ownership interest in any Person
other than the Subsidiaries and Joint Ventures in which the Borrower or any
Guarantor has an interest.  All
outstanding shares of capital stock or ownership interests, as the case may be,
of each Subsidiary and each such Joint Venture that are owned by the Borrower
or any Subsidiary are (1) owned of record and 


 


44













 


beneficially by the Borrower or by one or more Subsidiaries, free and
clear of all Liens, claims, encumbrances and rights of others, and (2) duly
authorized, validly issued, fully paid, nonassessable (except for capital calls
or contribution requirements in connection with ownership interests in the
Joint Ventures), and issued in compliance with all applicable state and federal
securities and other Laws.  The Borrower
may update Schedule 5.4 from time to time
by sending written notice to the Agent.


 


(b)           Each Restricted Subsidiary is a
corporation, partnership or limited liability company duly incorporated or
formed, validly existing and in good standing under the laws of its respective
jurisdiction of incorporation or formation. Each Restricted Subsidiary is duly
qualified to do business as, and is in good standing as, a foreign corporation,
partnership or limited liability company in each jurisdiction in which the
conduct of its business or the ownership or leasing of its properties makes
such qualification necessary, except where the failure to do so would not
reasonably be expected to result in a Material Adverse Effect.  Each Restricted Subsidiary has all requisite
corporate, partnership or limited liability company power and authority to
conduct its business and to own and lease its properties.


 


(c)           Each Restricted Subsidiary (i) is in
compliance in all material respects with all Laws and other requirements
applicable to its business and (ii) has obtained all material
authorizations, consents, approvals, orders, licenses, permits and exemptions
from, and has accomplished all material filings, registrations or
qualifications with, any Governmental Authority that are necessary for the
transaction of its business, except in the case of either (i) or (ii) where
the failure to do so would not reasonably be expected to result in a Material
Adverse Effect.


 


5.5           Financial
Statements of the Borrower and its Consolidated Subsidiaries. 
The consolidated balance sheets of the Company and its consolidated
Subsidiaries as at December 31, 2004 and the related consolidated
statements of income and cash flows for the fiscal year ended on such date,
reported on by Ernst & Young LLP, copies of which have heretofore been
furnished to each Lender, present fairly the consolidated financial condition
of the Borrower and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and changes in cash flows for the
fiscal year then ended.  The unaudited
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at September 30, 2005 and the related unaudited consolidated statements of
income and of cash flows for the three-month period ended on such date,
certified by a Responsible Official, copies of which have heretofore been
furnished to each Lender, present fairly the consolidated financial condition
of the Borrower and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and changes in cash flows for the
three-month period then ended (subject to normal year-end audit
adjustments).  All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP throughout the periods involved (except as
approved by such accountants or Responsible Official, as the case may be, and
as disclosed therein and except the quarterly statements are unaudited and do
not include footnotes as would be required for audited financial statements).


 


5.6           No Material
Adverse Change.  There has been no change in
the condition, financial or otherwise, of the Borrower and the Subsidiaries,
taken as a whole, from the financial condition of the Borrower and the
Subsidiaries, taken as a whole, since December 31, 2004 


 


45













 


which
would reasonably be expected to have a Material Adverse Effect, and the
Borrower and the Subsidiaries, taken as a whole, do not have any material
liability or, to the best knowledge of the Borrower, material contingent
liability not reflected or disclosed in the financial statements or notes
thereto described in Section 5.5 (or, to the extent that
financial statements have been delivered pursuant to Section 6.1,
in the most recently delivered financial statements), or otherwise disclosed to
the Agent and the Lenders in writing.


 


5.7           Tax Liability. 
The Borrower and each Subsidiary have filed all tax returns (federal,
state and local) required to be filed by them and have paid all material taxes
shown thereon to be due and all property taxes due, including interest and
penalties, if any, other than any taxes of which the amount or validity is
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been provided for on the books of the Borrower or
its Subsidiaries, as the case may be.  To
the best knowledge of the Borrower, there does not exist any substantial
likelihood that any Governmental Authority will assert a tax deficiency against
the Borrower or any Subsidiary that is material to the Borrower and the
Subsidiaries, taken as a whole, that has not been adequately reserved against
in the financial statements described in Section 5.5
(or, to the extent that financial statements have been delivered pursuant to Section 6.1,
in the most recently delivered financial statements).  The Borrower and each Subsidiary have
established and are maintaining adequate reserves for tax liabilities, if any,
sufficient to comply with GAAP.


 


5.8           Litigation. 
There are no actions, suits or proceedings pending or, to the best
knowledge of the Borrower, threatened against or affecting the Borrower or any
Restricted Subsidiary, or any Property of the Borrower or any Restricted
Subsidiary, before any Governmental Authority in which there is a reasonable
possibility of a decision adverse to the Borrower or a Restricted Subsidiary
and which, if determined adversely to the Borrower or the Restricted
Subsidiary, could reasonably be expected to have a Material Adverse Effect.


 


5.9           ERISA.  (a) 
Neither the Borrower nor any member or the Controlled Group has established, is
a party to or has any liability under any Plan as of the date hereof.


 


(b)           In the event that, at any time after the date hereof at
which the representation under this paragraph (b) is made or deemed
remade, the Borrower or any member of the Controlled Group shall have
established, be a party or have any liability under any Plan, then: (i) neither
a Reportable Event nor an “accumulated funding deficiency” (within the meaning
of Section 412 of the Code or Section 302 of ERISA) has occurred
during the five-year period prior to the date on which this representation is
made or deemed made with respect to any Plan, and each Plan has complied in all
material respects with the applicable provisions of ERISA and the Code; (ii) no
termination of a Single Employer Plan has occurred, and no Lien in favor of the
PBGC or a Plan has arisen, during such five-year period; (iii) the present
value of all accrued benefits under each Single Employer Plan (based on those
assumptions used to fund such Plans) did not, as of the last annual valuation
date prior to the date on which this representation is made or deemed made,
exceed the value of the assets of such Plan allocable to such accrued benefits
to an extent which could reasonably be expected to have a Material Adverse
Effect; (iv) neither the Borrower nor any Commonly Controlled Entity has
had a complete or partial withdrawal from any Multiemployer Plan which could
reasonably be expected to have a Material Adverse Effect, and neither the
Borrower nor any Commonly


 


46













 


Controlled Entity would
become subject to any liability under ERISA in an amount which could reasonably
be expected to have a Material Adverse Effect if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made; (v) to the knowledge of the
Borrower or any Commonly Controlled Entity, no such Multiemployer Plan for
which the Borrower or any Subsidiary could reasonably be expected to have a
material liability is in Reorganization or Insolvent; and (vi) the present
value (determined using actuarial and other assumptions which are reasonable in
respect of the benefits provided and the employees participating) of the
liability of the Borrower and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of
ERISA) does not, in the aggregate, exceed the assets under all such Plans
allocable to such benefits by an amount in excess of $5,000,000.


 


5.10         Regulations U
and X.  Neither the Borrower nor any Subsidiary is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of “purchasing” or “carrying” any “margin
stock” within the meanings of Regulation U. 
No part of the Advances or the Facility LCs will be used to purchase or
carry any margin stock, or to extend credit to others for that purpose, or for
any purpose that violates the provisions of Regulations U or X.


 


5.11         No Default or
Unmatured Default.  No Default or Unmatured
Default has occurred and is continuing.


 


5.12         Ownership of
Property; Liens.  Each of the Borrower and its
Restricted Subsidiaries has good record and marketable title in fee simple to,
or a valid leasehold interest in, all its real property, and good title to all
its other Property, except for defects in title that do not interfere in any
material respect with its ability to conduct its business as currently
conducted or to utilize such Properties for their intended purposes, and none
of such Property is subject to any Lien except as permitted by Section 6.12.  Each of the Borrower and its Restricted
Subsidiaries has good record and marketable title in fee simple to all Real
Estate Inventory included in the Borrowing Base, except for defects in title
that do not interfere in any material respect with its ability to conduct its
business as currently conducted or to utilize such properties for their
intended purposes.


 


5.13         Environmental
Matters.  Except to the extent that all of the
following, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect:


 


(a)           To the knowledge of the Borrower, no
Property of the Borrower or any of its Subsidiaries contains or has previously
contained any Materials of Environmental Concern in amounts or concentrations
which (1) constitute or constituted a violation of, or (2) could
reasonably be expected to give rise to liability under, any Environmental Law.


 


(b)           To the knowledge of the Borrower, the
Properties of the Borrower and its Subsidiaries and all operations at such
Properties are in compliance, and, to the extent of the Borrower’s and its
Subsidiaries’ involvement with the Properties, have heretofore been in
compliance, in all material respects with all applicable Environmental Laws,
and there is no 


 


47













 


contamination at, under or about such Properties or violation of any
Environmental Law with respect to such Properties or the business operated by
the Borrower or any of its Subsidiaries (the “Business”).


 


(c)           Neither the Borrower nor any of its
Subsidiaries has received any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the
Properties of the Borrower and its Subsidiaries or the Business, nor does the
Borrower have knowledge or reason to believe that any such notice will be
received or is being threatened.


 


(d)           To the knowledge of the Borrower,
Materials of Environmental Concern have not been transported or disposed of
from the Properties of the Borrower and its Subsidiaries while owned or
operated by the Borrower or any of its Subsidiaries in violation of, or in a manner
or to a location which could reasonably be expected to give rise to liability
under, any Environmental Law, nor have any Materials of Environmental Concern
been generated, treated, stored or disposed of at, on or under any of such
Properties in violation of, or in a manner that could reasonably be expected to
give rise to liability under, any applicable Environmental Law.


 


(e)           No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of the Borrower,
threatened, under any Environmental Law to which the Borrower or any Subsidiary
is or will be named as a party with respect to the Properties of the Borrower
and its Subsidiaries or the Business, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to such Properties or the Business.


 


(f)            To the knowledge of the Borrower, there
has been no release or threat of release of Materials of Environmental Concern
at or from the Properties of the Borrower and its Subsidiaries, or arising from
or related to the operations of the Borrower or any Subsidiary in connection
with such Properties or otherwise in connection with the Business, in violation
of, or in amounts or in a manner that could reasonably give rise to liability
under, Environmental Laws.


 


5.14         Investment
Company Act.  Neither the Borrower nor any Subsidiary is an
“investment company” or a company “controlled” by an “investment company”,
within the meaning of the Investment Company Act of 1940, as amended.


 


5.15         Public Utility
Holding Company Act.  Neither the
Borrower nor any Subsidiary is a “holding company” or a “subsidiary company” of
a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary
company” of a “holding company”, within the meaning of the Public Utility
Holding Company Act of 1935, as amended.


 


5.16         Subordinated
Indebtedness.  The Obligations constitute senior
Indebtedness which is entitled to the benefits of the subordination provisions
of all outstanding Subordinated Indebtedness.


 


48












 


ARTICLE VI


 


COVENANTS


 


During the term of this Agreement, unless the Required
Lenders shall otherwise consent in writing:


 


6.1           Financial Statements.  The Borrower shall cause to be delivered to
the Agent, in form and detail satisfactory to the Agent (for prompt
distribution by the Agent to the Lenders):


 


(a)           as
soon as available, but in any event within 90 days after the end of each fiscal
year of the Borrower, copies of the consolidated balance sheets of the Borrower
and its consolidated Subsidiaries as at the end of such year and the related
consolidated statements of income and retained earnings and changes in cash
flows for such year, setting forth in each case in comparative form the figures
for the previous year, reported on without a “going concern” or like
qualification or exception, or qualification arising out of the scope of the
audit (other than qualifications related to the incorporation of reports by
other independent certified public accountants), by Ernst & Young LLP
or other independent certified public accountants of nationally recognized
standing reasonably acceptable to the Required Lenders; and


 


(b)           as
soon as available, but in any event not later than 45 days after the end of
each of the first three quarterly periods of each fiscal year of the Borrower,
the unaudited consolidated balance sheets of the Borrower and its consolidated
Subsidiaries as at the end of such quarter and the related unaudited
consolidated statements of income and retained earnings and changes in cash
flows of the Borrower and its consolidated Subsidiaries for such quarter and
the portion of the fiscal year through the end of such quarter, setting forth
in each case in comparative form the figures for the previous year, certified
by an Authorized Person as being fairly stated in all material respects when
considered in relation to the consolidated financial position of the Borrower
and its consolidated Subsidiaries (subject to normal year-end audit
adjustments);


 


all such financial
statements to be prepared in accordance with GAAP throughout the periods
reflected therein and with prior periods (except as approved by such
accountants or officer, as the case may be, and disclosed therein).


 


6.2           Certificates; Other Information.  The Borrower shall cause to be delivered to the
Agent, in form and detail satisfactory to the Agent (for prompt distribution by
the Agent to the Lenders):


 


(a)           concurrently
with the delivery of the financial statements referred to in Section 6.1(a), a certificate of the
independent certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Unmatured Default, except as specified in such
certificate;


 


(b)           concurrently
with the delivery of the financial statements referred to in Sections 6.1(a) and 6.1(b), a Compliance Certificate in substantially
the form of Exhibit H hereto executed by an Authorized Person,
stating that, to the best of such Authorized Person’s 


 


49













 


knowledge, the Borrower during such period has observed or performed
all of its covenants and other agreements, and satisfied every condition,
contained in this Agreement to be observed, performed or satisfied by it (and
containing calculations demonstrating compliance with Sections 6.17(f), 6.24, 6.25,
6.26, 6.28 and 6.29 and such other financial information as
requested by the Agent), and that such officer has obtained no knowledge of any
Default or Unmatured Default except as specified in such certificate;


 


(c)           not
later than 90 days after the end of each fiscal year of the Borrower, a copy of
the projections by the Borrower of the operating budget and cash flow budget of
the Borrower and its Subsidiaries for the succeeding two fiscal years and the
projected consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such succeeding fiscal years, such projections to be accompanied by
a certificate of an Authorized Person to the effect that while such an Authorized
Person has no reason to believe such projections are incorrect or misleading in
any material respect, such projections are based upon assumptions that may not
materialize or may change adversely due to factors related to the Borrower’s
business or industry, and unanticipated events and circumstances may occur
subsequent to the date of such projections, such that the actual results
achieved may vary from such projections, and such variations may be material,
and that the Borrower is under no obligation to update such projections;


 


(d)           promptly
after the same are filed with any security exchange or with the Securities and
Exchange Commission or any successor or analogous Governmental Authority,
copies of all financial statements, reports, notices and proxy statements and
all regular and periodic reports and all registration statements (excluding
exhibits thereto and Registration Statements on Form S-8) and
prospectuses, if any, filed by the Borrower or any of its Restricted
Subsidiaries with any securities exchange or with the Securities and Exchange
Commission or any successor or analogous Governmental Authority;


 


(e)           promptly,
such additional financial and other information as any Lender may from time to
time reasonably request;


 


(f)            as
soon as practicable, but in no event later than 30 days after the end of each
calendar quarter, a Borrowing Base Certificate certifying in reasonable detail
the Borrowing Base as of the last day of such quarter, which certificate shall
be complete and correct as of the date thereof;


 


(g)           from
and after the date on which the Borrower or any member of the Controlled Group
shall establish, become a party to or have any liability under any Plan, (i) within
270 days after the close of each fiscal year, a statement of the Unfunded Liabilities
of each Single Employer Plan, certified as correct by an actuary enrolled under
ERISA and (ii) as soon as possible and in any event within 10 days after
the Borrower knows that any Reportable Event has occurred with respect to any
Plan, a statement, signed by the chief financial officer of the Borrower,
describing said Reportable Event and the action which the Borrower proposes to
take with respect thereto; and


 


(h)           as
soon as possible and in any event within 10 days after receipt by the Borrower,
a copy of (i) any notice or claim to the effect that the Borrower or any
of its 


 


50













 


Subsidiaries is or may be liable to any Person as a result of the
release by the Borrower, any of its Subsidiaries, or any other Person of any
Materials of Environmental Concern into the environment, and (ii) any
notice alleging any violation of any Environmental Law by the Borrower or any
of its Subsidiaries, which, in either case, could reasonably be expected to
have a Material Adverse Effect.


 


If any information which is required to be furnished
to the Lenders under Section 6.1 or this Section 6.2 is required by
law or regulation to be filed by the Borrower with a government body on an
earlier date, then the information required hereunder shall be furnished to the
Lenders at such earlier date.


 


6.3           Payment of Obligations.  The Borrower and each Restricted Subsidiary
shall pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, all obligations of whatever nature
except where (a) failure to pay could reasonably be expected to have a
Material Adverse Effect, and (b) the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower or its Subsidiaries, as the case may be.


 


6.4           Conduct of Business and Maintenance of Existence.  The Borrower and the Restricted Subsidiaries,
taken as a whole, shall at all times remain principally engaged in the business
conducted as of the date of this Agreement by the Borrower and the Restricted
Subsidiaries, and, in all respects material to the business of the Borrower and
the Restricted Subsidiaries taken as a whole, the Borrower shall, and shall
cause each of the Restricted Subsidiaries to, preserve, renew and keep in full
force and effect its corporate, partnership or limited liability company
existence (as applicable) and take all reasonable action to maintain all
rights, privileges and franchises required for the normal conduct of such
business, except (a) as otherwise permitted pursuant to Section 6.14
and (b) the Borrower shall not be required to preserve any
such right, privilege or franchise if the Borrower shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Borrower or any Subsidiary and that the loss thereof could not reasonably
be expected to have a Material Adverse Effect. 
The Borrower shall, and shall cause each Restricted Subsidiary to,
comply with all Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith could not reasonably be expected to
have a Material Adverse Effect.


 


6.5           Maintenance of Property; Insurance.


 


(a)           The
Borrower and each Restricted Subsidiary shall keep in all material respects all
Property useful and necessary in its business in good working order and
condition (provided, however, that nothing in this Section 6.5
shall prevent the Borrower from discontinuing the operation or maintenance, or
both the operation and maintenance, of any of such Properties if such
discontinuance is, in the judgment of the Borrower, desirable in the conduct of
its business or the business of any Subsidiary and could not reasonably be
expected to have a Material Adverse Effect).


