Exhibit 4.1


 




 





MERITAGE CORPORATION,


 


THE GUARANTORS named herein



and



WELLS FARGO BANK, National Association, as Trustee


 












 


INDENTURE



Dated as of April 21, 2004


 












 


7% Senior Notes due 2014




 





 

















 


CROSS-REFERENCE TABLE


 


	
  TIA

  Section

  	
   

  	
   

  	
  Indenture

  Section

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  310 

  	
  (a)(1)

  	
   

  	
   

  	
  7.10

  
	
   

  	
  (a)(2)

  	
   

  	
   

  	
  7.10

  
	
   

  	
  (a)(3)

  	
   

  	
   

  	
  N.A.

  
	
   

  	
  (a)(4)

  	
   

  	
   

  	
  N.A.

  
	
   

  	
  (a)(5)

  	
   

  	
   

  	
  N.A.

  
	
   

  	
  (b)

  	
   

  	
   

  	
  7.08; 7.10; 12.02

  
	
   

  	
  (b)(1)

  	
   

  	
   

  	
  7.10

  
	
   

  	
  (c)

  	
   

  	
   

  	
  N.A.

  
	
  311 

  	
  (a)

  	
   

  	
   

  	
  7.11

  
	
   

  	
  (b)

  	
   

  	
   

  	
  7.11

  
	
   

  	
  (c)

  	
   

  	
   

  	
  N.A.

  
	
  312 

  	
  (a)

  	
   

  	
   

  	
  2.06

  
	
   

  	
  (b)

  	
   

  	
   

  	
  12.03

  
	
   

  	
  (c)

  	
   

  	
   

  	
  12.03

  
	
  313 

  	
  (a)

  	
   

  	
   

  	
  7.06

  
	
   

  	
  (b)(1)

  	
   

  	
   

  	
  N.A.

  
	
   

  	
  (b)(2)

  	
   

  	
   

  	
  7.06

  
	
   

  	
  (c)

  	
   

  	
   

  	
  7.06; 12.02

  
	
   

  	
  (d)

  	
   

  	
   

  	
  7.06

  
	
  314 

  	
  (a)

  	
   

  	
   

  	
  4.02; 4.04; 12.02

  
	
   

  	
  (b)

  	
   

  	
   

  	
  N.A.

  
	
   

  	
  (c)(1)

  	
   

  	
   

  	
  12.04

  
	
   

  	
  (c)(2)

  	
   

  	
   

  	
  12.04

  
	
   

  	
  (c)(3)

  	
   

  	
   

  	
  N.A.

  
	
   

  	
  (d)

  	
   

  	
   

  	
  N.A.

  
	
   

  	
  (e)

  	
   

  	
   

  	
  12.05

  
	
   

  	
  (f)

  	
   

  	
   

  	
  N.A.

  
	
  315 

  	
  (a)

  	
   

  	
   

  	
  7.01(b)

  
	
   

  	
  (b)

  	
   

  	
   

  	
  7.05; 12.02

  
	
   

  	
  (c)

  	
   

  	
   

  	
  7.01(a)

  
	
   

  	
  (d)

  	
   

  	
   

  	
  7.01(c)

  
	
   

  	
  (e)

  	
   

  	
   

  	
  6.12

  
	
  316 

  	
  (a) (last sentence)

  	
   

  	
   

  	
  2.10

  
	
   

  	
  (a)(1)(A)

  	
   

  	
   

  	
  6.05

  
	
   

  	
  (a)(1)(B)

  	
   

  	
   

  	
  6.04

  
	
   

  	
  (a)(2)

  	
   

  	
   

  	
  N.A.

  
	
   

  	
  (b)

  	
   

  	
   

  	
  6.08

  
	
   

  	
  (c)

  	
   

  	
   

  	
  8.04

  
	
  317 

  	
  (a)(1)

  	
   

  	
   

  	
  6.09

  
	
   

  	
  (a)(2)

  	
   

  	
   

  	
  6.10

  
	
   

  	
  (b)

  	
   

  	
   

  	
  2.05; 7.12

  
	
  318 

  	
  (a)

  	
   

  	
   

  	
  12.01

  



 












N.A. means Not Applicable


Note:                   This Cross-Reference Table shall
not, for any purpose, be deemed to be a part of the Indenture


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE ONE

  
	
   

  
	
  DEFINITIONS
  AND INCORPORATION BY REFERENCE

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
  Definitions.

  	
   

  
	
  SECTION 1.02.

  	
  Other
  Definitions.

  	
   

  
	
  SECTION 1.03.

  	
  Incorporation
  by Reference of Trust Indenture Act.

  	
   

  
	
  SECTION 1.04.

  	
  Rules
  of Construction.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE TWO

  
	
   

  	
   

  	
   

  
	
  THE NOTES

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01.

  	
  Amount
  of Notes.

  	
   

  
	
  SECTION 2.02.

  	
  Form
  and Dating.

  	
   

  
	
  SECTION 2.03.

  	
  Execution
  and Authentication.

  	
   

  
	
  SECTION 2.04.

  	
  Registrar
  and Paying Agent.

  	
   

  
	
  SECTION 2.05.

  	
  Paying
  Agent To Hold Money in Trust.

  	
   

  
	
  SECTION 2.06.

  	
  Holder
  Lists.

  	
   

  
	
  SECTION 2.07.

  	
  Transfer
  and Exchange.

  	
   

  
	
  SECTION 2.08.

  	
  Replacement
  Notes.

  	
   

  
	
  SECTION 2.09.

  	
  Outstanding
  Notes.

  	
   

  
	
  SECTION 2.10.

  	
  Treasury
  Notes.

  	
   

  
	
  SECTION 2.11.

  	
  Temporary
  Notes.

  	
   

  
	
  SECTION 2.12.

  	
  Cancellation.

  	
   

  
	
  SECTION 2.13.

  	
  Defaulted
  Interest.

  	
   

  
	
  SECTION 2.14.

  	
  CUSIP
  Number.

  	
   

  
	
  SECTION 2.15.

  	
  Deposit of
  Moneys.

  	
   

  
	
  SECTION 2.16.

  	
  Book-Entry
  Provisions for Global Notes.

  	
   

  
	
  SECTION 2.17.

  	
  Special
  Transfer Provisions.

  	
   

  
	
  SECTION 2.18.

  	
  Computation
  of Interest.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE THREE

  
	
   

  	
   

  	
   

  
	
  REDEMPTION

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.

  	
  Election To
  Redeem; Notices to Trustee.

  	
   

  
	
  SECTION 3.02.

  	
  Selection
  by Trustee of Notes To Be Redeemed.