 


(b)           The
Borrower and each Restricted Subsidiary shall maintain insurance for their
respective Properties and businesses, (1) with financially sound and
reputable insurance 


 


51













 


companies or associations, and (2) of such types (including
insurance against theft and fraud and against loss or damage by fire, flood,
explosion or hazard of or to property and general public liability insurance),
in such amounts and with such deductibles, covering such casualties and
contingencies and otherwise on such terms as those usually carried by companies
of established reputations engaged in similar businesses and owning similar
properties and assets in the same general areas in which the Borrower or its
applicable Subsidiary operates or as may otherwise be required by applicable
Requirements of Law.  The Borrower shall
furnish to each Lender, upon written request, reasonable information as to the
insurance carried.


 


6.6           Inspection of Property; Books and Records; Discussions.  The Borrower and each Restricted Subsidiary
shall in all material respects keep proper books of records and account in
which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities; and permit representatives of any Lender, at
such Lender’s expense prior to the occurrence of a Default and at the Borrower’s
expense after the occurrence and during the continuance of a Default, to visit
and inspect as reasonably requested any of its Properties and the Properties of
the Joint Ventures in which the Borrower or any Guarantor participates or
manages and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and to discuss the
business, operations, Properties and financial and other condition of the
Borrower and its Subsidiaries and such Joint Ventures in which the Borrower or
any Guarantor participates or manages, as reasonably requested with officers
and employees of the Borrower and its Subsidiaries and with its independent
certified public accountants.


 


6.7           Notices. 
The Borrower will promptly give notice to the Agent and each Lender of:


 


(a)           the
occurrence of any Default or Unmatured Default;


 


(b)           any
(1) default or event of default under any Contractual Obligation of the
Borrower or any of its Restricted Subsidiaries or (2) litigation,
investigation or, proceeding which may exist at any time between the Borrower
or any of its Restricted Subsidiaries and any Governmental Authority, which, in
the case of either clause (1) or clause (2), reasonably could be expected
to have a Material Adverse Effect;


 


(c)           any
litigation or proceeding affecting the Borrower or any of its Restricted
Subsidiaries in which damages or injunctive or similar relief is sought which
reasonably could be expected to have a Material Adverse Effect (which notice
shall be required to be given at the time the Borrower files with the
Securities and Exchange Commission a filing disclosing such litigation);


 


(d)           from
and after the date on which the Borrower or any member of the Controlled Group
shall establish, become a party to or have any liability under any Plan, any of
the following events, as soon as possible and in any event within 30 days after
the Borrower knows or has reason to know thereof: (1) the occurrence of
any Reportable Event with respect to any Plan which must be reported to the
applicable governmental authorities, or any withdrawal from, or the
termination, Reorganization or Insolvency of any Multiemployer Plan; or (2) the
institution of proceedings or the taking of any other action by the PBGC or the
Borrower or any 


 


52













 


Commonly Controlled Entity or any Multiemployer Plan with respect to
the withdrawal from, or the terminating, Reorganization or Insolvency of, any
Plan; and


 


(e)           any
event or occurrence which has a Material Adverse Effect.


 


Each
notice pursuant to this Section shall be accompanied by a statement of a
Responsible Official setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.


 


6.8           Environmental Laws.


 


(a)           The
Borrower, each Restricted Subsidiary and each Joint Venture which the Borrower
or any Restricted Subsidiary manages shall comply and cause compliance by all
tenants and subtenants, if any, with all Environmental Laws and obtain and
comply in all material respects with and maintain, and cause all tenants and
subtenants to obtain and comply with and maintain, any and all licenses,
approvals, registrations or permits required by Environmental Laws, except in
each case to the extent that failure to do so could not reasonably be expected
to have a Material Adverse Effect.


 


(b)           The
Borrower, each Restricted Subsidiary and each such Joint Venture shall conduct
and complete all investigations, studies, sampling and testing, and all remedial,
removal and other actions required under Environmental Laws and promptly comply
in all material respects with all lawful orders and directives of all
Governmental Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not reasonably be expected to have a
Material Adverse Effect.


 


(c)           The
Borrower shall defend, indemnify and hold harmless the Agent and the Lenders,
and their respective Related Parties from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or otherwise, arising out
of, or in any way relating to the violation by the Borrower or any of its
Subsidiaries of or their noncompliance with, any Environmental Laws, or any
orders, requirements or demand of Governmental Authorities related thereto,
including reasonable attorney and consultant fees, investigation and laboratory
fees, court costs and litigation expenses, except to the extent that any of the
foregoing arise out of the gross negligence or willful misconduct of the party
seeking indemnification therefor.  The
agreements contained in this clause (c) shall survive the termination of
this Agreement and the payment of the Obligations.


 


6.9           Guaranties from Future Subsidiaries; Release of Guarantors.  (a) The Borrower shall promptly secure
the execution and delivery of the Guaranty (or a Supplemental Guaranty) to the
Agent for the benefit of the Lenders from each Subsidiary, whether now existing
or formed and organized after the date hereof, if such Subsidiary is a
Wholly-Owned Subsidiary of the Borrower and is included in the Homebuilding
Segment; provided that (i) any Subsidiary whose sole purpose is to
serve as a joint venturer, partner, member or shareholder in a Joint Venture
shall not be required to deliver a Guaranty, (ii) none of the Subsidiaries
listed on Schedule 6.9 hereto shall be required to be a Guarantor and (iii) a
Subsidiary hereafter formed or 


 


53













 


organized
will not be required to be a Guarantor if federal or state regulatory
requirements prohibit such Subsidiary from being a Guarantor or if such Subsidiary
is not engaged in the construction or sale of homes or in any activities that
are material to the Homebuilding Segment. 
Each such Subsidiary that does not deliver the Guaranty on the Closing
Date shall execute and deliver a Supplemental Guaranty within 30 days after it
meets the criteria set forth in the preceding sentence.  Concurrently with the execution and delivery
by such a Subsidiary of a Supplemental Guaranty, the Borrower will deliver to
the Agent such legal opinions and evidence of corporate or other action and
authority in respect thereof as shall be reasonably requested by the Agent.


 


(b)           In the event that any Guarantor
ceases to be a Wholly-Owned Subsidiary of the Borrower in the Homebuilding
Segment or ceases to be engaged in the active conduct of business, the Borrower
may request the release of such Guarantor from its obligations under its
Guaranty, and provided no Default or Unmatured Default exists, the Agent
shall deliver to the Borrower a written release of such Guarantor from its
obligations under the Guaranty and shall so notify the Lenders.


 


(c)           The Borrower shall not cause or
permit the voting securities or other ownership interests of any Subsidiary in
the Homebuilding Segment to be less than 100% owned and controlled, directly or
indirectly, by the Borrower except for a legitimate business purpose unrelated
to whether such Subsidiary is required to be a Guarantor hereunder.


 


6.10         Use of Proceeds. 
The Borrower shall, and shall cause each Subsidiary to, use the proceeds
of the Credit Extensions for repayment of the obligations under the Existing
Credit Agreement and for general corporate purposes, including Acquisitions
(that are not hostile) in the same or similar lines of business.  The Borrower will not, nor will it permit any
Subsidiary to, use any of the proceeds of the Advances to purchase or carry any
“margin stock” (as defined in Regulation U).


 


6.11         Taxes.  The
Borrower shall, and shall cause each Subsidiary to, timely file (subject to
extensions as permitted by law) complete and correct United States federal and
applicable foreign, state and local tax returns required by law and pay when
due all taxes, assessments and governmental charges and levies upon it or its
income, profits or Property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside in accordance with GAAP.


 


6.12         Limitation on Liens.  Neither the Borrower nor any Restricted
Subsidiary will create, incur, assume or suffer to exist any Lien of any nature
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, except for:


 


(a)           Liens
for taxes not yet due or which are being contested in good faith by appropriate
proceedings, provided that adequate reserves
with respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;


 


(b)           carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period
of more than 60 days or which are being contested in good faith by appropriate
proceedings;


 


54













 


(c)           pledges
or deposits in connection with workers’ compensation, unemployment insurance
and other social security legislation and deposits securing liability to
insurance carriers under insurance or self-insurance arrangements;


 


(d)           deposits
to secure the performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of
business;


 


(e)           easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business which, in the aggregate, are not substantial in
amount and which do not in any case materially detract from the value of the
Property subject thereto or materially interfere with the ordinary conduct of
the business of the Borrower or such Subsidiary;


 


(f)            Liens
securing Non-Recourse Indebtedness of the Borrower and its Subsidiaries
incurred to finance the acquisition, construction or development of Real Estate
Inventory or Liens securing Indebtedness of the Borrower and its Subsidiaries
incurred to finance the construction or acquisition of fixed or capital assets
or a Refinancing Indebtedness with respect to any of such Indebtedness, provided that (1) such Liens
shall be created within 180 days after (A) the acquisition of such Real
Estate Inventory or (B) the acquisition or completion of construction of
fixed or capital assets (or, in the case of Refinancing Indebtedness with
respect thereto, such Liens shall be renewals or replacements of Liens created
within such 180-day time period) and (2) such Liens do not at any time
encumber any Property other than the Property financed by such Indebtedness;


 


(g)           Liens
on the property or assets of a corporation or other entity which becomes a
Subsidiary or which is merged into the Borrower or a Subsidiary after the date
hereof securing Indebtedness of such corporation or other entity, provided that (1) such Liens
existed at the time such corporation or other entity became a Subsidiary or was
so merged and were not created in anticipation thereof, (2) any such Lien
is not spread to cover any additional Property of such corporation or other
entity after the time such corporation or other entity becomes a Subsidiary or
is so merged, and (3) the amount of Indebtedness secured thereby is not
increased;


 


(h)           Liens
on assets of the Financial Services Segment securing Indebtedness of the
Financial Services Segment; and


 


(i)            Judgment
and other similar Liens arising in connection with court proceedings except
Liens arising from judgments that constitute a Default under Section 7.9.


 


6.13         Limitation on Guarantee Obligations.  Neither the Borrower nor any Restricted
Subsidiary will create, incur, assume or suffer to exist any Guarantee
Obligation except:


 


(a)           the Borrower and any Guarantor may
incur Guarantee Obligations, not to exceed $35,000,000 in the aggregate at any
time, in respect of obligations of entities in the Financial Services Segment;


 


(b)           the entities within the Financial
Services Segment may incur Guarantee Obligations;


 


55













 


(c)           the Borrower and any Guarantor may
incur Guarantee Obligations in respect of reimbursement obligations with
respect to Letters of Credit issued for the account of the Borrower or any
Guarantor for the benefit of employee benefit or employee insurance programs of
the Borrower or any of its Subsidiaries;


 


(d)           Subsidiaries of the Borrower may
incur Guarantee Obligations in respect of the Specified Debt, provided that simultaneously with
the execution and delivery of any guaranty in respect thereof by any
Subsidiary, such Subsidiary shall execute and deliver a Supplemental Guaranty
if it is not already a Guarantor; and


 


(e)           the Borrower and any Guarantor may
incur Guarantee Obligations in respect of obligations of the Borrower and
Subsidiaries, joint ventures and other entities in each case in the
Homebuilding Segment.


 


6.14         Limitations on Fundamental Changes.  Neither the Borrower nor any Restricted
Subsidiary will enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets, except:


 


(a)           any
Restricted Subsidiary of the Borrower may be merged or consolidated (i) with
or into the Borrower, provided that
the Borrower shall be the continuing or surviving corporation, or (ii) with
or into any one or more Restricted Subsidiaries of the Borrower, provided that the Restricted
Subsidiary or Restricted Subsidiaries shall be the continuing or surviving
entity and that, if either Subsidiary was a Guarantor, the continuing or
surviving entity shall also be a Guarantor or become a Guarantor on the
effective date of such merger or consolidation;


 


(b)           the
Borrower or any Restricted Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise)
to the Borrower or any other Restricted Subsidiary of the Borrower; provided
that, if the transferor is the Borrower or a Guarantor, the transferee shall be
the Borrower or shall be a Guarantor or become a Guarantor on the effective
date of such transaction;


 


(c)           any
Restricted Subsidiary may sell, lease, transfer or otherwise dispose of any or
all of its assets to the Borrower or any Restricted Subsidiary of the Borrower,
whether existing on or created after the date of this Agreement, provided that if the transferor
is a Guarantor, the transferee shall be the Borrower or a Guarantor; and


 


(d)           sales,
conveyances, leases, assignments, transfers or other dispositions of property,
business or assets permitted under Section 6.15.


 


6.15         Limitations on Sales of Assets.  Neither the Borrower nor any Restricted
Subsidiary will convey, sell, lease, assign, transfer or otherwise dispose of
any of its Property or business (including stock of Subsidiaries, receivables
and leasehold interests), whether now owned or hereafter acquired, except:


 


(a)           obsolete
or worn out property disposed of in the ordinary course of business;


 


56













 


(b)           the
sale of inventory in the ordinary course of business, including sale-leasebacks
of model homes;


 


(c)           the
sale or discount of accounts receivable arising in the ordinary course of
business in connection with the compromise or collection thereof;


 


(d)           the
sale or discount without recourse of mortgage loan receivables;


 


(e)           the
sale by the Financial Services Segment of its rights under loan servicing
portfolios;


 


(f)            as
permitted by Section 6.14 (other than pursuant to
clause (d) thereof);


 


(g)           the
sale of mortgages and mortgage-backed or other securities by the Financial
Services Segment;


 


(h)           the
sale, transfer or other disposition of any stock, property or assets of the Limited-Purpose
Subsidiaries;


 


(i)            the
sale, transfer or other disposition of Cash Equivalents; and


 


(j)            any
other sale or disposition of Property (including stock or Property of
Subsidiaries), provided that
the aggregate book value of all assets so sold or disposed of pursuant to this
clause (j) in any period of twelve (12) consecutive months shall not
exceed 10% of the book value of the consolidated total assets of the Borrower
and its Subsidiaries (excluding the assets of the Limited Purpose Subsidiaries)
as at the beginning of such twelve (12) month period.


 


6.16         Limitation on Dividends.  The Borrower will not declare or pay any
dividend (other than dividends payable solely in Common Stock of the Borrower)
on, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of stock of the Borrower or any
warrants or options to purchase any such stock, whether now or hereafter outstanding,
or make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary (such declarations, payments, setting apart, purchases,
redemptions, defeasances, retirements, acquisitions and distributions being
herein called “Restricted Payments”), except that the
Borrower may make any Restricted Payment so long as, after giving effect
thereto, no Default or Unmatured Default will be in existence.


 


6.17         Limitation on Investments.  Neither the Borrower nor any Restricted
Subsidiary will make any Investments, except:


 


(a)           extensions
of trade credit and other payables in the ordinary course of business and
extensions of non-material advances for Improvements to property not then owned
by the Borrower in the ordinary course of business, provided that the
Borrower shall give notice to the Lenders of any such non-material advances
aggregating in excess of $20,000,000 in any fiscal quarter;


 


57













 


(b)           Investments
in Cash Equivalents;


 


(c)           Acquisitions
by the Borrower or any of its Restricted Subsidiaries of assets constituting a
business unit or the capital stock of any Person, provided
that such business unit or Person is engaged in the same general type of
business as conducted by the Borrower or one of its Restricted Subsidiaries and
provided, further, that before any such
Acquisition and after giving effect thereto, no Default or Unmatured Default
shall be in existence and the Borrower shall, at its sole expense, have
delivered to the Agent not less than 10 days prior to the date of such
Acquisition a certificate to such effect, in form and substance satisfactory to
the Agent, signed by an Authorized Person;


 


(d)           Acquisitions
by the Borrower or any of its Restricted Subsidiaries other than Acquisitions
permitted under clauses (c) or (g) of this Section 6.17 of,
or investments in, assets constituting a business unit or the capital stock of
any Person; provided, that the aggregate
amount of consideration paid by the Borrower and its Restricted Subsidiaries
for all such Acquisitions of assets or capital stock (including as a part of
such consideration any Indebtedness assumed as a part thereof) does not exceed
an aggregate amount equal to $25,000,000 in any 12-month period; and provided, further, that after giving effect
thereto, no Default or Unmatured Default shall be in existence;


 


(e)           Investments
by the Borrower in any Guarantor or by any Guarantor in the Borrower or in any
other Guarantor;


 


(f)            Investments
by the Borrower or any Guarantor in Joint Ventures, in Subsidiaries that are
not wholly-owned Subsidiaries, in the Limited-Purposes Subsidiaries Segment and
in the Financial Services Segment, so long as the aggregate amount of such
Investments shall not at any time exceed 40% of Consolidated Tangible Net
Worth; provided, that such limitation
shall not apply to Investments in the Financial Services Segment to the extent
made following termination of the Countrywide Loan Purchase Agreement (or any
successor agreement thereto) and that are repaid in full not later than the
first to occur of:  (A) 90 days
following the date such termination becomes effective or (B) the date upon
which Ryland Mortgage Company enters into a successor agreement;


 


(g)           Investments
by entities within the Financial Services Segment in any Person and
Acquisitions of assets constituting a business unit or the capital stock of any
Person by entities within the Financial Services Segment;


 


(h)           loans
and advances to officers, employees, consultants and agents of the Borrower or
its Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business; and


 


(i)            other
loans and advances to employees of the Borrower in connection with incentive or
stock purchase plans or arrangements in an aggregate amount not to exceed
$3,000,000 at any time outstanding.


 


6.18         Limitation on Optional Payments and Modification of Debt
Instruments.


 


58












 


(a)           Neither the Borrower nor any Restricted
Subsidiary will (1) make any optional payment or prepayment on or
redemption of any Subordinated Debt or (2) amend, modify or change, or
consent or agree to any amendment, modification or change to, any of the terms
(including the subordination terms) of any Subordinated Debt (other than any
such amendment, modification or change that is in form reasonably satisfactory
to the Agent), provided that so
long as no Unmatured Default or Default is in existence or would result
therefrom, the Borrower may prepay Subordinated Debt.


 


(b)           No Restricted Subsidiary within the
Financial Services Segment will amend, modify or change, or consent or agree to
any amendment, modification or change to, any of the terms of any debt instrument
to which it is a party the effect of which would be to:  (1) impose restrictions on the payment
of dividends, directly or indirectly, to or for the benefit of the Borrower
which would limit such dividends to an aggregate amount for all Restricted
Subsidiaries in the Financial Services Segment in any fiscal year which is less
than the consolidated net income of the Financial Services Segment for the
current fiscal year; or (2) impose restrictions on the making by such
Restricted Subsidiaries of Credit Advances, directly or indirectly, to or for
the benefit of the Borrower which would limit such Credit Advances to an
aggregate amount for all Restricted Subsidiaries in the Financial Services
Segment which is less than $25,000,000 at any time outstanding, provided that provisions which by
their terms would impose such restrictions only in the event of a default under
such debt instrument and solely as a result of such default shall not be deemed
to be included in the restrictions described in the foregoing clauses (1) or
(2).