  	
   

  
	
  SECTION 3.03.

  	
  Notice of
  Redemption.

  	
   

  



 


i

















 


	
  SECTION 3.04.

  	
  Effect of
  Notice of Redemption.

  	
   

  
	
  SECTION 3.05.

  	
  Deposit of
  Redemption Price.

  	
   

  
	
  SECTION 3.06.

  	
  Notes
  Redeemed in Part.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE FOUR

  
	
   

  	
   

  	
   

  
	
  COVENANTS

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01.

  	
  Payment of
  Notes.

  	
   

  
	
  SECTION 4.02.

  	
  Reports to
  Holders.

  	
   

  
	
  SECTION 4.03.

  	
  Waiver of
  Stay, Extension or Usury Laws.

  	
   

  
	
  SECTION 4.04.

  	
  Compliance
  Certificate.

  	
   

  
	
  SECTION 4.05.

  	
  Taxes.

  	
   

  
	
  SECTION 4.06.

  	
  Limitations
  on Additional Indebtedness.

  	
   

  
	
  SECTION 4.07.

  	
  Limitations
  on Layering Indebtedness.

  	
   

  
	
  SECTION 4.08.

  	
  Limitations
  on Restricted Payments.

  	
   

  
	
  SECTION 4.09.

  	
  Limitations
  on Asset Sales.

  	
   

  
	
  SECTION 4.10.

  	
  Limitations
  on Transactions with Affiliates.

  	
   

  
	
  SECTION 4.11.

  	
  Limitations
  on Liens.

  	
   

  
	
  SECTION 4.12.

  	
  Conduct of
  Business.

  	
   

  
	
  SECTION 4.13.

  	
  Additional
  Note Guarantees.

  	
   

  
	
  SECTION 4.14.

  	
  Limitations on Dividend and Other
  Restrictions Affecting Restricted Subsidiaries.

  	
   

  
	
  SECTION 4.15.

  	
  Limitations
  on Designation of Unrestricted Subsidiaries.

  	
   

  
	
  SECTION 4.16.

  	
  Maintenance
  of Consolidated Tangible Net Worth.

  	
   

  
	
  SECTION 4.17.

  	
  Maintenance
  of Properties; Insurance; Compliance with Law.

  	
   

  
	
  SECTION 4.18.

  	
  Payments
  for Consent.

  	
   

  
	
  SECTION 4.19.

  	
  Legal
  Existence.

  	
   

  
	
  SECTION 4.20.

  	
  Change of
  Control Offer.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE FIVE

  
	
   

  	
   

  	
   

  
	
  SUCCESSOR
  CORPORATION

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01.

  	
  Limitations
  on Mergers, Consolidations, Etc.

  	
   

  
	
  SECTION 5.02.

  	
  Successor
  Person Substituted.

  	
   

  



 


ii

















 


	
  ARTICLE SIX

  
	
   

  	
   

  	
   

  
	
  DEFAULTS
  AND REMEDIES

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01.

  	
  Events of
  Default.

  	
   

  
	
  SECTION 6.02.

  	
  Acceleration.

  	
   

  
	
  SECTION 6.03.

  	
  Other
  Remedies.

  	
   

  
	
  SECTION 6.04.

  	
  Waiver of
  Past Defaults and Events of Default.

  	
   

  
	
  SECTION 6.05.

  	
  Control by
  Majority.

  	
   

  
	
  SECTION 6.06.

  	
  Limitation
  on Suits.

  	
   

  
	
  SECTION 6.07.

  	
  No Personal
  Liability of Directors, Officers, Employees and Stockholders.

  	
   

  
	
  SECTION 6.08.

  	
  Rights of
  Holders To Receive Payment.

  	
   

  
	
  SECTION 6.09.

  	
  Collection
  Suit by Trustee.

  	
   

  
	
  SECTION 6.10.

  	
  Trustee May
  File Proofs of Claim.

  	
   

  
	
  SECTION 6.11.

  	
  Priorities.

  	
   

  
	
  SECTION 6.12.

  	
  Undertaking
  for Costs.

  	
   

  
	
  SECTION 6.13.

  	
  Restoration
  of Rights and Remedies.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE SEVEN

  
	
   

  	
   

  	
   

  
	
  TRUSTEE

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01.

  	
  Duties of
  Trustee.

  	
   

  
	
  SECTION 7.02.

  	
  Rights of
  Trustee.

  	
   

  
	
  SECTION 7.03.

  	
  Individual
  Rights of Trustee.

  	
   

  
	
  SECTION 7.04.

  	
  Trustee’s
  Disclaimer.

  	
   

  
	
  SECTION 7.05.

  	
  Notice of
  Defaults.

  	
   

  
	
  SECTION 7.06.

  	
  Reports by
  Trustee to Holders.

  	
   

  
	
  SECTION 7.07.

  	
  Compensation
  and Indemnity.

  	
   

  
	
  SECTION 7.08.

  	
  Replacement
  of Trustee.

  	
   

  
	
  SECTION 7.09.

  	
  Successor
  Trustee by Consolidation, Merger, etc.

  	
   

  
	
  SECTION 7.10.

  	
  Eligibility;
  Disqualification.

  	
   

  
	
  SECTION 7.11.

  	
  Preferential
  Collection of Claims Against Issuer.

  	
   

  
	
  SECTION 7.12.

  	
  Paying
  Agents.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE EIGHT

  
	
   

  	
   

  	
   

  
	
  AMENDMENTS, SUPPLEMENTS AND WAIVERS

  
	
   

  	
   

  	
   

  
	
  SECTION 8.01.

  	
  Without
  Consent of Holders.

  	
   

  



 


iii

















 


	
  SECTION 8.02.

  	
  With
  Consent of Holders.

  	
   

  
	
  SECTION 8.03.

  	
  Compliance
  with Trust Indenture Act.

  	
   

  
	
  SECTION 8.04.

  	
  Revocation
  and Effect of Consents.

  	
   

  
	
  SECTION 8.05.

  	
  Notation on
  or Exchange of Notes.

  	
   

  
	
  SECTION 8.06.

  	
  Trustee To
  Sign Amendments, etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE NINE

  
	
   

  	
   

  	
   

  
	
  DISCHARGE OF
  INDENTURE; DEFEASANCE

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01.

  	
  Discharge
  of Indenture.

  	
   

  
	
  SECTION 9.02.

  	
  Legal
  Defeasance.

  	
   

  
	
  SECTION 9.03.

  	
  Covenant
  Defeasance.

  	
   

  
	
  SECTION 9.04.

  	
  Conditions
  to Defeasance or Covenant Defeasance.