 


6.19         Transactions
with Affiliates.  Neither the Borrower nor any
Restricted Subsidiary will enter into any transaction, including any purchase,
sale, lease or exchange of property or the rendering of any service, with any
Affiliate (other than the Borrower or a Guarantor) unless such transaction is
otherwise expressly permitted under this Agreement, or is upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary, as the
case may be, than it would obtain in a comparable arm’s-length transaction with
a Person not an Affiliate.


 


6.20         Fiscal Year. 
The Borrower will not permit the fiscal year of the Borrower to end on a
day other than December 31 without at least 90 days’ prior written notice
to the Agent (which notice shall be forwarded promptly by the Agent to the
Lenders).


 


6.21         Compliance with
ERISA.  From and after the date on which the Borrower
or any member of the Controlled Group shall establish, become a party to or
have any liability under any Plan, neither the Borrower nor any Restricted
Subsidiary will:


 


(a)           terminate any Plan so as to result in any
material liability to the PBGC;


 


(b)           engage in any “prohibited transaction”
(as defined in Section 4975 of the Code or Section 406 of ERISA)
involving any Plan which would result in a material liability for an excise tax
or civil penalty in connection therewith;


 


(c)           incur or suffer to exist any material “accumulated
funding deficiency” (as defined in Section 302 of ERISA), whether or not
waived, involving any Plan; or


 


59













 


(d)           allow or suffer to exist any event or
condition which presents a material risk of incurring a material liability to
the PBGC by reason of termination of any such Plan.


 


6.22         Preferred Stock. 
The Borrower will not permit any Guarantor to issue preferred stock to
any Person other than the Borrower.


 


6.23         No Other Negative Pledges. 
Neither the Borrower nor any Restricted Subsidiary will enter into,
assume or become subject to any agreement prohibiting or otherwise restricting
the creation or assumption of any Lien upon its properties or assets, whether
now owned or hereafter acquired, or requiring the grant of any security for
such obligation if security is given for some other obligation except as set
forth in (a) the Loan Documents, (b) any indenture or equivalent
instrument (or any amendment or supplement thereto) relating to any Specified
Debt and (c) agreements which evidence or secure Indebtedness secured by
Liens permitted under this Agreement so long as such prohibition applies only
to the Property subject to such Lien.


 


6.24         Consolidated
Tangible Net Worth.  The Borrower shall not permit
Consolidated Tangible Net Worth at any time to be less than the sum of (a) $967,974,000
plus (b) 50% of
the Consolidated Net Income (without deduction for losses sustained during any
fiscal quarter) for each fiscal quarter subsequent to the fiscal quarter ended September 30,
2005, plus (c) 50% of
the net proceeds from any equity offerings of the Borrower from and after September 30,
2005.  Notwithstanding the
foregoing, in the event that the Borrower shall at any time engage in an
Acquisition with a purchase price (determined under GAAP) equaling or exceeding
$100,000,000, the minimum Consolidated Tangible Net Worth requirement shall be
adjusted to the sum of (i) 80% of Consolidated Tangible Net Worth at the
end of the fiscal quarter in which the closing of such Acquisition occurs, plus (ii) an amount equal to 50% of the Consolidated
Net Income (without deduction for losses sustained in any fiscal quarter) for
each fiscal quarter subsequent to the closing of such Acquisition, plus (iii) 50% of the net proceeds received by the
Borrower for any capital stock issued after the closing of such Acquisition.


 


6.25         Leverage Ratio. 
The Borrower shall not permit the Leverage Ratio at any time to exceed
60%.


 


6.26         Minimum Interest
Coverage.  The Borrower shall not permit the ratio
of (a) EBITDA to (b) Consolidated Interest Incurred,
for any period consisting of the preceding four fiscal quarters, to be less
than 2.0 to 1.0 at any time.


 


6.27         Senior Permitted
Debt Not to Exceed Borrowing Base.  As of the end
of the first fiscal quarter that is at least thirty days after the date on
which the Borrower does not have an Investment Grade Rating from at least one
of Moody’s or S&P and thereafter for so long as the Borrower does not have
an Investment Grade Rating from at least one of Moody’s or S&P, the
Borrower shall not permit Senior Permitted Debt to exceed the Borrowing Base.


 


6.28         Limitation on
Housing Inventory.  As of the end of the first
fiscal quarter that is at least thirty days after the date on which the
Borrower does not have an Investment Grade Rating from at least one of Moody’s
or S&P and thereafter for so long as the Borrower does not have an
Investment Grade Rating from at least one of Moody’s or S&P, the Borrower
shall not permit the aggregate unit number of Unsold Housing Inventory of the
Borrower and Guarantors on a 


 


60













 


combined
basis at any time to exceed the greater of: 
(a) 50% of homes delivered by the Borrower and Guarantors during
the immediately preceding twelve (12) months; or (b) 70% of the homes
delivered by the Borrower and Guarantors during the immediately preceding six (6) months.


 


6.29         Limitations on Land Inventory. 
As of the end of the first fiscal quarter that is at least thirty days
after the date on which the Borrower does not have an Investment Grade Rating
from at least one of Moody’s or S&P and thereafter for so long as the
Borrower does not have an Investment Grade Rating from at least one of Moody’s
or S&P, the Borrower shall not permit the ratio of (1) the sum of the
book value of (A) Unsold Finished Lots, (B) Unsold Land Under Development,
and (C) Unsold Raw Land of the Borrower and Guarantors to (2) Consolidated
Tangible Net Worth to exceed 1.0 to 1.0 at any time.


 


ARTICLE VII


 


DEFAULTS


 


The occurrence of any one or more of the following
events shall constitute a Default:


 


7.1           Any representation or warranty made or
deemed made by or on behalf of the Borrower or any of its Subsidiaries to the
Lenders, any LC Issuer or the Agent under or in connection with this Agreement,
any Credit Extension, or any certificate or information delivered in connection
with this Agreement or any other Loan Document shall be materially false on the
date as of which made.


 


7.2           Nonpayment of principal of any Loan or
any Reimbursement Obligation when due; or nonpayment of interest upon any Loan
within five (5) days of the date when due; or nonpayment or of any
Commitment Fee, LC Fee or other payment under any of the Loan Documents within
five (5) days after the same becomes due (following receipt of an accurate
invoice).


 


7.3           The breach by the Borrower of any of the
terms or provisions of Section 6.14, 6.18, 6.20, 6.22, 6.24, 6.25, 6.26,
6.27, 6.28 or 6.29.


 


7.4           The breach by the Borrower (other than a
breach which constitutes a Default under another Section of this Article VII)
of any of the terms or provisions of this Agreement which is not remedied
within thirty (30) days.


 


7.5           Failure of the Borrower or any of its
Restricted Subsidiaries to pay when due any Material Indebtedness (beyond the
applicable grace period (not to exceed fifteen (15) days) with respect thereto,
if any); or the default by the Borrower or any of its Restricted Subsidiaries
in the performance of any term, provision or condition contained in any
Material Indebtedness Agreement or any other event shall occur or condition
exist, the effect of which default, event or condition is to cause, or to
permit the holder(s) of such Material Indebtedness or the lender(s) under
any Material Indebtedness Agreement to cause, such Material Indebtedness to
become due prior to its stated maturity or any commitment to lend under any
Material Indebtedness Agreement to be terminated prior to its stated expiration
date or any Material Indebtedness of the Borrower or any of its Restricted
Subsidiaries shall be declared to be due and payable or the 


 


61













 


repurchase,
prepayment, defeasance or redemption thereof shall be required prior to the
stated maturity thereof; provided that
the failure by Ryland Mortgage Company or any of its Subsidiaries that is a
Restricted Subsidiary to pay any such Indebtedness in the form of reimbursement
obligations in respect of Letters of Credit issued for the account of Ryland
Mortgage Company or any of its Subsidiaries that is a Restricted Subsidiary
backing obligations under master servicing agreements shall not constitute a
Default under this Section 7.5 until the date which is 90 days after the
date on which such reimbursement obligations become due and payable; or the
Borrower or any of its Restricted Subsidiaries shall not pay, or shall admit in
writing its inability to pay, its debts generally as they become due.


 


7.6           The Borrower or any of its Restricted
Subsidiaries shall (i) have an order for relief entered with respect to it
under the Federal bankruptcy laws as now or hereafter in effect, (ii) make
an assignment for the benefit of creditors, (iii) apply for, seek, consent
to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any Substantial Portion of
its Property, (iv) institute any proceeding seeking an order for relief
under the Federal bankruptcy laws as now or hereafter in effect or seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or
its debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (v) take any
corporate or partnership action to authorize or effect any of the foregoing
actions set forth in this Section 7.6 or (vi) fail to contest in good
faith any appointment or proceeding described in Section 7.7.


 


7.7           Without the application, approval or
consent of the Borrower or any of its Restricted Subsidiaries, a receiver,
trustee, examiner, liquidator or similar official shall be appointed for the
Borrower or any of its Restricted Subsidiaries or any Substantial Portion of
its Property, or a proceeding described in Section 7.6(iv) shall be
instituted against the Borrower or any of its Restricted Subsidiaries and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of 60 consecutive days.


 


7.8           Any court, government or governmental
agency shall condemn, seize or otherwise appropriate, or take custody or
control of, all or any portion of the Property of the Borrower and its
Subsidiaries which, when taken together with all other Property of the Borrower
and its Subsidiaries so condemned, seized, appropriated, or taken custody or
control of, during the twelve-month period ending with the month in which any
such action occurs, constitutes a Substantial Portion.


 


7.9           The Borrower or any of its Subsidiaries
shall fail within 30 days to pay, bond or otherwise discharge one or more
judgments or orders for the payment of money in excess of $10,000,000.


 


7.10         Any Change in Control shall occur.


 


7.11         The Borrower or any of its Subsidiaries
shall (i) be the subject of any proceeding pertaining to the release by
the Borrower, any of its Subsidiaries or any other Person of any Materials of
Environmental Concern into the environment, or (ii) violate any
Environmental 


 


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Law,
which, in the case of an event described in clause (i) or clause (ii),
could reasonably be expected to have a Material Adverse Effect.


 


7.12         The occurrence of any “default”, as
defined in any Loan Document (other than this Agreement) or the breach of any
of the terms or provisions of any Loan Document (other than this Agreement),
which default or breach continues beyond any period of grace therein provided.


 


7.13         Except for the release of any Guarantor
pursuant to Section 6.9, (a) any Guaranty shall fail to remain in
full force or effect or any action shall be taken to discontinue or to assert
the invalidity or unenforceability of any Guaranty, (b) any Guarantor
shall fail to comply with any of the terms or provisions of any Guaranty to
which it is a party, or (c) any Guarantor shall deny that it has any
further liability under any Guaranty to which it is a party, or shall give
notice to such effect.


 


7.14         Any one or more of the following occurs
at any time from and after the date on which the Borrower or any member of the
Controlled Group shall establish, become a party to or have any liability under
any Plan:  (1) Any Person shall
engage in any “prohibited transaction” (as defined in Section 406 of ERISA
or Section 4975 of the Code) involving any Plan; or (2) any “accumulated
funding deficiency” (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan or any Lien in favor of the PBGC
or a Plan shall arise on the assets of the Borrower or any Commonly Controlled
Entity; or (3) 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 commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA; or (4) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA; or (5) the
Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion
of the Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan; or
(6) any other event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (1) through (6) above, such event
or condition, together with all other such events or conditions, if any, could
reasonably be expected to have a Material Adverse Effect.


 


7.15         The Borrower shall cease to own, directly
or indirectly and free and clear of any Lien, 100% of the issued and
outstanding capital stock of Ryland Homes of California, Inc. and Ryland
Mortgage Company.


 


ARTICLE VIII


 


ACCELERATION,
WAIVERS, AMENDMENTS AND REMEDIES


 


8.1           Acceleration; Facility LC Collateral
Account.  (i) If any Default described in Section 7.6
or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to
make Loans hereunder and the obligation and power of the LC Issuers to issue
Facility LCs shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part
of the Agent or any Lender or LC Issuer and the Borrower will 


 


63













 


be
and become thereby unconditionally obligated, without any notice, act or
demand, to pay to the Agent in immediately available funds the amount required
to be paid pursuant to Section 2.19.12. 
If any other Default occurs, the Required Lenders (or the Agent with the
consent of the Required Lenders) may (a) terminate or suspend the
obligations of the Lenders to make Loans hereunder and the obligation and power
of LC Issuers to issue Facility LCs, or declare the Obligations to be due and
payable, or both, whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which the Borrower hereby expressly waives, and (b) upon notice to the
Borrower and in addition to the continuing right to demand payment of all
amounts payable under this Agreement, make demand on the Borrower to pay, and
the Borrower will, forthwith upon such demand and without any further notice or
act, pay to the Agent the amount required to be paid pursuant to Section 2.19.12.


 


(ii)           If, within 30 days after acceleration of the maturity
of the Obligations or termination of the obligations of the Lenders to make
Loans and the obligation and power of the LC Issuers to issue Facility LCs
hereunder as a result of any Default (other than any Default as described in Section 7.6
or 7.7 with respect to the Borrower) and before any judgment or decree for the
payment of the Obligations due shall have been obtained or entered, the
Required Lenders (in their sole discretion) shall so direct, the Agent shall,
by notice to the Borrower, rescind and annul such acceleration and/or
termination.


 


8.2           Amendments. 
Subject to the provisions of this Section 8.2, the Required Lenders
(or the Agent with the consent in writing of the Required Lenders) and the
Borrower may enter into agreements supplemental hereto for the purpose of
adding or modifying any provisions to the Loan Documents or changing in any
manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such
supplemental agreement shall, without the consent of all of the Lenders:


 


(i)            Extend the final maturity of any Loan or extend the
expiry date of any Facility LC to a date after the Facility Termination Date or
forgive all or any portion of the principal amount of any Loan or Reimbursement
Obligation, or reduce the rate or extend the time of payment of interest or
fees on any Loan or Reimbursement Obligation;


 


(ii)           Reduce the percentage specified in the definition of
Required Lenders;


 


(iii)          Extend the Facility Termination Date (except as
provided in Section 2.20) or increase the amount of the Aggregate
Commitment or of the Commitment of any Lender hereunder or the commitment to
issue Facility LCs (except as provided in Section 2.5.3), or permit the
Borrower to assign its rights under this Agreement;


 


(iv)          Amend this Section 8.2;


 


(v)           Release any Guarantor (except as provided in Section 6.9(b));
or


 


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(vi)          Release any collateral from the Facility LC Collateral
Account (except as provided in Section 2.19.12 or 2.20(c)).


 


No
amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent.  No amendment of any provision of this
Agreement relating to the Swing Line Lender shall be effective without the
written consent of the Swing Line Lender. 
No amendment of any provision of the Agreement relating to the LC
Issuers shall be effective without the written consent of the LC Issuers
affected thereby.  The Agent may waive
payment of the fee required under Section 12.1(b)(ii)(C) without
obtaining the consent of any other party to this Agreement.


 


8.3           Preservation of
Rights.  No delay or omission of the Lenders, the LC
Issuers or the Agent to exercise any right under the Loan Documents shall
impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Credit Extension notwithstanding the
existence of a Default or the inability of the Borrower to satisfy the
conditions precedent to such Credit Extension shall not constitute any waiver
or acquiescence.  Any single or partial
exercise of any such right shall not preclude other or further exercise thereof
or the exercise of any other right, and no waiver, amendment or other variation
of the terms, conditions or provisions of the Loan Documents whatsoever shall
be valid unless in writing signed by the Lenders required pursuant to Section 8.2,
and then only to the extent in such writing specifically set forth.  All remedies contained in the Loan Documents
or by law afforded shall be cumulative and all shall be available to the Agent,
the Lenders and the LC Issuers until the Obligations have been paid in full.


 


ARTICLE IX


 


GENERAL PROVISIONS


 


9.1           Survival of
Representations.  All representations and
warranties of the Borrower contained in this Agreement shall survive the making
of the Credit Extensions herein contemplated.


 


9.2           Governmental
Regulation.  Anything contained in this Agreement to the
contrary notwithstanding, no Lender or LC Issuer shall be obligated to extend
credit to the Borrower in violation of any limitation or prohibition provided
by any applicable Law.


 


9.3           Headings.  Section headings
in the Loan Documents are for convenience of reference only, and shall not
govern the interpretation of any of the provisions of the Loan Documents.


 


9.4           Entire Agreement. 
The Loan Documents embody the entire agreement and understanding among
the Borrower, the Agent, the Lenders and the LC Issuers and supersede all prior
agreements and understandings among the Borrower, the Agent, the Lenders and
the LC Issuers relating to the subject matter thereof other than those
contained in the fee letter described in Section 10.13 which shall survive
and remain in full force and effect during the term of this Agreement.


 


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9.5           Several
Obligations; Benefits of this Agreement.  The
respective obligations of the Lenders hereunder are several and not joint and
no Lender shall be the partner or agent of any other (except to the extent to
which the Agent is authorized to act as such). 
The failure of any Lender to perform any of its obligations hereunder
shall not relieve any other Lender from any of its obligations hereunder.  This Agreement shall not be construed so as
to confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns, provided,
however, that the parties hereto
expressly agree that the Arranger shall enjoy the benefits of the provisions of
Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and
shall have the right to enforce such provisions on its own behalf and in its
own name to the same extent as if it were a party to this Agreement.


 


9.6           Expenses;
Indemnification.  (i)  The Borrower shall
reimburse the Agent and the Arranger for any costs, internal charges and
out-of-pocket expenses (including attorneys’ fees and time charges of attorneys
for the Agent, which attorneys may be employees of the Agent) paid or incurred
by the Agent or the Arranger in connection with the preparation, negotiation,
execution, delivery, syndication, distribution (including, without limitation, via
the internet), review, amendment, modification, and administration of the Loan
Documents.  The Borrower also agrees to
reimburse the Agent, the Arranger, the Lenders and the LC Issuers for any
costs, internal charges and out-of-pocket expenses (including attorneys’ fees
and time charges of attorneys for the Agent, the Arranger, the Lenders and the
LC Issuers which attorneys may be employees of the Agent, the Arranger, the
Lenders and the LC Issuers) paid or incurred by the Agent, the Arranger, any
Lender or LC Issuer in connection with the collection and enforcement of the
Loan Documents (including any workout or restructuring).  Expenses being reimbursed by the Borrower
under this Section include, without limitation, costs and expenses
incurred in connection with the Reports described in the following
sentence.  The Borrower acknowledges that
from time to time JPMorgan Chase Bank may prepare and may distribute to the
Lenders (but shall have no obligation or duty to prepare or to distribute to
the Lenders) certain audit reports (the “Reports”) pertaining to the Borrower’s
assets for internal use by JPMorgan Chase Bank from information furnished to it
by or on behalf of the Borrower, after JPMorgan Chase Bank has exercised its
rights of inspection pursuant to this Agreement.


 


(i)            The Borrower hereby further agrees to
indemnify the Agent, the Arranger, each Lender, each LC Issuer, their
respective Related Parties against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all
expenses of litigation or preparation therefor whether or not the Agent, the
Arranger, any Lender or LC Issuer or any affiliate is a party thereto) which
any of them may pay or incur arising out of or relating to this Agreement, the other
Loan Documents, the transactions contemplated hereby or the direct or indirect
application or proposed application of the proceeds of any Credit Extension
hereunder except to the extent that they are determined in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of, or breach of its
obligations under this Agreement by, the party seeking indemnification.  The obligations of the Borrower under this Section 9.6
shall survive the termination of this Agreement.


 


9.7           Numbers of
Documents.  All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may 


 


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furnish
one to each of the Lenders, and the Agent shall promptly furnish the same to
each of the Lenders.


 


9.8           Accounting. 
Except as provided to the contrary herein, all accounting terms used
herein shall be interpreted and all accounting determinations hereunder shall
be made in accordance with GAAP in a manner consistent with that used in
preparing the financial statements referred to in Section 5.4, provided, that, for purposes of
determining compliance with the financial covenants contained in Article VI,
the application of Financial Accounting Standards Board Interpretation No. 46
shall be disregarded with respect to financial consolidation of any Person that
is not a Subsidiary.  If at
any time any change in GAAP would affect the computation of any financial ratio
or requirement set forth in any Loan Document, and the Borrower, the Agent or
the Required Lenders shall so request, the Agent, the Lenders and the Borrower
shall negotiate in good faith to amend such ratio or requirement to preserve
the original intent thereof in light of such change in GAAP (subject to the
approval of the Required Lenders), provided
that, until so amended, such
ratio or requirement shall continue to be computed in accordance with GAAP
prior to such change therein and the Borrower shall provide to the Agent and
the Lenders reconciliation statements showing the difference in such
calculation, together with the delivery of quarterly and annual financial
statements required hereunder.


 


9.9           Severability of
Provisions.  Any provision in any Loan Document that is
held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as
to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.


 


9.10         Nonliability of
Lenders.  The relationship between the Borrower on the
one hand and the Lenders, the LC Issuers and the Agent on the other hand shall
be solely that of borrower and lender. 
Neither the Agent, the Arranger nor any Lender or LC Issuer shall have
any fiduciary responsibilities to the Borrower. 
Neither the Agent, the Arranger nor any Lender or LC Issuer undertakes
any responsibility to the Borrower to review or inform the Borrower of any
matter in connection with any phase of the Borrower’s business or
operations.  The Borrower agrees that
neither the Agent, the Arranger nor any Lender or LC Issuer shall have
liability to the Borrower (whether sounding in tort, contract or otherwise) for
losses suffered by the Borrower in connection with, arising out of, or in any
way related to, the transactions contemplated and the relationship established
by the Loan Documents, or any act, omission or event occurring in connection
therewith, unless it is determined in a final non-appealable judgment by a
court of competent jurisdiction that such losses resulted from the gross
negligence or willful misconduct of the party from which recovery is
sought.  Neither the Agent, the Arranger
nor any Lender or LC Issuer shall have any liability with respect to, and the
Borrower hereby waives, releases and agrees not to sue for, any special, indirect,
consequential or punitive damages suffered by the Borrower in connection with,
arising out of, or in any way related to the Loan Documents or the transactions
contemplated thereby.


 


9.11         Confidentiality. 
The Agent and each Lender agrees to hold any confidential information
which it may receive from the Borrower in connection with this Agreement in
confidence, except for disclosure (i) to its Affiliates and to the Agent
and any other Lender and 


 


67













 


their
respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to such Lender or to a Transferee, (iii) to
regulatory officials, (iv) to any Person as requested pursuant to or as
required by law, regulation, or legal process, (v) to any Person in
connection with any legal proceeding to which it is a party, (vi) to its
direct or indirect contractual counterparties in swap agreements or to legal
counsel, accountants and other professional advisors to such counterparties, (vii) permitted
by Section 12.4, and (viii) to rating agencies if requested or
required by such agencies in connection with a rating relating to the Advances
hereunder.  Without limiting Section 9.4,
the Borrower agrees that the terms of this Section 9.11 shall set forth
the entire agreement between the Borrower and each Lender (including the Agent)
with respect to any confidential information previously or hereafter received
by such Lender in connection with this Agreement, and this Section 9.11
shall supersede any and all prior confidentiality agreements entered into by
such Lender with respect to such confidential information.


 


9.12         Nonreliance. 
Each Lender hereby represents that it is not relying on or looking to
any margin stock (as defined in Regulation U of the Fed. Board) for the
repayment of the Credit Extensions provided for herein.


 


9.13         Disclosure. 
The Borrower and each Lender hereby acknowledge and agree that JP Morgan
Chase Bank and/or its Affiliates from time to time may hold investments in,
make other loans to or have other relationships with the Borrower and its
Affiliates.


 


9.14         USA PATRIOT Act.  Each
Lender that is subject to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies
the Borrower that pursuant to the requirements of the Act, it is required to
obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act
and is or may be required (or may elect) to obtain comparable information with
respect to the Guarantors.


 


ARTICLE X


 


THE AGENT


 


10.1         Appointment;
Nature of Relationship.  JPMorgan
Chase Bank is hereby appointed by each of the Lenders as its contractual
representative (herein referred to as the “Agent”) hereunder and under each
other Loan Document, and each of the Lenders irrevocably authorizes the Agent
to act as the contractual representative of such Lender with the rights and
duties expressly set forth herein and in the other Loan Documents.  The Agent agrees to act as such contractual
representative upon the express conditions contained in this Article X.  Notwithstanding the use of the defined term “Agent,”
it is expressly understood and agreed that the Agent shall not have any
fiduciary responsibilities to any Lender by reason of this Agreement or any
other Loan Document and that the Agent is merely acting as the contractual
representative of the Lenders with only those duties as are expressly set forth
in this Agreement and the other Loan Documents. 
In its capacity as the Lenders’ contractual representative, the Agent (i) does
not hereby assume any fiduciary duties to any of the Lenders, (ii) is a “representative”
of the Lenders within the meaning of the term “secured party” as defined in the
New York Uniform


 


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Commercial
Code and (iii) is acting as an independent contractor, the rights and
duties of which are limited to those expressly set forth in this Agreement and
the other Loan Documents.  Each of the
Lenders hereby agrees to assert no claim against the Agent on any agency theory
or any other theory of liability for breach of fiduciary duty, all of which
claims each Lender hereby waives.


 


10.2         Powers. 
The Agent shall have and may exercise such powers under the Loan
Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto.  The Agent shall have no implied duties to the
Lenders, or any obligation to the Lenders to take any action thereunder except
any action specifically provided by the Loan Documents to be taken by the
Agent.


 


10.3         General Immunity. 
Neither the Agent nor any of its directors, officers, agents or
employees shall be liable to the Borrower, the Lenders or any Lender for any
action taken or omitted to be taken by it or them hereunder or under any other
Loan Document or in connection herewith or therewith except to the extent such
action or inaction is determined in a final non-appealable judgment by a court
of competent jurisdiction to have arisen from the gross negligence or willful
misconduct of such Person.


 


10.4         No Responsibility for Loans, Recitals, etc.  Neither the Agent nor any of its directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into, or verify (a) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without limitation,
any agreement by an obligor to furnish information directly to each Lender; (c) the
satisfaction of any condition specified in Article IV, except receipt of
items required to be delivered solely to the Agent; (d) the existence or
possible existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; (f) the
value, sufficiency, creation, perfection or priority of any Lien in any
collateral security; or (g) the financial condition of the Borrower or any
Subsidiary.


 


10.5         Action on Instructions of Lenders.  The Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders.  The Lenders hereby acknowledge that the Agent
shall be under no duty to take any discretionary action permitted to be taken
by it pursuant to the provisions of this Agreement or any other Loan Document
unless it shall be requested in writing to do so by the Required Lenders.  The Agent shall be fully justified in failing
or refusing to take any action hereunder and under any other Loan Document
unless it shall first be indemnified to its satisfaction by the Lenders pro
rata against any and all liability, cost and expense that it may incur by
reason of taking or continuing to take any such action.


 


10.6         Employment of Agents and Counsel.  The Agent may execute any of its duties as
Agent hereunder and under any other Loan Document by or through employees,
agents, and attorneys-in-fact and shall not be answerable to the Lenders,
except as to money or securities 


 


69













 


received
by it or its authorized agents, for the default or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care.  The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the
Lenders and all matters pertaining to the Agent’s duties hereunder and under
any other Loan Document.


 


10.7         Reliance on Documents; Counsel.  The Agent shall be entitled to rely upon any
Note, notice, consent, certificate, affidavit, letter, telegram, facsimile,
telex, electronic mail message, statement, paper or document believed by it in
good faith to be genuine and correct and to have been signed or sent by the
proper person or persons, and, in respect to legal matters, upon the opinion of
counsel selected by the Agent, which counsel may be employees of the
Agent.  For purposes of determining
compliance with the conditions specified in Sections 4.1 and 4.2, each Lender
that has signed this Agreement shall be deemed to have consented to, approved
or accepted or to be satisfied with, each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to a
Lender unless the Agent shall have received notice from such Lender prior to
the applicable date specifying its objection thereto.


 


10.8         Agent’s Reimbursement and Indemnification.  The Lenders agree to reimburse and indemnify
the Agent ratably in proportion to their respective Commitments (or, if the
Commitments have been terminated, in proportion to their Commitments
immediately prior to such termination) (i) for any amounts not reimbursed
by the Borrower for which the Agent is entitled to reimbursement by the
Borrower under the Loan Documents (but without limiting the Borrower’s
obligation to do so), (ii) for any other expenses incurred by the Agent on
behalf of the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents (including, without
limitation, for any expenses incurred by the Agent in connection with any
dispute between the Agent and any Lender or between two or more of the Lenders)
and (iii) for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of the Loan Documents or any other
document delivered in connection therewith or the transactions contemplated
thereby (including, without limitation, for any such amounts incurred by or
asserted against the Agent in connection with any dispute between the Agent and
any Lender or between two or more of the Lenders), or the enforcement of any of
the terms of the Loan Documents or of any such other documents, provided that (i) no Lender
shall be liable for any of the foregoing to the extent any of the foregoing is
found in a final non-appealable judgment by a court of competent jurisdiction
to have resulted from the gross negligence or willful misconduct of the Agent, (ii) any
indemnification required pursuant to Section 3.5(vii) shall,
notwithstanding the provisions of this Section 10.8, be paid by the
relevant Lender in accordance with the provisions thereof and (iii) no
Lender shall have any obligation to indemnify or reimburse the Agent with
respect to defaults by Borrower under any fee letter.  The obligations of the Lenders under this Section 10.8
shall survive payment of the Obligations and termination of this Agreement.


 


10.9         Notice of Default.  The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder (other than the Borrower’s failure to make a payment of principal,
interest or fees required to be made to the Agent hereunder) unless the Agent
has received written notice from a Lender or the Borrower referring to this
Agreement describing such Default or Unmatured Default and stating that such
notice is a 


 


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“notice
of default”.  In the event that the Agent
receives such a notice, the Agent shall give prompt notice thereof to the
Lenders.


 


10.10       Rights
as a Lender.  In the event the
Agent is a Lender, the Agent shall have the same rights and powers hereunder
and under any other Loan Document with respect to its Commitment and its Loans
as any Lender and may exercise the same as though it were not the Agent, and
the term “Lender” or “Lenders” shall, at any time when the Agent is a Lender,
unless the context otherwise indicates, include the Agent in its individual
capacity.  The Agent and its Affiliates
may accept deposits from, lend money to, and generally engage in any kind of
trust, debt, equity or other transaction, in addition to those contemplated by
this Agreement or any other Loan Document, with the Borrower or any of its
Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby
from engaging with any other Person.


 


10.11       Lender
Credit Decision.  Each Lender
acknowledges that it has, independently and without reliance upon the Agent,
the Arranger or any other Lender and based on the financial statements prepared
by the Borrower and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and the other Loan Documents. 
Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents. 
Except for any notice, report, document or other information expressly
required to be furnished to the Lenders by the Agent or Arranger hereunder,
neither the Agent nor the Arranger shall have any duty or responsibility
(either initially or on a continuing basis) to provide any Lender with any
notice, report, document, credit information or other information concerning
the affairs, financial condition or business of the Borrower or any of its
Affiliates that may come into the possession of the Agent or Arranger (whether
or not in their respective capacity as Agent or Arranger) or any of their
Affiliates.


 


10.12       Successor
Agent.  The Agent may resign
at any time by giving written notice thereof to the Lenders and the Borrower,
such resignation to be effective upon the appointment of a successor Agent or,
if no successor Agent has been appointed, forty-five days after the retiring
Agent gives notice of its intention to resign. 
The Agent may be removed at any time with or without cause by written
notice received by the Agent from the Required Lenders, such removal to be
effective on the date specified by the Required Lenders.  Upon any such resignation or removal, the
Required Lenders shall have the right to appoint, on behalf of the Borrower and
the Lenders, a successor Agent.  If no
successor Agent shall have been so appointed by the Required Lenders within
thirty days after the resigning Agent’s giving notice of its intention to
resign, then the resigning Agent may appoint, on behalf of the Borrower and the
Lenders, a successor Agent. 
Notwithstanding the previous sentence, the Agent may at any time without
the consent of the Borrower or any Lender, appoint any of its Affiliates which
is a commercial bank as a successor Agent hereunder.  If the Agent has resigned or been removed and
no successor Agent has been appointed, the Lenders may perform all the duties
of the Agent hereunder and the Borrower shall make all payments in respect of
the Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders.  No successor
Agent shall be deemed to be appointed hereunder until such successor Agent has
accepted the appointment.  Any such
successor Agent shall be a commercial bank having capital and retained 


 


71













 


earnings
of at least $100,000,000.  Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning or removed Agent.  Upon the effectiveness of the resignation or
removal of the Agent, the resigning or removed Agent shall be discharged from
its duties and obligations hereunder and under the Loan Documents.  After the effectiveness of the resignation or
removal of an Agent, the provisions of this Article X shall continue in
effect for the benefit of such Agent in respect of any actions taken or omitted
to be taken by it while it was acting as the Agent hereunder and under the
other Loan Documents.  In the event that
there is a successor to the Agent by merger, or the Agent assigns its duties
and obligations to an Affiliate pursuant to this Section 10.12, then the
term “Prime Rate” as used in this Agreement shall mean the prime rate, base
rate or other analogous rate of the new Agent.


 


10.13       Agent
and Arranger Fees.  The
Borrower agrees to pay to the Agent and the Arranger, for their respective
accounts, the fees agreed to by the Borrower, the Agent and the Arranger
pursuant to that certain letter agreement dated November 19, 2005, or as
otherwise agreed from time to time.


 


10.14       Delegation
to Affiliates.  The Borrower
and the Lenders agree that the Agent may delegate any of its duties under this
Agreement to any of its Affiliates.  Any
such Affiliate (and such Affiliate’s directors, officers, agents and employees)
which performs duties in connection with this Agreement shall be entitled to
the same benefits of the indemnification, waiver and other protective
provisions to which the Agent is entitled under Articles IX and X.


 


10.15       Co-Agent,
Documentation Agent, Managing Agent, Syndication Agent, etc.  Neither any of the Lenders identified in this
Agreement as a co-agent, documentation agent, managing agent or syndication
agent shall have any right, power, obligation, liability, responsibility or
duty under this Agreement other than those applicable to all Lenders as
such.  Without limiting the foregoing,
none of such Lenders shall have or be deemed to have a fiduciary relationship
with any Lender.  Each Lender hereby
makes the same acknowledgments with respect to such Lenders as it makes with
respect to the Agent in Section 10.11.


 


ARTICLE XI


 


SETOFF; RATABLE
PAYMENTS


 


11.1         Setoff.  In
addition to, and without limitation of, any rights of the Lenders under
applicable law, if the Borrower becomes insolvent, however evidenced, or any
Default occurs, any and all deposits (including all account balances, whether
provisional or final and whether or not collected or available) and any other
Indebtedness at any time held or owing by any Lender or any Affiliate of any
Lender to or for the credit or account of the Borrower may be offset and
applied toward the payment of the Obligations owing to such Lender, whether or
not the Obligations, or any part thereof, shall then be due.


 


11.2         Ratable Payments. 
If any Lender, whether by setoff or otherwise, has payment made to it
upon its Revolving Credit Exposure (other than payments received pursuant to Section 3.1,
3.2, 3.4 or 3.5) in a greater proportion than that received by any other
Lender, such Lender agrees, promptly upon demand, to purchase a portion of the
Aggregate Credit Exposure held by 


 


72













 


the
other Lenders so that after such purchase each Lender will hold its Pro Rata
Share of the Aggregate Credit Exposure. 
If any Lender, whether in connection with setoff or amounts which might
be subject to setoff or otherwise, receives collateral or other protection for
its Obligations or such amounts which may be subject to setoff, such Lender
agrees, promptly upon demand, to take such action necessary such that all
Lenders share in the benefits of such collateral ratably in proportion to their
respective Pro Rata Shares of the Revolving Credit Exposure.  In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made.