  	
   

  
	
  SECTION 9.05.

  	
  Deposited Money and U.S. Government
  Obligations To Be Held in Trust; Other Miscellaneous Provisions.

  	
   

  
	
  SECTION 9.06.

  	
  Reinstatement.

  	
   

  
	
  SECTION 9.07.

  	
  Moneys
  Held by Paying Agent.

  	
   

  
	
  SECTION 9.08.

  	
  Moneys
  Held by Trustee.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE TEN

  
	
   

  	
   

  	
   

  
	
  GUARANTEE
  OF NOTES

  
	
   

  	
   

  	
   

  
	
  SECTION 10.01.

  	
  Guarantee.

  	
   

  
	
  SECTION 10.02.

  	
  Execution
  and Delivery of Guarantee.

  	
   

  
	
  SECTION 10.03.

  	
  Limitation
  of Guarantee.

  	
   

  
	
  SECTION 10.04.

  	
  Release
  of Guarantor.

  	
   

  
	
  SECTION 10.05.

  	
  Waiver of
  Subrogation.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE ELEVEN

  
	
   

  	
   

  	
   

  
	
  [INTENTIONALLY
  OMITTED]

  
	
   

  	
   

  	
   

  
	
  ARTICLE TWELVE

  
	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  SECTION 12.01.

  	
  Trust
  Indenture Act Controls.

  	
   

  
	
  SECTION 12.02.

  	
  Notices.

  	
   

  



 


iv

















 


	
  SECTION 12.03.

  	
  Communications
  by Holders with Other Holders.

  	
   

  
	
  SECTION 12.04.

  	
  Certificate
  and Opinion as to Conditions Precedent.

  	
   

  
	
  SECTION 12.05.

  	
  Statements
  Required in Certificate and Opinion.

  	
   

  
	
  SECTION 12.06.

  	
  Rules by
  Trustee and Agents.

  	
   

  
	
  SECTION 12.07.

  	
  Business
  Days; Legal Holidays.

  	
   

  
	
  SECTION 12.08.

  	
  Governing
  Law.

  	
   

  
	
  SECTION 12.09.

  	
  No
  Adverse Interpretation of Other Agreements.

  	
   

  
	
  SECTION 12.10.

  	
  No
  Recourse Against Others.

  	
   

  
	
  SECTION 12.11.

  	
  Successors.

  	
   

  
	
  SECTION 12.12.

  	
  Multiple
  Counterparts.

  	
   

  
	
  SECTION 12.13.

  	
  Table of
  Contents, Headings, etc.

  	
   

  
	
  SECTION 12.14.

  	
  Separability.

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  
	
   

  	
   

  	
   

  
	
  Exhibit A.

  	
  Form of Note

  	
   

  
	
  Exhibit B.

  	
  Form
  of Legend for Rule 144A Notes and Other Notes That Are Restricted Notes

  	
   

  
	
  Exhibit C.

  	
  Form of Legend
  for Regulation S Note

  	
   

  
	
  Exhibit D.

  	
  Form of Legend
  for Global Note

  	
   

  
	
  Exhibit E.

  	
  Form
  of Certificate To Be Delivered in Connection with Transfers to Non-QIB
  Accredited Investors

  	
   

  
	
  Exhibit F.

  	
  Form
  of Certificate To Be Delivered in Connection with Transfers Pursuant to
  Regulation S

  	
   

  
	
  Exhibit G.

  	
  Form of Guarantee

  	
   

  



 


v

















 


INDENTURE, dated as of
April 21, 2004, among MERITAGE CORPORATION, a Maryland corporation, as
issuer (the “Issuer”), the Guarantors (as hereinafter defined) and WELLS
FARGO BANK, NATIONAL ASSOCIATION, as trustee (the “Trustee”).


 


Each party agrees as
follows for the benefit of the other parties and for the equal and ratable
benefit of the Holders.


 


ARTICLE ONE


 


DEFINITIONS AND
INCORPORATION BY REFERENCE


 


SECTION 1.01.                                                                 Definitions.


 


“Acquired Indebtedness”
means (1) with respect to any Person that becomes a Restricted Subsidiary after
the Issue Date, Indebtedness of such Person and its Subsidiaries existing at
the time such Person becomes a Restricted Subsidiary that was not incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary and (2) with respect to the Issuer or any Restricted Subsidiary, any
Indebtedness of a Person (other than the Issuer or a Restricted Subsidiary)
existing at the time such Person is merged with or into the Issuer or a
Restricted Subsidiary, or Indebtedness expressly assumed by the Issuer or any
Restricted Subsidiary in connection with the acquisition of an asset or assets
from another Person, which Indebtedness was not, in any case, incurred by such
other Person in connection with, or in contemplation of, such merger or acquisition.


 


“Additional Notes”
shall mean an unlimited principal amount of Notes having identical terms and
conditions to the Notes issued pursuant to Article Two and in compliance
with Section 4.06.


 


“Adjusted Net Assets”
of a Guarantor at any date shall mean the lesser of the amount by which
(x) the fair value of the property of such Guarantor exceeds the total
amount of liabilities, including, without limitation, contingent liabilities
(after giving effect to all other fixed and contingent liabilities), but
excluding liabilities under the Guarantee, of such Guarantor at such date and
(y) the present fair salable value of the assets of such Guarantor at such
date exceeds the amount that will be required to pay the probable liability of
such Guarantor on its debts and all other fixed and contingent liabilities
(after giving effect to all other fixed and contingent liabilities and after
giving effect to any collection from any Subsidiary of such Guarantor in
respect of the obligations of such Guarantor under the Guarantee), excluding Indebtedness
in respect of the Guarantee, as they become absolute and matured.


 

















 


“Affiliate” of any
Person means any other Person which directly or indirectly controls or is
controlled by, or is under direct or indirect common control with, the referent
Person.  For purposes of
Section 4.10, Affiliates shall be deemed to include, with respect to any
Person, any other Person (1) which beneficially owns or holds, directly or
indirectly, 10% or more of any class of the Voting Stock of the referent
Person, (2) of which 10% or more of the Voting Stock is beneficially owned
or held, directly or indirectly, by the referent Person or (3) with
respect to an individual, any immediate family member of such Person.  For purposes of this definition, “control”
of a Person shall mean the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.


 


“Agent” means any
Registrar, Paying Agent or agent for service or notices and demands.


 


“amend” means to
amend, supplement, restate, amend and restate or otherwise modify; and “amendment”
shall have a correlative meaning.


 


“asset” means any
asset or property.