 


ARTICLE XII


 


BENEFIT OF
AGREEMENT; ASSIGNMENTS; PARTICIPATIONS


 


12.1         Successors and Assigns.  (a)  The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
an LC Issuer that issues any Facility LC), except that (i) other than
pursuant to a merger consented to by the Required Lenders, the Borrower may not
assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender (and any attempted assignment or
transfer by the Borrower without such consent shall be null and void) and (ii) no
Lender may assign or otherwise transfer its rights or obligations hereunder
except in accordance with this Section. 
Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby (including any Affiliate of an LC
Issuer that issues any Facility LC), Participants (to the extent provided in Section 12.2)
and, to the extent expressly contemplated hereby, the Arranger and the Related Parties
of each of the Agent, the LC Issuers and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.


 


(a)                                  (i)  Subject to the conditions set
forth in paragraph (b)(ii) below, any Lender may assign to one or more
assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time owing
to it) with the prior written consent (such consent not to be unreasonably
withheld or delayed) of:


 


(A)          the Borrower, provided that no consent of the Borrower shall
be required for an assignment to a Lender, an Affiliate of a Lender, an
Approved Fund or, if a Default has occurred and is continuing, any other
assignee; and


 


(B)                                the Agent, provided that no consent of
the Agent shall be required for an assignment of any Commitment to an assignee
that is a Lender, an Affiliate of a Lender or an Approved Fund.


 


(ii)           Assignments shall
be subject to the following additional conditions:


 


(A)          except in the case of
an assignment to a Lender or an Affiliate of a Lender or an assignment of the
entire remaining amount of the assigning Lender’s Commitment or Loans of any
Class, the amount of the Commitment or Loans of the assigning Lender subject to
each such assignment (determined as of the date the 


 


73













 


Assignment and Assumption with respect to such
assignment is delivered to the Agent) shall not be less than $1,000,000 unless
each of the Borrower and the Agent otherwise consent, provided that no such
consent of the Borrower shall be required if a Default has occurred and is
continuing;


 


(B)           each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement, provided that this clause shall not be construed
to prohibit the assignment of a proportionate part of all the assigning Lender’s
rights and obligations in respect of one Class of Commitments or Loans;


 


(C)           the parties to each
assignment shall execute and deliver to the Agent an Assignment and Assumption,
together with a processing and recordation fee of $3,500; and


 


(D)          the assignee, if it
shall not be a Lender, shall deliver to the Agent an Administrative
Questionnaire.


 


(iii)                              Subject to acceptance and recording
thereof pursuant to paragraph (b)(iv) of this Section, from and after the
effective date specified in each Assignment and Assumption the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned by
such Assignment and Assumption, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Assumption, be released from
its obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.19.10, 2.19.11, 2.19.12, 3.1, 3.2,
3.4, 3.5, 6.8(c), 9.6 and 9.10).  Any
assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this Section 12.1 shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such
rights and obligations in accordance with Section 12.2.


 


(iv)                             The Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans and Reimbursement Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, absent manifest error, and the Borrower, the Agent, the LC Issuer
and the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Borrower, the LC Issuers and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.


 


(v)                                Upon its receipt of a duly completed
Assignment and Assumption executed by an assigning Lender and an assignee, the
assignee’s completed 


 


74













 


Administrative Questionnaire (unless the assignee
shall already be a Lender hereunder), the processing and recordation fee
referred to in paragraph (b) of this Section and any written consent
to such assignment required by paragraph (b) of this Section, the Agent
shall accept such Assignment and Assumption and record the information
contained therein in the Register; provided that if either the assigning Lender
or the assignee shall have failed to make any payment required to be made by it
pursuant to Section 2.18, 2.19.6, 2.22(d), 10.8 or 11.2, the Agent shall
have no obligation to accept such Assignment and Assumption and record the
information therein in the Register unless and until such payment shall have
been made in full, together with all accrued interest thereon.  No assignment shall be effective for purposes
of this Agreement unless it has been recorded in the Register as provided in
this paragraph.


 


12.2                          Participations.  (a) Any
Lender may, without notice to or the consent of the Borrower, the Agent, any
other Lender or any LC Issuer, sell participations to one or more banks or
other entities (a “Participant”) in all or a portion of such Lender’s rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations and (iii) the Borrower, the Agent, the and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant,
agree to any amendment, modification or waiver described in Section 8.2
that requires the consent of all Lenders. 
Subject to paragraph (b) of this Section, the Borrower agrees that
each Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4
and 3.5 to the same extent as if it were a Lender and had acquired its interest
by assignment pursuant to Section 12.1. 
To the extent permitted by law, each Participant also shall be entitled
to the benefits of Section 11.1 as though it were a Lender, provided such
Participant agrees to be subject to Section 11.2 as though it were a
Lender.


 


(a)           A
Participant shall not be entitled to receive any greater payment under Section 3.1,
3.2 and 3.5 than the applicable Lender would have been entitled to receive with
respect to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrower’s prior written
consent.  A Participant that would be a
Non-U.S. Lender if it were a Lender shall not be entitled to the benefits of Section 3.5
unless the Borrower is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.5(e) as
though it were a Lender.


 


12.3                          Pledge to
Federal Reserve Bank.  Any Lender
may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of such Lender, including
without limitation any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided
that no such pledge or assignment of a security interest shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.


 


75













 


12.4                          Dissemination of
Information.  The Borrower authorizes each lender to
disclose to any Participant, assignee of an interest in the Loan Documents or
any other Person acquiring an interest in the Loan Documents by operation of
law (each a “Transferee”) and any prospective Transferee any and all
information in such Lender’s possession concerning the creditworthiness of the
Borrower and its Subsidiaries, including without limitation any information
contained in any Reports; provided that each Transferee and prospective
Transferee agrees to be bound by Section 9.11 of this Agreement.


 


ARTICLE XIII


 


NOTICES


 


13.1                          Notices;
Effectiveness; Electronic Communication


 


(a)                                  Notices
Generally.  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)            if to the Borrower,
at its address or telecopier number set forth on the signature page hereof;


 


(ii)           if to the Agent, at
its address or telecopier number set forth on the signature page hereof;


 


(iii)          if to a Lender, to
it at its address or telecopier number set forth in its Administrative
Questionnaire.  The Agent shall promptly
furnish such information to the Borrower.


 


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)                                 Electronic
Communications.  Notices and other
communications to the 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 the Agent or as otherwise
determined by the Agent, provided that the foregoing shall not apply to notices
to any Lender or LC Issuer pursuant to Article II if such Lender or LC
Issuer, as applicable, has notified the Agent that it is incapable of receiving
notices under such Article by electronic communication.  The Agent or the Borrower may, in its
respective discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it or
as it otherwise determines, provided that such determination or approval may be
limited to particular notices or communications.


 


76













 


Unless the 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 given during the normal business
hours of the recipient, such notice or communication shall be deemed to have
been given 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)           Change of Address, Etc.  Any party hereto may change its address or
telecopier number for notices and other communications hereunder by notice to
the other parties hereto.


 


ARTICLE XIV


 


COUNTERPARTS; INTEGRATION;
EFFECTIVENESS; ELECTRONIC EXECUTION


 


14.1                           Counterparts;
Effectiveness.  This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. 
Except as provided in Article IV, this Agreement shall become
effective when it shall have been executed by the Agent and when the Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the parties hereto, and thereafter shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement.


 


14.2                           Electronic
Execution of Assignments.  The words “execution,”
“signed,” “signature,” and words of like import in any assignment and
assumption agreement shall be deemed to include electronic signatures or the
keeping of records in electronic form, each of which shall be of the same legal
effect, validity or enforceability as a manually executed signature or the use
of a paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, or any other state laws based on the
Uniform Electronic Transactions Act.


 


ARTICLE XV


 


CHOICE OF LAW; CONSENT
TO JURISDICTION; WAIVER OF JURY TRIAL


 


15.1                           CHOICE OF LAW.  THE LOAN
DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW
PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (BUT WITHOUT
REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW 


 


77













 


YORK, BUT GIVING
EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.


 


15.2                           CONSENT TO JURISDICTION.  THE BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE
BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS
AN INCONVENIENT FORUM.  NOTHING HEREIN
SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER OR LC ISSUER TO BRING
PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE AGENT OR ANY LENDER OR LC ISSUER OR ANY AFFILIATE OF THE AGENT OR
ANY LENDER OR LC ISSUER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE
BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.


 


15.3                           WAIVER OF JURY TRIAL.  THE BORROWER,
THE AGENT AND EACH LENDER AND LC ISSUER HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.


 


78












 


IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.


 


 


	
   

  	
  THE RYLAND GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Gordon A. Milne

  
	
   

  	
   

  	
  Executive Vice
  President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Ryland
  Group, Inc.

  
	
   

  	
   

  	
  24025 Park Sorrento,
  Suite 400

  
	
   

  	
   

  	
  Calabasas, CA 91302

  
	
   

  	
   

  	
  Attention: Cathey S.
  Lowe

  
	
   

  	
   

  	
  Telephone:

  	
  (818) 223-7530

  
	
   

  	
   

  	
  FAX:

  	
  (818) 223-7685

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Ryland
  Group, Inc.

  
	
   

  	
   

  	
  24025 Park Sorrento,
  Suite 400

  
	
   

  	
   

  	
  Calabasas, CA 91302

  
	
   

  	
   

  	
  Attention: Timothy J.
  Geckle

  
	
   

  	
   

  	
  Telephone:

  	
  (818) 223-7575

  
	
   

  	
   

  	
  FAX:

  	
  (818) 223-7685

  



 


79













 


	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  
	
   

  	
  Individually and as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
  JPMorgan Chase Bank,
  N.A.

  
	
   

  	
   

  	
  Loan and Agency
  Services Group

  
	
   

  	
   

  	
  1111 Fannin — 8th Fl.

  
	
   

  	
   

  	
  Houston, TX  77002

  
	
   

  	
   

  	
  Attention:  Kimberly Brown

  
	
   

  	
   

  	
  Telephone: 

  	
  (713) 750-2880

  
	
   

  	
   

  	
  FAX:

  	
  (713) 750-2782

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  JPMorgan Chase Bank,
  N.A.

  
	
   

  	
   

  	
  707 Travis, Floor 6, Suite TX2-NO47

  
	
   

  	
   

  	
  Houston, TX  77002

  
	
   

  	
   

  	
  Attention:  Kent Kaiser

  
	
   

  	
   

  	
  Telephone:

  	
  (713) 216-8699

  
	
   

  	
   

  	
  FAX:

  	
  (713) 216-6190

  
								



 













 


PRICING SCHEDULE


 


	
   

  	
   

  	
   

  	
  Level I

  	
   

  	
   

  	
  Level II

  	
   

  	
   

  	
  Level III

  	
   

  	
   

  	
  Level IV

  	
   

  	
   

  	
  Level V

  
	
  

  

  Rating

  	
   

  	
   

  	
  

  

  BBB+/Baa1

  	
   

  	
   

  	
  

  

  BBB/Baa2

  	
   

  	
   

  	
  

  

  BBB-/Baa3

  	
   

  	
   

  	
  

  

  BB+/Bal

  	
   

  	
   

  	
  BB/Ba2 or

  below or no

  Rating



  
	
  Leverage Ratio

  	
   

  	
   

  	
  < 30%

  	
   

  	
   

  	
  > 30% < 40%

  	
   

  	
   

  	
  > 40% < 50%

  	
   

  	
   

  	
  > 50% < 55%

  	
   

  	
   

  	
  > 55%

  
	
  Applicable Margin

  	
   

  	
   

  	
  0.50%

  	
   

  	
   

  	
  0.625%

  	
   

  	
   

  	
  0.75%

  	
   

  	
   

  	
  1.00%

  	
   

  	
   

  	
  1.375%

  
	
  Applicable Fee Rate

  	
   

  	
   

  	
  0.125%

  	
   

  	
   

  	
  0.15%

  	
   

  	
   

  	
  0.175%

  	
   

  	
   

  	
  0.20%

  	
   

  	
   

  	
  0.225%

  



 


“Rating” means the higher of the publicly announced ratings of the
Borrower’s senior unsecured public debt by Moody’s and S&P.  If only one of Moody’s or S&P announces a
rating of the Borrower’s senior unsecured public debt, no Rating shall be
deemed to exist.


 


If the Level as determined by the Rating is
not the same as the Level as determined by the Leverage Ratio, but no more than
one Level apart, then the Applicable Margin and the Applicable Fee Rate shall
correspond to the Level which causes pricing to be lower.  If the Level as determined by the Rating is
more than one Level different from the Level as determined by the Leverage
Ratio, then the Applicable Margin and the Applicable Fee Rate shall be one
Level lower (i.e., lower pricing) than the higher of such two Levels.


 


The Applicable Margin and Applicable Fee Rate shall be determined in
accordance with the foregoing table based on the Borrower’s status as reflected
in the then most recent Ratings and the then most recent annual or quarterly
financial statements of the Borrower delivered pursuant to Section 6.1(a) or
(b) (the “Financials”). 
Adjustments, if any, to the Applicable Margin or Applicable Fee Rate
resulting from changes in the Leverage Ratio shall be effective five Business
Days after the Agent has received the applicable Financials.  If the Borrower fails to deliver the
Financials to the Agent at the time required pursuant to Section 6.1, then
the Applicable Margin and Applicable Fee Rate shall be the highest Applicable
Margin and Applicable Fee Rate set forth in the foregoing table until five days
after such Financials are so delivered. 
The Rating in effect on any date for the purposes of this Schedule is
that in effect at the close of business on such date.


 













 


EXHIBIT A


 


BORROWING
BASE CERTIFICATE


 


The
undersigned, being the duly elected                                     
of The Ryland Group, Inc. (the “Company”) hereby certifies that the
following is a true and correct calculation of the Borrowing Base as of                                     
(the “Statement Date”). 
Capitalized terms used but not defined herein shall have the meanings
set forth in the Credit Agreement dated as of January 12, 2006, as
amended, extended, supplemented or otherwise modified from time to time (the “Agreement”),
by and among the Company, the several financial institutions party thereto (the
“Lenders”) and JPMorgan Chase Bank, N.A., as agent for the Lenders.


 


	
  Period Ending/Statement
  Date:

  	
   

  	
                 , 200  

  



 


	
   

  	
   

  	
  ($000’s)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Homes
  Proceeds Receivables

  	
   

  	
  $

  	
   

  	
   

  
	
  Sold
  – Construction in Progress/Completed

  	
   

  	
  $

  	
   

  	
   

  
	
  Unsold
  – Construction in Progress/Completed

  	
   

  	
  $

  	
   

  	
   

  
	
  Finished
  Lots

  	
   

  	
  $

  	
   

  	
   

  
	
  Land
  Under Development

  	
   

  	
  $

  	
   

  	
   

  
	
  Raw
  Land – Entitled

  	
   

  	
  $

  	
   

  	
   

  
	
  Raw
  Land – Unentitled

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total
  Inventory

  	
   

  	
  $

  	
   

  	
   

  



 


Borrowing Base
Calculation


 


A.            Borrowing Base.


 


1.  The following Unencumbered Real Estate
Inventory and Home Proceeds Receivable of the Company and any Guarantor qualify
for inclusion in the Borrowing Base (all figures are as of Statement Date):


 


	
  90%
  of Home Proceeds Receivable

  	
   

  	
  $

  	
   

  	
   

  
	
  90%
  of the book value of Sold Construction in Progress and Sold 

  Completed Units

  	
   

  	
  $

  	
   

  	
   

  
	
  80%
  of the book value of Unsold Construction in Progress and Unsold 

  Completed Units

  	
   

  	
  $

  	
   

  	
   

  
	
  70%
  of the book value of Finished Lots

  	
   

  	
  $

  	
   

  	
   

  
	
  50%
  of the book value of Land Under Development

  	
   

  	
  $

  	
   

  	
   

  
	
  25%
  of the book value of Raw Land – Entitled

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
   

  	
   

  



 













 


	
  2. The sum of 70% of
  Finished Lots, 50% of Land Under Development and 25% of Raw Land Entitled
  shall not exceed 40% of the Borrowing Base

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  70%
  of the book value of Finished Lots

  	
   

  	
  $

  	
   

  	
   

  
	
  50%
  of the book value of Land Under Development

  	
   

  	
  $

  	
   

  	
   

  
	
  25%
  of the book value of Raw Land – Entitled

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  40%
  of Borrowing Base

  	
   

  	
  $

  	
   

  	
   

  
	
  Cushion/(Violation)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.
  25% of the book value of Raw Land – Entitled shall not exceed 10% of the
  Borrowing Base

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  25%
  of book value of Raw Land – Entitled

  	
   

  	
  $

  	
   

  	
   

  
	
  10%
  of Borrowing Base

  	
   

  	
  $

  	
   

  	
   

  
	
  Cushion/(Violation)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.
  The Total Borrowing Base equals the total in item 1 above

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less adjustments (if any) required under
  item 2 or 3 above

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total
  Borrowing Base

  	
  $

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.          Senior
  Permitted Debt. The following figures are as of the Statement Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Senior
  Permitted Debt:

  	
   

  	
   

  	
   

  	
   

  
	
  Loans,
  including Swing Line Loans

  	
   

  	
  $

  	
   

  	
   

  
	
  Outstanding
  Facility LCs issued under the Agreement

  	
   

  	
  $

  	
   

  	
   

  
	
  Reimbursement
  Obligations

  	
   

  	
  $

  	
   

  	
   

  
	
  Other
  Senior Permitted Debt (as itemized in Annex I)

  	
   

  	
  $

  	
   

  	
   

  
	
  Total
  Senior Permitted Debt

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Borrowing
  Base surplus/(deficit)

  	
   

  	
  $

  	
   

  	
   

  
							



 


IN
WITNESS WHEREOF, the undersigned has executed this Borrowing Base Certificate
as of                                   ,
200  .







                                                 


 


2













 


ANNEX I


 


TO BORROWING BASE
CERTIFICATE


 


	
  Description
  of other Senior Permitted Debt  

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  a.

  	
   

  	
  8.00% Senior Notes due
  8/15/06

  	
   

  	
  $

  	
   

  	
   

  
	
  b.

  	
   

  	
  5.375% Senior Notes due
  6/1/08

  	
   

  	
  $

  	
   

  	
   

  
	
  c.

  	
   

  	
  5.375% Senior Notes due
  5/15/12

  	
   

  	
  $

  	
   

  	
   

  
	
  d.

  	
   

  	
  5.375% Senior Notes due
  1/15/15

  	
   

  	
  $

  	
   

  	
   

  
	
  e.

  	
   

  	
  Third party financial
  LC’s

  	
   

  	
  $

  	
   

  	
   

  
	
  f.

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  



 


3












 


EXHIBIT B


 


GUARANTY


 


THIS
GUARANTY (this
“Guaranty”) is made as of January 12, 2006 by the undersigned parties
hereto (collectively, the “Guarantors”) in favor of the Agent, for the benefit
of the Lenders under the Credit Agreement referred to below.


 


WITNESSETH:


 


WHEREAS, The Ryland Group, Inc., a Maryland
corporation (the “Borrower”) and JPMorgan Chase Bank, N.A., as Agent (the “Agent”),
and certain other Lenders from time to time party thereto have entered into a
certain Credit Agreement dated as of January 12, 2006 (as same may be
amended or modified from time to time, the “Credit Agreement”), providing,
subject to the terms and conditions thereof, for extensions of credit to be
made by the Lenders to the Borrower;


 


WHEREAS, it is a condition precedent to the
execution of the Credit Agreement by the Agent and the Lenders that each of the
Guarantors execute and deliver this Guaranty whereby each of the Guarantors
shall guarantee the payment when due, subject to Section 9 hereof, of all
Guaranteed Obligations, as defined below; and


 


WHEREAS, in consideration of the financial and
other support that the Borrower has provided, and in consideration of such
financial and other support as the Borrower may in the future provide, to the
Guarantors, and in order to induce the Lenders and the Agent to enter into the
Credit Agreement, and because each Guarantor has determined that executing this
Guaranty is in its interest and to its financial benefit, each of the
Guarantors is willing to guarantee the obligations of the Borrower under the
Credit Agreement, any Note and any other Loan Documents;


 


NOW,
THEREFORE,
in consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:


 


SECTION 1.                               Defined Terms. “Guaranteed Obligations” is defined in Section 3
below.  Other capitalized terms used
herein but not defined herein shall have the meaning set forth in the Credit
Agreement.


 


SECTION 2.                               Representations
and Warranties.  Each of the Guarantors
represents and warrants (which representations and warranties shall be deemed
to have been renewed upon each Credit Extension Date under the Credit
Agreement) that:


 


(a)           Such Guarantor has all requisite
power and authority to execute and deliver, and to perform all of its
obligations under, this Guaranty.


 


(b)          The
execution and delivery by such Guarantor of, and the performance by such
Guarantor of its obligations under, this Guaranty have been duly authorized by
all necessary action and do not and will not: 
(1) require any consent or approval not heretofore obtained of 


 


1













 


any of its stockholders, security holders or
creditors; (2) violate any provision of such Guarantor’s articles or
certificate of incorporation, limited partnership or formation or bylaws,
partnership agreement or operating agreement; (3) result in or require the
creation or imposition of any Lien, claim or encumbrance upon or with respect
to any Property now owned or leased or hereafter acquired by such Guarantor; (4) violate
any provision of any Law, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to such
Guarantor; or (5) result in a breach of or constitute a default under, or
cause or permit the acceleration of any obligation owed under, any Material
Indebtedness Agreement.


 


(c)           Such Guarantor is not in default
under any Law, order, writ, judgment, injunction, decree, determination or
award described in subparagraph (b)(4) above
or any Material Indebtedness Agreement in any respect that is materially
adverse to the interests of any Lender or that has a Material Adverse Effect.


 


(d)           No authorization, consent, approval,
order, license, permit or exemption from, or filing, registration or
qualification with, any Governmental Authority not heretofore obtained is or
will be required under applicable Law to authorize or permit the execution and
delivery by such Guarantor of, and the performance by it of all of its
obligations under, this Guaranty.


 


(e)           This Guaranty constitutes such
Guarantor’s legal, valid and binding obligations enforceable against such
Guarantor in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other
similar laws relating to or affecting creditors’ rights generally or equitable
principles relating to the granting of specific performance or other equitable
remedies as a matter of judicial discretion.


 


SECTION 3.                              The Guaranty. 
Subject to Section 9 hereof, each of the Guarantors hereby
absolutely, irrevocably and unconditionally guarantees, as primary obligor and
not as surety, the full and punctual payment (whether at stated maturity, upon
acceleration or early termination or otherwise, and at all times thereafter, at
the time and place and in the manner provided for in the Credit Agreement) and
performance of the Obligations, including without limitation any such
Obligations incurred or accrued during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, whether or not allowed or
allowable in such proceeding (collectively, subject to the provisions of Section 9
hereof, being referred to collectively as the “Guaranteed Obligations”).  Upon failure by the Borrower to pay
punctually any such amount, each of the Guarantors agrees that it shall
forthwith on demand pay to the Agent for the benefit of the Lenders, the amount
not so paid at the place and in the manner specified in the Credit Agreement,
any Note or any other Loan Document, as the case may be.  This Guaranty is a continuing guaranty of
payment and not of collection.  Each of
the Guarantors waives any right to require the Agent or any Lender to sue the
Borrower, any other guarantor, or any other Person obligated for all or any
part of the Guaranteed Obligations, or otherwise to enforce its payment against
any collateral securing all or any part of the Guaranteed Obligations.


 


SECTION 4.                              Guaranty
Unconditional.  Subject to Section 9 hereof, the
obligations of each of the Guarantors hereunder shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:


 


2













 


(i)            any
extension, renewal, settlement, compromise, waiver or release in respect of any
of the Guaranteed Obligations, by operation of law or otherwise, or any
obligation of any other guarantor of any of the Guaranteed Obligations, or any
default, failure or delay, willful or otherwise, in the payment or performance
of the Guaranteed Obligations;


 


(ii)           any
modification or amendment of or supplement to the Credit Agreement, any Note or
any other Loan Document;


 


(iii)                              any release, nonperfection or invalidity
of any direct or indirect security for any obligation of the Borrower under the
Credit Agreement, any Note, any other Loan Document or any obligations of any
other guarantor of any of the Guaranteed Obligations, or any action or failure
to act by the Agent, any Lender or any Affiliate of any Lender with respect to
any collateral securing all or any part of the Guaranteed Obligations;


 


(iv)          any
change in the corporate existence, structure or ownership of the Borrower or
any other guarantor of any of the Guaranteed Obligations, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the Borrower,
or any other guarantor of the Guaranteed Obligations, or its assets or any
resulting release or discharge of any obligation of the Borrower or any other
guarantor of any of the Guaranteed Obligations;


 


(v)           the
existence of any claim, setoff or other rights which the Guarantors may have at
any time against the Borrower, any other guarantor of any of the Guaranteed
Obligations, the Agent, any Lender or any other Person, whether in connection
herewith or any unrelated transactions;


 


(vi)                              any invalidity or unenforceability
relating to or against the Borrower, or any other guarantor of any of the
Guaranteed Obligations, for any reason related to the Credit Agreement, any
Note, any other Loan Document or any provision of applicable law or regulation
purporting to prohibit the payment by the Borrower, or any other guarantor of
the Guaranteed Obligations, of the principal of or interest on any Note or any
other amount payable by the Borrower under the Credit Agreement, any Note or
any other Loan Document;


 


(vii)         any
law, regulation or order of any jurisdiction, or any other event affecting any
term of any Guaranteed Obligation or any Lender’s rights with respect thereto;
or


 


3













 


(viii)        any
other act or omission to act or delay of any kind by the Borrower, any other
guarantor of the Guaranteed Obligations, the Agent, any Lender or any other
Person or any other circumstance whatsoever which might, but for the provisions
of this paragraph, constitute a legal or equitable discharge of any Guarantor’s
obligations hereunder.


 


SECTION 5.                              Discharge Only
Upon Payment In Full: Reinstatement In Certain Circumstances. 
Each of the Guarantor’s obligations hereunder shall remain in full force
and effect until all Guaranteed Obligations shall have been indefeasibly paid
in full and the Commitments under the Credit Agreement shall have terminated or
expired.  If at any time any payment of
the principal of or interest on any Note or any other amount payable by the
Borrower or any other party under the Credit Agreement, any Note or any other
Loan Document is rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, each of the
Guarantor’s obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.


 


SECTION 6.                              Waivers. 
Each of the Guarantors irrevocably waives acceptance hereof,
presentment, demand, protest and, to the fullest extent permitted by law, any
notice not provided for herein, as well as any requirement that at any time any
action be taken by any Person against the Borrower, any other guarantor of any
of the Guaranteed Obligations, or any other Person.


 


SECTION 7.                              Subordination;
Subrogation.  Each of the Guarantors hereby subordinates to
the Guaranteed Obligations all indebtedness or other liabilities now or
hereafter payable to such Guarantor by the Borrower or by any other
Guarantor.  Each of the Guarantors hereby
further agrees not to assert any right, claim or cause of action, including,
without limitation, a claim for subrogation, reimbursement, indemnification or
otherwise, against the Borrower arising out of or by reason of this Guaranty or
the obligations hereunder, including, without limitation, the payment or
securing or purchasing of any of the Guaranteed Obligations by any of the
Guarantors unless and until the Guaranteed Obligations are indefeasibly paid in
full and all Commitments have terminated or expired.


 


SECTION 8.                              Stay of
Acceleration.  If acceleration of the time for payment of
any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, any Note or any other
Loan Document shall nonetheless be payable by each of the Guarantors hereunder
forthwith on demand by the Agent made at the request of the Required Lenders.


 


SECTION 9.                              Limitation on
Obligations.
(a) The provisions of this Guaranty are severable, and in any action or
proceeding involving any state corporate law, or any state, federal or foreign
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under this Guaranty
would otherwise be held or determined to be avoidable, invalid or unenforceable
on account of the amount of such Guarantor’s liability under this Guaranty,
then, notwithstanding any other provision of this Guaranty to the contrary, the
amount of such liability shall, without any further action by the 


 


4













 


Guarantors, the Agent or
any Lender, be automatically limited and reduced to the highest amount that is
valid and enforceable as determined in such action or proceeding (such highest
amount determined hereunder being the relevant Guarantor’s “Maximum Liability”).  This Section 9(a) with respect to
the Maximum Liability of the Guarantors is intended solely to preserve the
rights of the Agent hereunder to the maximum extent not subject to avoidance
under applicable law, and neither the Guarantor nor any other person or entity
shall have any right or claim under this Section 9(a) with respect to
the Maximum Liability, except to the extent necessary so that the obligations
of the Guarantors hereunder shall not be rendered voidable under applicable
law.


 


(b)           Each
of the Guarantors agrees that the Guaranteed Obligations may at any time and
from time to time exceed the Maximum Liability of each Guarantor, and may
exceed the aggregate Maximum Liability of all other Guarantors, without
impairing this Guaranty or affecting the rights and remedies of the Agent
hereunder.  Nothing in this Section 9(b) shall
be construed to increase any Guarantor’s obligations hereunder beyond its
Maximum Liability.


 


(c)           In
the event any Guarantor (a “Paying Guarantor”) shall make any payment or
payments under this Guaranty or shall suffer any loss as a result of any
realization upon any collateral granted by it to secure its obligations under
this Guaranty, each other Guarantor (each a “Non-Paying Guarantor”) shall
contribute to such Paying Guarantor an amount equal to such Non-Paying
Guarantor’s “Pro Rata Share” of such payment or payments made, or losses
suffered, by such Paying Guarantor.  For
the purposes hereof, each Non-Paying Guarantor’s “Pro Rata Share” with respect
to any such payment or loss by a Paying Guarantor shall be determined as of the
date on which such payment or loss was made by reference to the ratio of (i) such
Non-Paying Guarantor’s Maximum Liability as of such date (without giving effect
to any right to receive, or obligation to make, any contribution hereunder) or,
if such Non-Paying Guarantor’s Maximum Liability has not been determined, the
aggregate amount of all monies received by such Non-Paying Guarantor from the
Borrower after the date hereof (whether by loan, capital infusion or by other
means) to (ii) the aggregate Maximum Liability of all Guarantors hereunder
(including such Paying Guarantor) as of such date (without giving effect to any
right to receive, or obligation to make, any contribution hereunder), or to the
extent that a Maximum Liability has not been determined for any Guarantors, the
aggregate amount of all monies received by such Guarantors from the Borrower
after the date hereof (whether by loan, capital infusion or by other means).  Nothing in this Section 9(c) shall
affect any Guarantor’s several liability for the entire amount of the
Guaranteed Obligations (up to such Guarantor’s Maximum Liability).  Each of the Guarantors covenants and agrees
that its right to receive any contribution under this Guaranty from a Non-Paying
Guarantor shall be subordinate and junior in right of payment to all the
Guaranteed Obligations.  The provisions
of this Section 9(c) are for the benefit of both the Agent and the
Guarantors and may be enforced by any one, or more, or all of them in
accordance with the terms hereof.


 


SECTION 10.         Notices.  All notices, requests and other
communications to any party hereunder shall be given or made by telecopier or
other writing and telecopied, or mailed or delivered to the intended recipient
at its address or telecopier number set forth on the signature pages hereof
or such other address or telecopy number as such party may hereafter specify
for such purpose by notice to the Agent in accordance with the provisions of Section 13.1
of the Credit Agreement.  Except as
otherwise provided in this Guaranty, all such communications shall be deemed to
have been duly given when transmitted by telecopier, or personally delivered 


 


5













 


or, in the case of
a mailed notice sent by certified mail return-receipt requested, on the date
set forth on the receipt (provided, that any refusal to accept any such notice
shall be deemed to be notice thereof as of the time of any such refusal), in
each case given or addressed as aforesaid.


 


SECTION 11.         No Waivers. 
No failure or delay by the Agent or any Lenders in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.  The rights and remedies provided in this
Guaranty, the Credit Agreement, any Note or the other Loan Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.


 


SECTION 12.         No Duty to Advise.  Each of the Guarantors assumes all
responsibility for being and keeping itself informed of the Borrower’s
financial condition and assets, and of all other circumstances bearing upon the
risk of nonpayment of the Guaranteed Obligations and the nature, scope and
extent of the risks that each of the Guarantors assumes and incurs under this
Guaranty, and agrees that neither the Agent nor any Lender has any duty to
advise any of the Guarantors of information known to it regarding those
circumstances or risks.


 


SECTION 13.         Successors and Assigns.  This Guaranty is for the benefit of the Agent
and the Lenders and their respective successors and permitted assigns and in
the event of an assignment of any amounts payable under the Credit Agreement,
any Note or any other Loan Documents, the rights hereunder, to the extent
applicable to the indebtedness so assigned, shall be transferred with such
indebtedness.  This Guaranty shall be
binding upon each of the Guarantors and their respective successors and
permitted assigns.


 


SECTION 14.         Changes in Writing.  Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by each of the Guarantors and the Agent with the consent of the
Required Lenders or all of the Lenders as may be required pursuant to the
Credit Agreement.


 


SECTION 15.         Costs of Enforcement.  Each of the Guarantors agrees to pay all
costs and expenses including, without limitation, all court costs and attorneys’
fees and expenses paid or incurred by the Agent or any Lender or any Affiliate
of any Lender in endeavoring to collect all or any part of the Guaranteed
Obligations from, or in prosecuting any action against, the Borrower, the
Guarantors or any other guarantor of all or any part of the Guaranteed
Obligations.


 


SECTION 16.         GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL.  THIS GUARANTY SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK.  EACH OF THE GUARANTORS HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT,
AND ANY NEW YORK STATE COURT, SITTING IN NEW YORK, NEW YORK AND FOR PURPOSES OF
ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY (INCLUDING, WITHOUT
LIMITATION, ANY OF THE OTHER LOAN DOCUMENTS) OR THE TRANSACTIONS CONTEMPLATED
HEREBY.  EACH OF THE GUARANTORS
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY 


 


6













 


SUCH PROCEEDING BROUGHT
IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 
EACH OF THE GUARANTORS, AND THE AGENT AND THE LENDERS ACCEPTING THIS
GUARANTY, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY.


 


SECTION 17.         Taxes, etc. 
All payments required to be made by any of the Guarantors hereunder
shall be made without setoff or counterclaim and free and clear of and without
deduction or withholding for or on account of, any present or future Taxes, provided,
however, that if any of the Guarantors is required by law to make such
deduction or withholding, such Guarantor shall forthwith (i) pay to the
Agent or any Lender, as applicable, such additional amount as results in the
net amount received by the Agent or any Lender, as applicable, equaling the
full amount which would have been received by the Agent or any Lender, as
applicable, had no such deduction or withholding been made, (ii) pay the
full amount deducted to the relevant authority in accordance with applicable
law, and (iii) furnish to the Agent or any Lender, as applicable,
certified copies of official receipts evidencing payment of such withholding
Taxes within 30 days after such payment is made.


 


SECTION 18.         Supplemental Guaranties.  Pursuant to Section 6.9 of the Credit
Agreement, additional Subsidiaries shall become obligated as Guarantors
hereunder (each as fully as though an original signatory hereto) by executing
and delivering to the Agent a supplemental guaranty in the form of Exhibit A
attached hereto (with blanks appropriately filled in), together with such
additional supporting documentation required pursuant to Section 6.9 of
the Credit Agreement.


 


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


 


	
   

  	
  [GUARANTOR SIGNATURES]

  
	
   

  	
   

  
	
   

  	
  Address for Notices to
  all Guarantors

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


7













 


EXHIBIT A


 


SUPPLEMENTAL GUARANTY


 


[Date]


 


JPMorgan
Chase Bank, N.A., as Agent


for
the Lenders


 


Ladies
and Gentlemen:


 


Reference is hereby made
to (i) that certain Credit Agreement, dated as of January 12, 2006 as
amended, among The Ryland Group, Inc., the lenders from time to time
parties thereto (the “Lenders”), and JPMorgan Chase Bank, N.A., as a Lender and
as Agent (the “Agent”) on behalf of itself and the other Lenders (as amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) and (ii) that certain Guaranty, dated as of January 12,
2006, executed and delivered by the Guarantors parties thereto in favor of the
Agent, for the benefit of the Lenders (as amended, restated, supplemented or
otherwise modified from time to time, the “Guaranty”).  Terms not defined herein which are defined in
the Credit Agreement shall have for the purposes hereof the respective meanings
provided therein.