 


“Asset Acquisition”
means


 


(1)                                  an Investment by the Issuer or any
Restricted Subsidiary of the Issuer in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary of the Issuer, or
shall be merged with or into the Issuer or any Restricted Subsidiary of the
Issuer, or


 


(2)                                  the acquisition by the Issuer or any
Restricted Subsidiary of the Issuer of all or substantially all of the assets
of any other Person or any division or line of business of any other Person.


 


“Asset Sale” means
any sale, issuance, conveyance, transfer, lease, assignment or other
disposition by the Issuer or any Restricted Subsidiary to any Person other than
the Issuer or any Restricted Subsidiary (including by means of a Sale and
Leaseback Transaction or a merger or consolidation) (collectively, for purposes
of this definition, a “transfer”), in one transaction or a series of
related transactions, of any assets (including Equity Interests) of the Issuer
or any of its Restricted Subsidiaries other than in the ordinary course of
business.  For purposes of this
definition, the term “Asset Sale” shall not include:


 


(1)                                  transfers of cash or Cash Equivalents;


 


(2)                                  transfers of assets (including Equity
Interests) that are governed by, and made in accordance with,
Section 5.01;


 


2

















 


(3)                                  Permitted Investments and Restricted
Payments permitted under Section 4.08;


 


(4)                                  the creation or realization of any
Permitted Lien;


 


(5)                                  transactions in the ordinary course of
business, including, without limitation, sales (directly or indirectly),
dedications and other donations to governmental authorities, leases and sales
and leasebacks of (A) homes, improved land and unimproved land and
(B) real estate (including related amenities and improvements);


 


(6)                                  dispositions of mortgage loans and
related assets and mortgage-backed securities in the ordinary course of a
mortgage lending business; and


 


(7)                                  any transfer or series of related
transfers that, but for this clause, would be Asset Sales, if after giving effect
to such transfers, the aggregate Fair Market Value of the assets transferred in
such transaction or any such series of related transactions does not exceed
$1.0 million.


 


“Attributable
Indebtedness”, when used with respect to any Sale and Leaseback Transaction,
means, as at the time of determination, the present value (discounted at a rate
equivalent to the Issuer’s then-current weighted average cost of funds for
borrowed money as at the time of determination, compounded on a semi-annual
basis) of the total obligations of the lessee for rental payments during the
remaining term of any Capitalized Lease included in any such Sale and Leaseback
Transaction.


 


“Bankruptcy Law”
means Title 11 of the United States Code, as amended, or any similar federal or
state law for the relief of debtors.


 


“Board of Directors”
means, with respect to any Person, the board of directors or comparable
governing body of such Person.


 


“Board Resolution”
means a copy of a resolution certified pursuant to an Officers’ Certificate to
have been duly adopted by the Board of Directors of the Issuer and to be in
full force and effect, and delivered to the Trustee.


 


“Borrowing Base” means, at any time of determination, the
sum of the following without duplication:


 


(1)                                  100% of all cash and Cash Equivalents
held by the Issuer or any Restricted Subsidiary;


 


(2)                                  75% of the book value of Developed Land
for which no construction has occurred;


 


3

















 


(3)                                  95% of the cost of the land and
construction costs including capitalized interest (as reasonably allocated by
the Issuer) for all Units for which there is an executed purchase contract with
a buyer not Affiliated with the Issuer, less any deposits, down payments or earnest
money;


 


(4)                                  80% of the cost of the land and
construction costs including capitalized interest (as reasonably allocated by
the Issuer) for all Units for which construction has begun and for which there
is not an executed purchase agreement with a buyer not Affiliated with the
Issuer; and


 


(5)                                  50% of the costs of Entitled Land (other
than Developed Land) on which improvements have not commenced, less mortgage
Indebtedness (other than under a Credit Facility) applicable to such land.


 


“Business Day”
means a day other than a Saturday, Sunday or other day on which banking
institutions in New York are authorized or required by law to close.


 


“Capitalized Lease”
means a lease required to be capitalized for financial reporting purposes in
accordance with GAAP.


 


“Capitalized Lease
Obligations” of any Person means the obligations of such Person to pay rent
or other amounts under a Capitalized Lease, and the amount of such obligation
shall be the capitalized amount thereof determined in accordance with GAAP.


 


“Cash Equivalents”
means:


 


(1)                                  marketable obligations with a maturity of
360 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof;


 


(2)                                  demand and time deposits and certificates
of deposit or acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500 million and is
assigned at least a “B” rating by Thomson Financial BankWatch;


 


(3)                                  commercial paper maturing no more than
180 days from the date of creation thereof issued by a corporation that is not
the Issuer or an Affiliate of the Issuer, and is organized under the laws of
any state of the United States of America or the District of Columbia and rated
at least A-1 by S&P or at least P-1 by Moody’s;


 


4

















 


(4)                                  repurchase obligations with a term of not
more than ten days for underlying securities of the types described in clause (1)
above entered into with any commercial bank meeting the specifications of
clause (2) above; and


 


(5)                                  investments in money market or other
mutual funds substantially all of whose assets comprise securities of the types
described in clauses (1) through (4) above.


 


“Change of Control”
means the occurrence of any of the following events:


 


(1)                                  any “person” or “group” (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or
more Permitted Holders, is or becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause
that person or group shall be deemed to have “beneficial ownership” of all
securities that any such person or group has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly
or indirectly, of Voting Stock representing more than 50% of the voting power
of the total outstanding Voting Stock of the Issuer;


 


(2)                                  during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors of the Issuer (together with any new directors whose election to such
Board of Directors or whose nomination for election by the stockholders of the
Issuer was approved by a vote of the majority of the directors of the Issuer
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the
Issuer;


 


(3)                                  (a) all or substantially all of the
assets of the Issuer and the Restricted Subsidiaries are sold or otherwise
transferred to any Person other than a Wholly-Owned Restricted Subsidiary or
one or more Permitted Holders or (b) the Issuer consolidates or merges with or
into another Person other than a Permitted Holder or any Person other than a
Permitted Holder consolidates or merges with or into the Issuer, in either case
under this clause (3), in one transaction or a series of related transactions
in which immediately after the consummation thereof Persons owning Voting Stock
representing in the aggregate 100% of the total voting power of the Voting
Stock of the Issuer immediately prior to such consummation do not own Voting
Stock representing a majority of the total voting power of the Voting Stock of
the Issuer or the surviving or transferee Person; or


 


(4)                                  the Issuer shall adopt a plan of
liquidation or dissolution or any such plan shall be approved by the stockholders
of the Issuer.


 


5

















 


“Consolidated
Amortization Expense” for any period means the amortization expense of the
Issuer and the Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.