 


In accordance with Section 6.9
of the Credit Agreement and Section 18 of the Guaranty, the undersigned,
[GUARANTOR]                        ,
a corporation [limited partnership/limited liability company] organized or
formed under the laws of                       ,
hereby elects to be a “Guarantor” for all purposes of the Credit Agreement and
the Guaranty, respectively, effective from the date hereof.


 


Without limiting the
generality of the foregoing, the undersigned hereby agrees to perform all the
obligations of a Guarantor under, and to be bound in all respects by the terms
of, the Guaranty, to the same extent and with the same force and effect as if
the undersigned were a direct signatory thereto.


 


This Supplemental
Guaranty shall be construed in accordance with and governed by the internal
laws of the State of New York (but otherwise without regard to the conflict of
laws provisions).


 


IN WITNESS WHEREOF, this
Supplemental Guaranty has been duly executed by the undersigned as of the     
day of         , 200_.


 


	
   

  	
  [GUARANTOR]

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


8












 


EXHIBIT C


 


COMMITMENT AND ACCEPTANCE


 


This Commitment and Acceptance (this “Commitment and Acceptance”) dated
as of                               ,
200_, is entered into among the parties listed on the signature pages hereof.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement (as defined below).


 


PRELIMINARY
STATEMENTS


 


Reference is made to that certain Credit Agreement dated as of January 12,
2006, by and among The Ryland Group, Inc., as Borrower, JPMorgan Chase
Bank, N.A., as Agent, and the Lenders that are parties thereto (as the same may
from time to time be amended, modified, supplemented or restated, in whole or
in part and without limitation as to amount, terms, conditions or covenants,
the “Credit Agreement”).


 


Pursuant to Section 2.5.3 of the Credit Agreement, the Borrower
has requested an increase in the Aggregate Commitment from $                             
to $                    .  Such increase in the Aggregate Commitment is
to become effective on                                       
    ,         
(the “Increase Date”) [THIS DATE IS TO BE MUTUALLY AGREED UPON BY THE BORROWER,
THE ACCEPTING LENDER AND AGENT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2.5.3
(ii) OF THE CREDIT AGREEMENT].  In
connection with such requested increase in the Aggregate Commitment, the
Borrower, the Agent and                                   
(“Accepting Lender”) hereby agree as follows:


 


1.             ACCEPTING LENDER’S COMMITMENT.  Effective as of the Increase Date, [Accepting
Lender shall become a party to the Credit Agreement as a Lender, shall have all
of the rights and obligations of a Lender thereunder, shall agree to be bound
by the terms and provisions thereof and shall thereupon have a Commitment under
and for purposes of the Credit Agreement in an amount equal] [the Commitment of
Accepting Lender under the Credit Agreement shall be increased from $                       ]
to the amount set forth opposite Accepting Lender’s name on the signature pages hereof.


 


2.             REPRESENTATIONS
AND AGREEMENTS OF ACCEPTING LENDER. 
Accepting Lender (a) represents and warrants that (i) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Commitment and Acceptance and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
satisfies the requirements, if any, specified in the Credit Agreement that are
required to be satisfied by it in order to become a Lender, (iii) from and
after the Increase Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and shall have the obligations of a Lender
thereunder, (iv) it has received a copy of the Credit Agreement, together
with copies of the most recent financial statements delivered pursuant to Section 6.1
thereof, as applicable, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Commitment and Acceptance on the basis of which it has made such analysis
and decision independently and without reliance on the Agent or any other
Lender, and (v) if it is a Non-U.S. Lender, it has delivered any
documentation 


 













 


required to be delivered by it pursuant to the terms
of the Credit Agreement, duly completed and executed by the Accepting Lender;
and (b) agrees that (i) it will, independently and without reliance
on the Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents, and (ii) it
will perform in accordance with their terms all of the obligations which by the
terms of the Loan Documents are required to be performed by it as a Lender.]


 


*Paragraph 2 is to be inserted only if Accepting Lender is not already
a party to the Credit Agreement prior to the Increase Date.


 


3.             REPRESENTATION OF BORROWER.  The Borrower hereby represents and warrants
that, as of the date hereof and as of the Increase Date, (a) no event or
condition shall have occurred and then be continuing which constitutes a
Default or Unmatured Default and (b) the representations and warranties of
the Borrower contained in the Credit Agreement are true and correct in all
material respects (except to the extent any such representation or warranty is
stated to relate solely to an earlier date).


 


4.             GOVERNING LAW. 
This Commitment and Acceptance shall be governed by the internal law,
and not the law of conflicts, of the State of New York.


 


5.             NOTICES. 
For the purpose of notices to be given under the Credit Agreement, the
address of Accepting Lender (until notice of a change is delivered) shall be
the address set forth in the Administrative Questionnaire delivered by
Accepting Lender to the Agent.


 


2













 


IN
WITNESS WHEREOF, the parties hereto have executed this Commitment and
Acceptance by their duly authorized officers as of the date first above
written.


 


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  THE RYLAND GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  AGENT:

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK,
  N.A., as AGENT

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
  $

  	
   

  	
   

  	
  ACCEPTING LENDER:

  
	
   

  	
   

  
	
   

  	
  [NAME OF ACCEPTING
  LENDER]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					



 


3













 


EXHIBIT D


 


NOTE


 


[Date]


 


The Ryland Group, Inc, a Maryland corporation (the “Borrower”),
promises to pay to the order of                                              
(the “Lender”) the aggregate unpaid principal amount of all Loans made by the
Lender to the Borrower pursuant to Article II of the Agreement (as
hereinafter defined), in immediately available funds at the office of JPMorgan
Chase Bank, N.A., in Houston, Texas, as Agent, together with interest on the
unpaid principal amount hereof at the rates and on the dates set forth in the
Agreement.  The Borrower shall pay the
principal of and accrued and unpaid interest on the Loans in full on the
Facility Termination Date.


 


This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Credit Agreement dated as of January 12, 2006 (which,
as it may be amended or modified and in effect from time to time, is herein
called the “Agreement”), among the Borrower, the lenders party thereto,
including the Lender, and JPMorgan Chase Bank, N.A., as Agent, to which
Agreement reference is hereby made for a statement of the terms and conditions
governing this Note, including the terms and conditions under which this Note
may be prepaid or its maturity date accelerated.  Capitalized terms used herein and not
otherwise defined herein are used with the meanings attributed to them in the
Agreement.


 


	
   

  	
  THE RYLAND GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 













 


EXHIBIT E


 


ASSIGNMENT AND ASSUMPTION


 


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


 


For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Credit Agreement, as of the Effective Date inserted by
the Agent as contemplated below (i) all of the Assignor’s rights and obligations
in its capacity as a Lender under the Credit Agreement and any other documents
or instruments delivered pursuant thereto to the extent related to the amount
and percentage interest identified below of all of such outstanding rights and
obligations of the Assignor under the respective facilities identified below
(including any letters of credit, guarantees, and Swing Line Loans included in
such facilities) and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims
and all other claims at law or in equity related to the rights and obligations
sold and assigned pursuant to clause (i) above (the rights and obligations
sold and assigned pursuant to clauses (i) and (ii) above being
referred to herein collectively as the “Assigned
Interest”).  Such sale and
assignment is without recourse to the Assignor and, except as expressly
provided in this Assignment and Assumption, without representation or warranty
by the Assignor.


 


	
  1.

  	
   

  	
  Assignor:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Assignee:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  [and is an Affiliate/Approved Fund of [identify Lender]1]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Borrower(s):

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Agent:

  	
   

  	
   

  	
  , as the Agent
  under the Credit Agreement

  
								



 






1                      Select as applicable.


 













 


	
  5.

  	
   

  	
  Credit Agreement:

  	
   

  	
  Credit Agreement
  dated as of January     , 2006 among The
  Ryland Group, Inc., the Lenders parties thereto, JPMorgan Chase Bank,
  N.A., as Agent, and the other agents parties thereto

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Assigned Interest:

  	
   

  	
   

  



 


	
  Aggregate Amount
  of

  Commitment/Loans for all

  Lenders

  	
   

  	
   

  	
  Amount of
  Commitment/

  Loans Assigned

  	
   

  	
   

  	
  Percentage
  Assigned of

  Commitment/Loans2

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  %

  



 


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


 


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


 


	
   

  	
  ASSIGNOR

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
				



 


[Consented to and]3 Accepted:


 


JPMORGAN CHASE BANK,
N.A., as

Agent


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  



 






2                                           Set forth, so at least 9 decimals, as a
percentage of the Commitment/Loans of all Lenders thereunder.


3                                           To be added only if the consent of the
Agent is required by the terms of the Credit Agreement.


 


2













 


[Consented to:]4


 


[NAME OF RELEVANT PARTY]


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  



 






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


 


3













 


ANNEX
1


 


THE
RYLAND GROUP, INC.


 


STANDARD
TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION


 


1.  Representations and Warranties.


 


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


 


1.2.  Assignee.  The Assignee (a) represents and warrants
that (i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby and to become a Lender under
the Credit Agreement, (ii) it satisfies the requirements, if any,
specified in the Credit Agreement that are required to be satisfied by it in
order to acquire the Assigned Interest and become a Lender, (iii) from and
after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of the Assigned Interest,
shall have the obligations of a Lender thereunder, (iv) it has received a
copy of the Credit Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 6.1 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption and to
purchase the Assigned Interest on the basis of which it has made such analysis
and decision independently and without reliance on the Agent or any other
Lender, and (v) if it is a Non-U.S. Lender, attached to the Assignment and
Assumption is any documentation required to be delivered by it pursuant to the
terms of the Credit Agreement, duly completed and executed by the Assignee; and
(b) agrees that (i) it will, independently and without reliance on
the Agent, the Assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents, and (ii) it
will perform in accordance with their terms all of the obligations which by the
terms of the Loan Documents are required to be performed by it as a Lender.


 













 


2.  Payments.  From and after the Effective Date, the Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees and other amounts) to the Assignor for amounts
which have accrued to but excluding the Effective Date and to the Assignee for
amounts which have accrued from and after the Effective Date.


 


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


 


2













 


EXHIBIT F


 


SWING LINE NOTE


 


January 12, 2006


 


The Ryland Group, Inc. a Maryland corporation (the “Borrower”),
promises to pay to the order of JPMorgan Chase Bank, N.A. (the “Swing Line
Lender”) the aggregate unpaid principal amount of all Swing Line Loans made by
the Swing Line Lender to the Borrower pursuant to Section 2.22 of the
Agreement (as hereinafter defined), in immediately available funds at the
office of JPMorgan Chase Bank, N.A. in Houston, Texas, as Agent, together with
interest on the unpaid principal amount hereof at the rates and on the dates
set forth in the Agreement.  The Borrower
shall pay the principal of each Swing Line Loan in full on the fifth (5th) Business Day following the making of such Swing Line
Loan but in no event later than the Facility Termination Date.


 


This Swing Line Note is issued pursuant to, and is entitled to the benefits
of, the Credit Agreement dated as of January 12, 2006 (which, as it may be
amended or modified and in effect from time to time, is herein called the “Agreement”),
among the Borrower, the lenders party thereto, including the Swing Line Lender,
and JPMorgan Chase Bank, N.A., as Agent, to which Agreement reference is hereby
made for a statement of the terms and conditions governing this Swing Line
Note, including the terms and conditions under which this Swing Line Note may
be prepaid or its maturity date accelerated. 
Capitalized terms used herein and not otherwise defined herein are used
with the meanings attributed to them in the Agreement.


 


 


	
   

  	
  THE RYLAND GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 












 


EXHIBIT G-1


 


OPINIONS OF TIMOTHY J. GECKLE,
GENERAL COUNSEL


 













 


[To be
Printed on Ryland Letterhead]


 


January 12, 2006


 


JPMorgan Chase Bank,
N.A., as Agent


under the Credit
Agreement referred to below


and


The Lenders that are, or
may become, party to the Credit Agreement referred to below


 


RE:          The Ryland Group, Inc.


 


Ladies and Gentlemen:


 


I am General Counsel to The Ryland Group, Inc., a Maryland
corporation (the “Company”), and
have acted in such capacity in connection with the execution and delivery of the
Credit Agreement, dated as of January 12, 2006 (the “Credit
Agreement”) by and among the Company, JPMorgan Chase Bank, N.A., as
Agent (in such capacity, the “Agent”), and
the several other financial institutions that are, or may from time to time
become, parties to the Credit Agreement (collectively, the “Lenders”).


 


This opinion is delivered to you pursuant to subsection 4.1(v) of
the Credit Agreement.  Terms used herein
that are defined in the Credit Agreement shall have the respective meanings set
forth in the Credit Agreement, unless otherwise defined herein.


 


For purposes of this opinion, I have examined the
following documents:


 


(i)            the
Credit Agreement and Notes;


 


(ii)           the
Charter and Bylaws of the Company;


 


(iii)          the
records of the corporate proceedings of the Company; and


 


(v)           such other documents
and matters as I have deemed necessary and appropriate to render the opinions
set forth in this letter, subject to the limitations, assumptions, and
qualifications noted below.


 


In reaching the options set forth below, I have assumed, and to my
knowledge there are no facts inconsistent with, the following:


 


(a)           each of the parties
thereto (other than the Company) has duly and validly executed and delivered
each instrument, document, and agreement executed in connection with the Credit
Agreement to which such other party is a signatory and that such party’s
obligations set forth therein are its legal, valid and binding obligations,
enforceable in accordance with their respective terms;


 













 


(b)           each person executing
any such instrument, document or agreement on behalf of any such party (other
than the Company) is duly authorized to do so;


 


(c)           each natural person
executing any such instrument, document or agreement is legally competent to do
so;


 


(d)           there are no
modifications or waivers of or amendments to the Credit Agreement; and


 


(e)           all documents
submitted to me as originals are authentic; all documents submitted to me as
certified or photostatic copies conform to the original documents; all
signatures on all documents submitted to me for examination are genuine; and
all public records reviewed are accurate and complete.


 


Based on my review of the foregoing and subject to the assumptions and
qualifications set forth herein, it is my opinion that, as of the date of this
letter:


 


1.             The Company (a) is
duly organized, validly existing and in good standing under the laws of the
State of Maryland, (b) has the corporate power to own and operate its
property, to lease the property it operates, and to conduct the business in
which it is currently engaged, and (c) is qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction where
its ownership, lease or operation of property or the conduct of its business
requires such qualification and where the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.


 


2.             The Company has the
corporate power to make, deliver and perform under the Credit Agreement and the
Notes and to borrow thereunder, and has taken all necessary corporate action to
authorize the borrowings on the terms and conditions of the Credit Agreement
and the Notes and to authorize the execution, delivery and performance of the
Credit Agreement and the Notes.  No
consent or authorization of, filing with, or other act by or in respect of any
public authority, is required of the Company in connection with the borrowings
thereunder or with the execution or delivery of the Credit Agreement or the
Notes.


 


3.             The Credit
Agreement and each of the Notes has been duly executed and delivered on behalf
of the Company.


 


4.             The execution and
delivery of the Credit Agreement and the Notes will not violate any Requirement
of Law or, to my knowledge, any material Contractual Obligation of the Company,
and, to my knowledge, will not result in, or require, the creation or
imposition of any Lien on any of the properties or revenues pursuant to any
Requirement of Law or any material Contractual Obligation.


 


5.             To my knowledge,
there is no litigation, investigation or proceeding of or before any arbitrator
or public authority that is pending or threatened by or against the Company or
against any of its properties or revenues (a) with respect to the 


 


2













 


Credit Agreement or the Notes or any of the
transactions contemplated thereby, or (b) which, if adversely determined,
would have a Material Adverse Effect, except as described in the financial
statements or in the notes thereto referred to in subsection 5.5 of the Credit
Agreement.


 


The opinions set forth herein are limited solely to Federal law and the
laws of the State of Maryland.


 


The opinions expressed in this letter are solely for the use of the
Agent, the Lenders, and their respective assigns, and these opinions may not be
relied on by any other persons without my express prior written approval.  The opinions expressed in this letter are
limited to the matters set forth in this letter, and no other opinions should
be inferred beyond the matters expressly stated.


 


Very truly yours,


 


 


Timothy J. Geckle

General Counsel


 


3













 


[To be
Printed on Ryland Letterhead]


 


January 12, 2006


 


JPMorgan Chase Bank,
N.A., as Agent


under the Credit
Agreement referred to below


and


The Lenders that are, or
may become, party to the Credit Agreement referred to below


 


Re:                             Guaranty of Credit Agreement dated January 12,
2006 (the “Credit Agreement”) by and among
The Ryland Group, Inc., as Borrower, JPMorgan Chase Bank, N.A., as Agent
(in such capacity, the “Agent”), and
the several other financial institutions that are, or may from time to time
become, parties to the Credit Agreement (collectively, the “Lenders”) (the “Guaranty”)


 


Ladies and Gentlemen:


 


I am General Counsel to each of the entities listed on Schedule 1
hereto (individually, a “Guarantor” and
collectively, the “Guarantors”),
and have acted in such capacity in connection with the execution and delivery
of the Guaranty as of even date herewith.


 


This opinion is delivered to you pursuant to subsection 4.1(v) of
the Credit Agreement.  Terms used herein
that are defined in the Credit Agreement and the Guaranty shall have the
respective meanings set forth in the Credit Agreement and the Guaranty, unless
otherwise defined herein.


 


For purposes of this opinion, I have examined the following documents:


 


(i)                                     the Credit Agreement;


 


(ii)                                  the Guaranty;


 


(iii)                             the Charter and Bylaws of each of the
Corporate Guarantors (as defined on Schedule 1 hereto);


 


(iv)                            the Certificates of Formation and
Operating Agreements or Limited Liability Company Agreements, as the case may
be, of each of the LLC Guarantors (as defined on Schedule 1 hereto);


 


(v)                               the Certificates of Limited Partnership
and Limited Partnership Agreements of each of the Partnership Guarantors (as
defined on Schedule 1 hereto);


 


(vi)                            the records of the corporate, limited
liability company and limited partnership proceedings, as the case may be, of
the Guarantors; and


 


1













 


(vii)                         such other documents and matters as I
have deemed necessary and appropriate to render the opinions set forth in this
letter, subject to the limitations, assumptions, and qualifications noted
below.