 


“Consolidated Cash
Flow Available for Fixed Charges” for any period means, without duplication,
the sum of the amounts for such period of


 


(1)                                  Consolidated Net Income, plus


 


(2)                                  in each case only to the extent (and in
the same proportion) deducted in determining Consolidated Net Income and with
respect to the portion of Consolidated Net Income attributable to any
Restricted Subsidiary only if a corresponding amount would be permitted at the
date of determination to be distributed to the Issuer by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders,


 


(a)                                  Consolidated Income Tax Expense,


 


(b)                                 Consolidated Amortization Expense (but
only to the extent not included in Consolidated Interest Expense),


 


(c)                                  Consolidated Depreciation Expense,


 


(d)                                 Consolidated Interest Expense and
interest and other charges amortized to cost of home sales and cost of land
sales, and


 


(e)                                  all other non-cash items reducing the
Consolidated Net Income (excluding any non-cash charge that results in an
accrual of a reserve for cash charges in any future period) for such period,


 


in each case
determined on a consolidated basis in accordance with GAAP, minus


 


(3)                                  the aggregate amount of all non-cash
items, determined on a consolidated basis, to the extent such items increased
Consolidated Net Income for such period.


 


“Consolidated
Depreciation Expense” for any period means the depreciation expense of the
Issuer and the Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.


 


6

















 


“Consolidated Fixed
Charge Coverage Ratio” means the ratio of Consolidated Cash Flow Available
for Fixed Charges during the most recent four consecutive full fiscal quarters
for which financial statements are available (the “Four-Quarter Period”)
ending on or prior to the date of the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (the “Transaction
Date”) to Consolidated Interest Incurred for the Four-Quarter Period.  For purposes of this definition,
Consolidated Cash Flow Available for Fixed Charges and Consolidated Interest
Incurred shall be calculated after giving effect on a pro forma basis for the period
of such calculation to:


 


(1)                                  the incurrence of any Indebtedness or the
issuance of any Preferred Stock of the Issuer or any Restricted Subsidiary (and
the application of the proceeds thereof) and any repayment of other
Indebtedness or redemption of other Preferred Stock (and the application of the
proceeds therefrom) (other than the incurrence or repayment of Indebtedness in
the ordinary course of business for working capital purposes pursuant to any
revolving credit arrangement) occurring during the Four-Quarter Period or at
any time subsequent to the last day of the Four-Quarter Period and on or prior
to the Transaction Date, as if such incurrence, repayment, issuance or redemption,
as the case may be (and the application of the proceeds thereof), occurred on
the first day of the Four-Quarter Period; and


 


(2)                                  any Asset Sale or Asset Acquisition
(including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of the Issuer or any Restricted Subsidiary
(including any Person who becomes a Restricted Subsidiary as a result of such
Asset Acquisition) incurring Acquired Indebtedness and also including any
Consolidated Cash Flow Available for Fixed Charges (including any pro forma
expense and cost reductions calculated on a basis consistent with Regulation
S-X under the Exchange Act) associated with any such Asset Acquisition) occurring
during the Four-Quarter Period or at any time subsequent to the last day of the
Four-Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition or other disposition (including the incurrence of, or
assumption or liability for, any such Indebtedness or Acquired Indebtedness)
occurred on the first day of the Four-Quarter Period.


 


If  the Issuer or any Restricted
Subsidiary directly or indirectly guarantees Indebtedness of a third Person,
the preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if the Issuer or such Restricted Subsidiary had directly incurred
or otherwise assumed such guaranteed Indebtedness.


 


For purposes of calculating
the Consolidated Fixed Charge Coverage Ratio prior to the expiration of the
first Four-Quarter Period subsequent to the Issue Date, such calculation


 


7

















 


shall be on the same pro
forma basis as the pro forma financial statements are presented in the Offering
Memorandum.


 


In calculating
Consolidated Interest Incurred for purposes of determining the denominator (but
not the numerator) of the Consolidated Fixed Charge Coverage Ratio:


 


(1)                                  interest on outstanding Indebtedness
determined on a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate per annum equal to the rate of interest on this Indebtedness in
effect on the Transaction Date;


 


(2)                                  if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Four-Quarter
Period; and


 


(3)                                  notwithstanding clause (1) or (2) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements with a term of at least one year after the
Transaction Date relating to Hedging Obligations, shall be deemed to accrue at
the rate per annum resulting after giving effect to the operation of these agreements.


 


“Consolidated Income
Tax Expense” for any period means the provision for taxes of the Issuer and
the Restricted Subsidiaries, determined on a consolidated basis in accordance
with GAAP.


 


“Consolidated
Indebtedness” means, as of any date, the total Indebtedness of the Issuer
and the Restricted Subsidiaries as of such date, determined on a consolidated basis.


 


“Consolidated Interest
Expense” for any period means the sum, without duplication, of the total
interest expense (other than interest and other charges amortized to cost of
home sales and cost of land sales) of the Issuer and the Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP and including, without duplication,


 


(1)                                  imputed interest on Capitalized Lease
Obligations and Attributable Indebtedness,


 


(2)                                  commissions, discounts and other fees and
charges owed with respect to letters of credit securing financial obligations,
bankers’ acceptance financing and receivables financings,


 


8

















 


(3)                                  the net costs associated with Hedging
Obligations,


 


(4)                                  amortization of debt issuance costs, debt
discount or premium and other financing fees and expenses,


 


(5)                                  the interest portion of any deferred
payment obligations,


 


(6)                                  all other non-cash interest expense,


 


(7)                                  the product of (a) all dividend payments
on any series of Disqualified Equity Interests of the Issuer or any Preferred
Stock of any Restricted Subsidiary (other than any such Disqualified Equity
Interests or any Preferred Stock held by the Issuer or a Wholly-Owned
Restricted Subsidiary), multiplied  by (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of the Issuer and the Restricted
Subsidiaries, expressed as a decimal,


 


(8)                                  all interest payable with respect to
discontinued operations, and


 


(9)                                  all interest on any Indebtedness of any
other Person guaranteed by the Issuer or any Restricted Subsidiary.


 


“Consolidated Interest
Incurred” for any period means the sum, without duplication, of
(1) Consolidated Interest Expense and (2) interest capitalized for
such period (including interest capitalized with respect to discontinued
operations but not including interest or other charges amortized to cost of
home sales and cost of land sales).


 


“Consolidated Net
Income” for any period means the net income (or loss) of the Issuer and the
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from such
net income (to the extent otherwise included therein), without duplication:


 


(1)                                  the net income (or loss) of any Person
(other than a Restricted Subsidiary) in which any Person other than the Issuer
and the Restricted Subsidiaries has an ownership interest, except to the extent
that cash in an amount equal to any such income has actually been received by
the Issuer or any of its Restricted Subsidiaries during such period;


 


(2)                                  except to the extent includible in the
consolidated net income of the Issuer pursuant to the foregoing clause (1), the
net income (or loss) of any Person that accrued prior to the date that (a) such
Person becomes a Restricted Subsidiary or is 


 


9

















 


merged into or
consolidated with the Issuer or any Restricted Subsidiary or (b) the assets of
such Person are acquired by the Issuer or any Restricted Subsidiary;


 


(3)                                  the net income of any Restricted
Subsidiary during such period to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of that income
is not permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary during such period;


 


(4)                                  for the purposes of calculating the
Restricted Payments Basket only, in the case of a successor to the Issuer by
consolidation, merger or transfer of its assets, any income (or loss) of the
successor prior to such merger, consolidation or transfer of assets;


 


(5)                                  other than for purposes of calculating
the Restricted Payments Basket, any gain (or loss), together with any related
provisions for taxes on any such gain (or the tax effect of any such loss),
realized during such period by the Issuer or any Restricted Subsidiary upon (a)
the acquisition of any securities, or the extinguishment of any Indebtedness,
of the Issuer or any Restricted Subsidiary or (b) any Asset Sale by the Issuer
or any Restricted Subsidiary; and


 


(6)                                  other than for purposes of calculating
the Restricted Payments Basket, any extraordinary gain (or extraordinary loss),
together with any related provision for taxes on any such extraordinary gain
(or the tax effect of any such extraordinary loss), realized by the Issuer or
any Restricted Subsidiary during such period.


 


In addition, any return
of capital with respect to an Investment that increased the Restricted Payments
Basket pursuant to clause (3)(d) of the first paragraph of Section 4.08 or
decreased the amount of Investments outstanding pursuant to clause (14) of the
definition of “Permitted Investments” shall be excluded from Consolidated Net
Income for purposes of calculating the Restricted Payments Basket.


 


“Consolidated Net
Worth” means, with respect to any Person as of any date, the consolidated
stockholders’ equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) (1) any amounts
thereof attributable to Disqualified Equity Interests of such Person or its
Subsidiaries or any amount attributable to Unrestricted Subsidiaries and
(2) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business made
within twelve months after the acquisition of such business) subsequent to the
Issue Date in the book value of any asset owned by such Person or a Subsidiary
of such Person.


 


10

















 


“Consolidated Tangible
Assets” means, as of any date, the total amount of assets of the Issuer and
the Restricted Subsidiaries on a consolidated basis at the end of the fiscal
quarter immediately preceding such date, as determined in accordance with GAAP,
less (1) Intangible Assets and (2) any assets securing Non-Recourse
Indebtedness.


 


“Consolidated Tangible
Net Worth” means, with respect to any Person as of any date, the
Consolidated Net Worth of such Person as of such date less (without
duplication) all Intangible Assets of such Person as of such date.


 


“Corporate Trust
Office” means the office of the Trustee at which at any particular time its
corporate trust business shall be principally administered, which office at the
date of execution is located at Wells Fargo Bank, National Association,
Corporate Trust Department, 707 Wilshire Boulevard, 17th Floor, Los Angeles,
California 90017.


 


“Credit Facilities”
means the Credit Agreement, dated as of December 12, 2002, as amended,
among the Issuer, Guaranty Bank, as administrative agent and swingline lender,
Bank One, NA, as syndication agent, Fleet National Bank, as documentation
agent, and the other lenders party thereto, including any notes, guarantees,
collateral and security documents, instruments and agreements executed in connection
therewith (including Hedging Obligations related to the Indebtedness incurred
thereunder), and in each case as amended or refinanced from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of borrowings or other
Indebtedness outstanding or available to be borrowed thereunder) all or any
portion of the Indebtedness under such agreements, and any successor or
replacement agreement or agreements with the same or any other agents,
creditor, lender or group of creditors or lenders.


 


“Custodian” means
any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.


 


“Default” means
(1) any Event of Default or (2) any event, act or condition that,
after notice or the passage of time or both, would be an Event of Default.


 


“Depository”
means, with respect to the Notes issued in the form of one or more Global
Notes, The Depository Trust Company or another Person designated as Depository
by the Issuer, which Person must be a clearing agency registered under the Exchange
Act.


 


“Designation”
has the meaning given to this term in Section 4.15.


 


“Designation Amount” has
the meaning given to this term in Section 4.15.


 


“Developed Land” means all Entitled Land of the Issuer
and its Restricted Subsidiaries which is undergoing active development or is
ready for vertical construction.


 


11

















 


“Disposition”
means, with respect to any Person, any merger, consolidation or other business
combination involving such Person (whether or not such Person is the Surviving
Person) or the sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of such Person’s assets.


 


“Disqualified Equity
Interests” of any Person means any Equity Interests of such Person that, by
their terms, or by the terms of any related agreement or of any security into
which they are convertible, puttable or exchangeable, are, or upon the
happening of any event or the passage of time would be, required to be redeemed
by such Person, whether or not at the option of the holder thereof, or mature
or are mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, in whole or in part, on or prior to the date which is 91 days after
the final maturity date of the Notes; provided, however, that any
class of Equity Interests of such Person that, by its terms, authorizes such
Person to satisfy in full its obligations with respect to the payment of
dividends or upon maturity, redemption (pursuant to a sinking fund or
otherwise) or repurchase thereof or otherwise by the delivery of Equity
Interests that are not Disqualified Equity Interests, and that are not
convertible, puttable or exchangeable for Disqualified Equity Interests or
Indebtedness, will not be deemed to be Disqualified Equity Interests so long as
such Person satisfies its obligations with respect thereto solely by the delivery
of Equity Interests that are not Disqualified Equity Interests; provided,  further,  however,
that any Equity Interests that would not constitute Disqualified Equity
Interests but for provisions thereof giving holders thereof (or the holders of
any security into or for which such Equity Interests are convertible, exchangeable
or exercisable) the right to require the Issuer to redeem such Equity Interests
upon the occurrence of a change in control occurring prior to the final
maturity date of the Notes shall not constitute Disqualified Equity Interests
if the change in control provisions applicable to such Equity Interests are no
more favorable to such holders than the provisions of Section 4.20 and
such Equity Interests specifically provide that the Issuer will not redeem any
such Equity Interests pursuant to such provisions prior to the Issuer’s
purchase of the Notes as required pursuant to the provisions of
Section 4.20.