 


In reaching the opinions set forth below, I have assumed that all
documents submitted to me as originals are authentic; all documents submitted
to me as certified or photostatic copies conform to the original documents; all
signatures on all documents submitted to me for examination are genuine; and
all public records reviewed are accurate and complete.


 


In reaching the opinions set forth in paragraph 7, I have assumed that
at each time a Guarantor incurs an obligation under the Guaranty, such
Guarantor, after giving effect to such obligation, had the ability to pay its
debts as such debts mature and that such Guarantor was solvent.


 


Based on and subject to the foregoing, it is my opinion, as of the date
of this letter:


 


1.             The Corporate
Guarantors (a) are duly organized, validly existing and in good standing
under the laws of the states of their incorporation, and (b) have the
corporate power to own and operate their properties, to lease the properties
they operate, and to conduct the business in which they are currently engaged.


 


2.             The LLC Guarantors (a) are
duly organized, validly existing and in good standing under the laws of the
states of their organization, and (b) have the limited liability company
power to own and operate their properties, to lease the properties they
operate, and to conduct the business in which they are currently engaged.


 


3.             The Partnership
Guarantors (a) are duly organized, validly existing and in good standing
under the laws of the states of their formation, and (b) have the limited
partnership power to own and operate their properties, to lease the properties
they operate, and to conduct the business in which they are currently engaged.


 


4.             The Corporate
Guarantors have the corporate power to make, deliver and perform the Guaranty
and have taken all necessary corporate action to authorize the execution, delivery
and performance of the Guaranty.  The LLC
Guarantors have the limited liability company power to make, deliver and
perform the Guaranty and have taken all necessary limited liability company
action to authorize the execution, delivery and performance of the
Guaranty.  The Partnership Guarantors
have the limited partnership power to make, deliver and perform the Guaranty
and have taken all necessary limited partnership action to authorize the
execution, delivery and performance of the Guaranty.


 


5.             No consent or
authorization of, filing with, or other act by or in respect of any public
authority, is required of the Guarantors in connection with the execution or
delivery of the Guaranty.


 


2













 


6.             The Guaranty has
been duly executed and delivered on behalf of the Guarantors.


 


7.             The execution and
delivery of the Guaranty will not violate any Requirement of Law or, to my
knowledge, any material Contractual Obligation of the Guarantors, and, to my
knowledge, will not result in, or require, the creation or imposition of any
Lien on any of the Guarantors’ properties or revenues pursuant to any
Requirement of Law or any material Contractual Obligation.


 


8.             To my knowledge,
there is no litigation, investigation or proceeding of or before any arbitrator
or public authority that is pending or threatened by or against the Guarantors
or against any of their properties or revenues (a) with respect to the
Guaranty or any of the transactions contemplated thereby, or (b) which, if
adversely determined, would have a Material Adverse Effect on the financial
condition of the Guarantors, the ability of the Guarantors to perform their
obligations under the Guaranty, or the validity or enforceability of the
Guaranty or the rights or remedies of the Agent or the Lenders thereunder,
except as described in the financial statements or in the notes thereto
referred to in subsection 5.5 of the Credit Agreement.


 


The opinions set forth herein are limited solely to Federal law and the
laws of the State of Maryland, except that I have examined (i) the
corporate laws of the States of California, Indiana, Delaware, Florida, Texas
and Arizona, (ii) the limited liability company laws of the State of
Delaware, and (iii) the limited partnership laws of the State of Indiana,
solely for the purpose of rendering the opinions concerning the organization of
the Guarantors (other than the Guarantors organized under the laws of the State
of Maryland), and the due authorization of the execution and delivery of the
Guaranty by the Guarantors (other than the Guarantors organized under the laws
of the State of Maryland).


 


The opinions expressed in this letter are solely for the use of the
Agent, the Lenders, and their respective assigns, and these opinions may not be
relied on by any other persons without my express prior written approval.  The opinions expressed in this letter are
limited to the matters set forth in this letter, and no other opinions should
be inferred beyond the matters expressly stated.


 


Very truly yours,




 


 


Timothy J. Geckle

General Counsel


 


3













 


SCHEDULE
1


 


Guarantors


 


[To be listed]


 


The Guarantors listed in items                             
above are referred to herein collectively as the “Corporate Guarantors.”  The Guarantors listed in items                             
are referred to herein collectively as the “LLC Guarantors.” 
The Guarantors listed in items               
are referred to herein collectively as the “Partnership Guarantors.”


 













 


EXHIBIT G-2


 


OPINION OF DLA PIPER
RUDNICK GRAY CARY LLP


 


6225 Smith Avenue


Baltimore, Maryland 21209-3600


main 410.580.3000  fax 410.580.3001


 


January 12, 2006


 


JPMorgan Chase
Bank, N.A., as Agent


under the Credit
Agreement referred to below


and


The Lenders party
to the Credit Agreement referred to below


 


Re:          The Ryland Group, Inc.


 


Ladies and
Gentlemen:


 


We
have acted as counsel for The Ryland Group, Inc., a Maryland corporation
(the “Company”), and the Guarantors
identified in Schedule 3 to the Credit Agreement (as defined below) (the
Company, together with the Guarantors, individually a “Loan Party”
and collectively the “Loan Parties”),
in connection with the execution and delivery of the Credit Agreement, dated as
of January 12, 2006 (the “Credit Agreement”)
among the Company, the financial institutions from time to time party thereto
(the “Lenders”), and JPMorgan Chase Bank,
N.A., as Agent (in such capacity, the “Agent”).


 


This
opinion is delivered to you pursuant to subsection 4.1(v) of the Credit Agreement.  Terms used herein which are defined in the
Credit Agreement shall have the respective meanings set forth in the Credit
Agreement, unless otherwise defined herein.


 


For
purposes of this opinion, we have examined the following documents:


 


(i)                          the Credit Agreement;


 


(ii)                            the Notes;


 


(iii)                             the Guaranty;


 


(iv)                              a certificate of the Company (the “Company Certificate”) as to the matters set forth therein;
and


 













 


(v)                            such other documents and matters of law
as we have deemed necessary and appropriate to render the opinions set forth in
this letter, subject to the limitations, assumptions and qualifications noted
below.


 


The Credit Agreement, the
Notes and the Guaranty are referred to herein individually as a “Loan Document” and collectively as the “Loan Documents.”


 


In rendering the opinions
expressed below, we have assumed, without any independent investigation or
verification of any kind, that:


 


(a)           all
of the parties to the Loan Documents are duly organized or formed and validly
existing and have the requisite corporate, partnership, company or other power
and authority to execute and deliver, and to perform their obligations under,
such Loan Documents, and to conduct their respective businesses;


 


(b)           the execution, delivery and
performance of their respective obligations under the Loan Documents has been
duly authorized by all of the parties to such Loan Documents;


 


(c)           the Loan Documents have been duly
executed and delivered by all the parties thereto;


 


(d)           except to the extent set forth below
with respect to the Loan Parties, the Loan Documents constitute the legal,
valid, binding and enforceable obligations of all of the parties to the Loan
Documents;


 


(e)           none of the (A) execution and
delivery by each Loan Party of the Loan Documents to which such Loan Party is a
party or (B) the performance of the terms of the Loan Documents by the
Loan Parties that are parties thereto (i) will conflict with or result in
a breach or violation of the provisions of the Certificate of Incorporation,
Certificate of Limited Partnership, Certificate of Formation, By-Laws,
partnership agreement, operating agreement, limited liability company agreement
or other organizational documents of such Loan Party or (ii) will (or,
with notice or lapse of time or both, will) violate, conflict with or
constitute a default under, or result in the termination of, or accelerate the
performance required by, or result in there being declared void, voidable or
without further binding effect, any of the provisions of, any note, deed of
trust, license, franchise, permit, agreement or other instrument or obligation
to which such Loan Party is a party or by which such Loan Party or any of its
properties may be bound or (iii) will result in the creation of any lien
or security interest upon any of the property or assets of such Loan Party
under any agreement referred to in clause (ii) of this paragraph;


 


(f)            there
are no modifications or waivers of or amendments to the Loan Documents; and


 


(g)           all
documents submitted to us as originals are authentic; all documents submitted
to us as certified or photostatic copies conform to the original documents; and
all signatures on all documents submitted to us for examination are genuine.


 


2












 


We
have also relied upon the Company Certificate as to the factual matters set
forth therein, which we assume to be accurate and complete.


 


Based
on our review of the foregoing and subject to the assumptions and
qualifications set forth herein, it is our opinion that, as of the date of this
letter:


 


1.                                       No consent or authorization of, filing
with, or other act by or in respect of any public authority, is required of the
Loan Parties in connection with the execution or delivery of the Loan Documents
to which each Loan Party is a party or the transactions contemplated
thereunder.


 


2.                                       Each Loan Document to which each Loan
Party is a party constitutes the valid and binding obligation of such Loan
Party enforceable against such Loan Party in accordance with its terms, subject
to the following: (a) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other laws relating to or affecting the
rights of creditors generally and (b) the exercise of judicial discretion
in accordance with general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.


 


3.                                       The execution and delivery by the Loan
Parties of the Loan Documents to which each is a party will not violate the law
of the State of New York or any federal law.


 


4.                                       The Company is not an “investment company”
or a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended.


 


5.                                       The Company is not a “holding company” or
a “subsidiary company” of a “holding company” or an “affiliate” of a “holding
company” or a “subsidiary company” of a “holding company,” within the meaning
of the Public Utility Holding Company Act of 1935, as amended.


 


6.                                       All principal and unpaid interest of the
Company under the Credit Agreement and the Notes (including interest accruing
after the occurrence of any event described in Section 7.6 or 7.7 of the
Credit Agreement, whether or not such interest constitutes an allowed claim in
any proceeding referred to in Section 7.6 or 7.7 of the Credit Agreement)
constitutes “Senior Debt” as such term is used in the Subordinated Debt
Indenture.


 


The opinions set forth
above are subject to the following further qualifications and limitations:


 


A.                                   We express no opinion as to the effect of
(i) the compliance or noncompliance of the Lenders, the Agent, or the
Arranger with any state, federal or other laws or regulations applicable to
them or (ii) the legal or regulatory status or nature of the Lenders, the
Agent or the Arranger on the opinions herein stated.


 


B.                                     We express no opinion as to the
applicability or effect of any fraudulent conveyance or similar law on the Loan
Documents or on the opinions expressed herein.


 


3













 


C.                                     We express no opinion concerning federal
or state securities laws or regulations, including, without limitation, any “Blue
Sky” laws.


 


D.                                    Our opinion in Paragraph 2 is subject to
the following additional qualifications:


 


(1)                                  we express no opinion as to the
enforceability of any rights to indemnification or contribution provided for in
the Loan Documents which are violative of the public policy underlying any law,
rule or regulation (including any federal or state securities law, rule or
regulation) or which are determined by a court or other tribunal to be in an
unreasonable amount or to constitute a penalty;


 


(2)                                  we express no opinion as to the
enforceability of those sections of the Credit Agreement or the other Loan
Documents which purport to grant to participants of the Lenders the right to
exercise against any Loan Party rights of set-off with respect to
participations purchased by such participants;


 


(3)                                  the unenforceability under certain
circumstances of provisions imposing an increase in interest rate upon
delinquency in payment or the occurrence of a default, to the extent such
charges are considered to be penalties, or imposing fees or charges in the
discretion of the Lenders;


 


(4)                                  enforceability may be limited to the
extent that remedies are sought by a party with respect to a breach that a
court concludes is not material or does not adversely affect such party, and
enforceability may be limited by any unconscionable, inequitable, or
unreasonable conduct on the part of such party seeking enforcement, defenses
arising from such party’s failure to act in accordance with the terms and
conditions of the Loan Documents, defenses arising as a consequence of the
passage of time, or defenses arising as a result of such party’s failure to act
reasonably or in good faith or to comply with the terms of the Loan Documents;


 


(5)                                  we express no opinion as to the
enforceability of any provisions of the Loan Documents requiring any party to
waive any procedural, judicial, or substantive rights or defenses, such as
rights to notice or the right to a jury trial, or any provisions purporting to
waive any right to consequential or other damages, or any provisions purporting
to require the Company to give notice to the Agent or any Lender of any acts or
omissions of the Agent or any Lender or of any of their respective agents or
employees;


 


(6)                                  we express no opinion on the
enforceability of any provisions permitting modifications of the Loan Documents
only if in writing, or stating that the provisions of the Loan Documents are
severable; and


 


(7)                                  the provisions of the Loan Documents
which provide for jurisdiction of the courts of any particular jurisdiction may
not be binding on the courts in the forums selected or excluded.


 


E.                                      We express no opinion as to whether an entity
(a “Guarantor Entity”) may guarantee or
otherwise become liable for indebtedness incurred by another entity (an “Other Entity”) except to the extent such Guarantor Entity
may be determined to have benefited from 


 


4













 


the incurrence of
such indebtedness by the Other Entity or as to whether such benefit may be
measured other than by the extent to which the proceeds of the indebtedness
incurred by the Other Entity are directly or indirectly made available to such
Guarantor Entity for its corporate purposes.


 


F.                                      We express no opinion as to any
agreement, document, certificate, or instrument, other than the Loan Documents,
that may be an exhibit to, or referred to in or contemplated by any of the Loan
Documents.


 


G.                                     We express no opinion on the
enforceability of any provision of the Loan Documents requiring any party to
indemnify the Agent or any Lender or any other person or its or their
directors, officers, agents, employees, or successors or assigns, or any provisions
exculpating the Agent or any Lender from liability for their actions or
inaction to the extent such indemnification or exculpation is contrary to
public policy or law.


 


Our opinions in
Paragraphs 1 and 3 of this letter are limited to only those published statutes,
laws or regulations of the State of New York or the United States of America in
effect on the date hereof that a lawyer in the State of New York exercising
customary professional diligence would reasonably recognize as being directly applicable
to the Loan Parties or the Loan Documents. 
We express no opinions in Paragraphs 1 and 3 of this letter regarding the statutes
and ordinances, administrative decisions and rules and regulations of
counties, towns, municipalities and special political subdivisions, or judicial
decisions relating thereto.


 


The
opinions set forth herein are limited solely to Federal law and the laws of the
State of New York which are in effect as of the date hereof, and we assume no
obligation to supplement this opinion in the event of any change in applicable
law or in the facts upon which any of the opinions herein are based.


 


The
opinions expressed in this letter are solely for the use of the Lenders and
their respective assigns, and these opinions may not be relied on by any other
persons without our express prior written approval.  The opinions expressed in this letter are
limited to the matters set forth in this letter, and no other opinions should
be inferred beyond the matters expressly stated.


 


Very truly yours,


 


5













 


EXHIBIT H


 


COMPLIANCE CERTIFICATE


 


	
  To:

  	
  The Lenders parties to
  the

  
	
   

  	
  Credit Agreement
  Described Below

  



 


This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of January 12, 2006 (as amended, modified,
renewed or extended from time to time, the “Agreement”) among The Ryland Group, Inc.
(the “Borrower”), the lenders party thereto and JPMorgan Chase Bank, N.A., as
Agent for the Lenders.  Unless otherwise
defined herein, capitalized terms used in this Compliance Certificate have the
meanings ascribed thereto in the Agreement.


 


THE UNDERSIGNED HEREBY CERTIFIES THAT:


 


1.                                       I am the duly elected                     
of the Borrower;


 


2.                                       I have reviewed the terms of the
Agreement and I have made, or have caused to be made under my supervision, a
detailed review of the transactions and conditions of the Borrower and its
Subsidiaries during the accounting period covered by the attached financial
statements;


 


3.                                       The examinations described in paragraph 2
did not disclose, and I have no knowledge of, the existence of any condition or
event which constitutes a Default or Unmatured Default during or at the end of
the accounting period covered by the attached financial statements or as of the
date of this Certificate, except as set forth below; and


 


4.                                       Schedule I attached hereto sets forth
financial data and computations evidencing the Borrower’s compliance with
certain covenants of the Agreement, all of which data and computations are
true, complete and correct.


 


Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:


 


	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  



 


The foregoing certifications, together with the computations set forth
in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this     
day of               ,
      .


 


                                                      


 













 


 SCHEDULE I TO
COMPLIANCE CERTIFICATE


 


Compliance
as of                   ,
         with

Provisions of        and         
of

the Agreement


 













 


SCHEDULE
1


 


LENDERS
AND COMMITMENTS


 


 


	
  Lender

  	
   

  	
  Commitment

  
	
   

  	
   

  	
   

  
	
  JPMorgan Chase Bank, NA

  	
   

  	
  $  65,000,000

  
	
  Bank of America, N.A.

  	
   

  	
  $  60,000,000

  
	
  Wachovia Bank

  	
   

  	
  $  60,000,000

  
	
  SunTrust Bank

  	
   

  	
  $  60,000,000

  
	
  The Royal Bank of
  Scotland plc

  	
   

  	
  $  60,000,000

  
	
  Guaranty Bank

  	
   

  	
  $  50,000,000

  
	
  Washington Mutual Bank,
  FA

  	
   

  	
  $  50,000,000

  
	
  Barclays Bank PLC

  	
   

  	
  $  45,000,000

  
	
  Citicorp North
  America, Inc.

  	
   

  	
  $  45,000,000

  
	
  PNC Bank, National
  Association

  	
   

  	
  $  45,000,000

  
	
  UBS Loan Finance LLC

  	
   

  	
  $  45,000,000

  
	
  AmSouth Bank

  	
   

  	
  $  35,000,000

  
	
  Comerica Bank

  	
   

  	
  $  35,000,000

  
	
  Calyon New York Branch

  	
   

  	
  $  30,000,000

  
	
  City National Bank

  	
   

  	
  $  22,500,000

  
	
  The Governor and
  Company of the Bank of Ireland

  	
   

  	
  $  22,500,000

  
	
  Chang Hwa Commercial
  Bank, Ltd., Los Angeles Branch

  	
   

  	
  $  10,000,000

  
	
  Malayan Banking Berhad,
  New York Branch

  	
   

  	
  $  10,000,000

  
	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $750,000,000

  



 













 


SCHEDULE
2


 


EXISTING
LCs


 













 


SCHEDULE
3


 


GUARANTORS


 













 


SCHEDULE
5.5


 


SUBSIDIARIES


 













 


SCHEDULE 6.9


 


SUBSIDIARIES NOT REQUIRED


 


TO BE GUARANTORS