 


“Entitled Land” means all land of the Issuer and its
Restricted Subsidiaries (a) on which Units may be constructed or which may be
utilized for commercial, retail or industrial uses, in each case, under
applicable laws and regulations and (b) the intended use by the Issuer for
which is permissible under the applicable regional plan, development agreement
or applicable zoning ordinance.


 


“Equity Interests”
of any Person means (1) any and all shares or other equity interests
(including common stock, preferred stock, limited liability company interests
and partnership interests) in such Person and (2) all rights to purchase,
warrants or options (whether or not currently exercisable), participations or
other equivalents of or interests in (however designated) such shares or other
interests in such Person.


 


12

















 


“Exchange Act”
means the U.S. Securities Exchange Act of 1934, as amended.


 


“Exchange Notes”
has the meaning provided in the Registration Rights Agreement.


 


“Fair Market Value”
means, with respect to any asset, the price (after taking into account any
liabilities relating to such assets) that would be negotiated in an
arm’s-length transaction for cash between a willing seller and a willing and
able buyer, neither of which is under any compulsion to complete the
transaction, as such price is determined in good faith by the Board of
Directors of the Issuer or a duly authorized committee thereof, as evidenced by
a resolution of such Board or committee.


 


“Financing Documents”
means this Indenture, the Registration Rights Agreement, the Notes and the
Guarantees.


 


“GAAP” means
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession of the
United States, as in effect on the Measurement Date.


 


“guarantee” means
a direct or indirect guarantee by any Person of any Indebtedness of any other
Person and includes any obligation, direct or indirect, contingent or otherwise,
of such Person:  (1) to purchase or
pay (or advance or supply funds for the purchase or payment of) Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm’s-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise); or (2) entered into for
purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part).  “guarantee,”
when used as a verb, and “guaranteed” have correlative meanings.


 


“Guarantors” means
each Restricted Subsidiary of the Issuer on the Issue Date, and each other
Person that is required to become a Guarantor by the terms of this Indenture
after the Issue Date, in each case, until such Person is released from its Note
Guarantee.


 


“Hedging Obligations”
of any Person means the obligations of such Person pursuant to (1) any
interest rate swap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect such Person against fluctuations
in interest 


 


13

















 


rates,
(2) agreements or arrangements designed to protect such Person against fluctuations
in foreign currency exchange rates in the conduct of its operations, or (3) any
forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in commodity prices, in each case entered into in the ordinary
course of business for bona fide hedging purposes and not for the purpose of
speculation.


 


“Holder” means any
registered holder, from time to time, of the Notes.


 


“incur” means,
with respect to any Indebtedness or Obligation, incur, create, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to such Indebtedness or Obligation; provided that (1) the
Indebtedness of a Person existing at the time such Person became a Restricted
Subsidiary or at the time such Person merged with or into the Issuer or a
Restricted Subsidiary shall be deemed to have been incurred at such time and
(2) neither the accrual of interest nor the accretion of original issue
discount shall be deemed to be an incurrence of Indebtedness.


 


“Indebtedness” of
any Person at any date means, without duplication:


 


(1)                                  all liabilities, contingent or otherwise,
of such Person for borrowed money (whether or not the recourse of the lender is
to the whole of the assets of such Person or only to a portion thereof);


 


(2)                                  all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments;


 


(3)                                  all obligations of such Person in respect
of letters of credit or other similar instruments (or reimbursement obligations
with respect thereto);


 


(4)                                  all obligations of such Person to pay the
deferred and unpaid purchase price of property or services, except trade
payables and accrued expenses incurred by such Person in the ordinary course of
business in connection with obtaining goods, materials or services;


 


(5)                                  the maximum fixed redemption or
repurchase price of all Disqualified Equity Interests of such Person;


 


(6)                                  all Capitalized Lease Obligations of such
Person;


 


(7)                                  all Indebtedness of others secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person;


 


14

















 


(8)                                  all Indebtedness of others guaranteed by
such Person to the extent of such guarantee; provided that Indebtedness
of the Issuer or its Subsidiaries that is guaranteed by the Issuer or the
Issuer’s Subsidiaries shall be counted only once in the calculation of the
amount of Indebtedness of the Issuer and its Subsidiaries on a consolidated
basis;


 


(9)                                  all Attributable Indebtedness;


 


(10)                            to the extent not otherwise included in
this definition, Hedging Obligations of such Person;


 


(11)                            all obligations of such Person under
conditional sale or other title retention agreements relating to assets
purchased by such Person; and


 


(12)                            the liquidation value of Preferred Stock
of a Subsidiary of such Person issued and outstanding and held by any Person
other than such Person (or one of its Wholly-Owned Restricted Subsidiaries).


 


Notwithstanding the
foregoing, (a) earn-outs or similar profit sharing arrangements provided
for in acquisition agreements which are determined on the basis of future operating
earnings or other similar performance criteria (which are not determinable at
the time of acquisition) of the acquired assets or entities and (b) accrued
expenses, trade payables, customer deposits or deferred income taxes arising in
the ordinary course of business shall not be considered Indebtedness.  Any Indebtedness which is incurred at a discount
to the principal amount at maturity thereof shall be deemed to have been
incurred in the amount of the full principal amount at maturity thereof.  The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above, the maximum liability of such Person for any
such contingent obligations at such date and, in the case of clause (7), the
lesser of (a) the Fair Market Value of any asset subject to a Lien
securing the Indebtedness of others on the date that the Lien attaches and
(b) the amount of the Indebtedness secured.  For purposes of clause (5), the “maximum fixed redemption or
repurchase price” of any Disqualified Equity Interests that do not have a fixed
redemption or repurchase price shall be calculated in accordance with the terms
of such Disqualified Equity Interests as if such Disqualified Equity Interests
were redeemed on any date on which an amount of Indebtedness outstanding shall
be required to be determined pursuant to this Indenture.


 


Notwithstanding the
above, this Indenture does not restrict any Unrestricted Subsidiary from
incurring Indebtedness nor will Indebtedness of any Unrestricted Subsidiaries
be included in the Consolidated Fixed Charge Coverage Ratio or the ratio of
Consolidated Indebtedness to Consolidated Tangible Net Worth hereunder, as long
as the Unrestricted Subsidiary incurring such Indebtedness remains an
Unrestricted Subsidiary.


 


15

















 


“Indenture” means
this Indenture as amended, restated or supplemented from time to time.


 


“Independent Director”
means a director of the Issuer who


 


(1)                                  is independent with respect to the
transaction at issue;


 


(2)                                  does not have any material financial
interest in the Issuer or any of its Affiliates (other than as a result of
holding securities of the Issuer); and


 


(3)                                  has not and whose Affiliates or
affiliated firm has not, at any time during the twelve months prior to the
taking of any action hereunder, directly or indirectly, received, or entered
into any understanding or agreement to receive, compensation, payment or other
benefit, of any type or form, from the Issuer or any of its Affiliates in
excess of $60,000, other than customary directors’ fees for serving on the
Board of Directors of the Issuer or any Affiliate and reimbursement of
out-of-pocket expenses for attendance at the Issuer’s or Affiliate’s board and
board committee meetings.


 


“Independent Financial
Advisor” means an accounting, appraisal or investment banking firm of
nationally recognized standing that is, in the reasonable judgment of the Issuer’s
Board of Directors, qualified to perform the task for which it has been engaged
and disinterested and independent with respect to the Issuer and its
Affiliates; provided, however, that the prior rendering of
service to the Issuer or an Affiliate of the Issuer shall not, by itself,
disqualify the advisor.


 


“Initial Purchaser”
means Citigroup Global Markets Inc.


 


“Institutional
Accredited Investor” means an institution that is an “accredited investor”
as that term is defined in Rule 501(a)(1), (2), (3) or (7) promulgated under
the Securities Act.


 


“Intangible Assets”
means, with respect to any Person, all unamortized debt discount and expense,
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, write-ups of assets over their carrying value (other
than write-ups which occurred prior to the Measurement Date and other than, in
connection with the acquisition of an asset, the write-up of the value of such
asset to its Fair Market Value in accordance with GAAP on the date of
acquisition) and all other items which would be treated as intangibles on the
consolidated balance sheet of such Person prepared in accordance with GAAP.


 


16

















 


“interest” means,
with respect to the Notes, interest and Liquidated Damages, if any, on the
Notes.


 


“Interest Payment
Dates” means each May 1 and November 1, commencing November 1,
2004.


 


“Investments” of
any Person means:


 


(1)                                  all direct or indirect investments by
such Person in any other Person in the form of loans, advances or capital
contributions or other credit extensions constituting Indebtedness of such
other Person, and any guarantee of Indebtedness of any other Person;


 


(2)                                  all purchases (or other acquisitions for
consideration) by such Person of Indebtedness, Equity Interests or other
securities of any other Person;


 


(3)                                  all other items that would be classified
as investments on a balance sheet of such Person prepared in accordance with
GAAP; and


 


(4)                                  the Designation of any Subsidiary as an
Unrestricted Subsidiary.


 


Except as otherwise
expressly specified in this definition, the amount of any Investment (other
than an Investment made in cash) shall be the Fair Market Value thereof on the
date such Investment is made.  The
amount of Investment pursuant to clause (4) shall be the Designation Amount
determined in accordance with Section 4.15.  If the Issuer or any Subsidiary sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary, the Issuer shall be deemed to have made an Investment on the date
of any such sale or other disposition equal to the Fair Market Value of the
Equity Interests of and all other Investments in such Subsidiary not sold or
disposed of, which amount shall be determined by the Board of Directors of the
Issuer.  Notwithstanding the foregoing,
redemptions of Equity Interests of the Issuer shall be deemed not to be Investments.


 


“Issue Date” means
April 21, 2004.


 


“Issuer” means the
party named as such in the first paragraph of this Indenture until a successor
replaces such party pursuant to Article Five and thereafter means the
successor.


 


“Issuer Request”
means any written request signed in the name of the Issuer by the Chairman of
the Board of Directors, the Chief Executive Officer, the President, any 


 


17

















 


Vice President, the Chief
Financial Officer or the Treasurer of the Issuer and attested to by the Secretary
or any Assistant Secretary of the Issuer.


 


“Lien” means, with
respect to any asset, any mortgage, deed of trust, lien (statutory or other),
pledge, lease, easement, restriction, covenant, charge, security interest or
other encumbrance of any kind or nature in respect of such asset, whether or
not filed, recorded or otherwise perfected under applicable law, including any
conditional sale or other title retention agreement, and any lease in the
nature thereof, any option or other agreement to sell, and any filing of, or
agreement to give, any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction (other than cautionary filings in
respect of operating leases).


 


“Liquidated Damages”
has the meaning set forth in the Registration Rights Agreement.


 


“Measurement Date”
means May 30, 2001.


 


“Moody’s” means
Moody’s Investors Service, Inc., and its successors.


 


“Net Available
Proceeds” means, with respect to any Asset Sale, the proceeds thereof in
the form of cash or Cash Equivalents, net of


 


(1)                                  brokerage commissions and other fees and
expenses (including fees and expenses of legal counsel, accountants and
investment banks) of such Asset Sale;


 


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


 


(3)                                  amounts required to be paid to any Person
(other than the Issuer or any Restricted Subsidiary) owning a beneficial
interest in the assets subject to the Asset Sale or having a Lien thereon;


 


(4)                                  payments of unassumed liabilities (not
constituting Indebtedness) relating to the assets sold at the time of, or
within 30 days after the date of, such Asset Sale; and


 


(5)                                  appropriate amounts to be provided by the
Issuer or any Restricted Subsidiary, as the case may be, as a reserve required
in accordance with GAAP against any liabilities associated with such Asset Sale
and retained by the Issuer or any Restricted Subsidiary, as the case may be,
after such Asset Sale, including pensions and other postemployment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale,


 


18

















 


all as reflected
in an Officers’ Certificate delivered to the Trustee; provided, however,
that any amounts remaining after adjustments, revaluations or liquidations of
such reserves shall constitute Net Available Proceeds.


 


“Non-Recourse
Indebtedness” with respect to any Person means Indebtedness of such Person
for which (1) the sole legal recourse for collection of principal and interest
on such Indebtedness is against the specific property identified in the
instruments evidencing or securing such Indebtedness and such property was
acquired with the proceeds of such Indebtedness or such Indebtedness was
incurred within 90 days after the acquisition of such property and (2) no
other assets of such Person may be realized upon in collection of principal or
interest on such Indebtedness.


 


“Non-U.S. Person”
means a Person who is not a U.S. person, as defined in Regulation S.


 


“Notes” means the
7% Senior Notes due 2014 issued by the Issuer, including, without limitation,
the Private Exchange Notes, if any, and the Exchange Notes, treated as a single
class of securities, as amended from time to time in accordance with the terms
hereof, that are issued pursuant to this Indenture.


 


“Obligation” means
any principal, interest, penalties, fees, indemnification, reimbursements,
costs, expenses, damages and other liabilities payable under the documentation
governing any Indebtedness.


 


“Offer” has the
meaning set forth in the definition of “Offer to Purchase.”


 


“Offer Expiration Date”
has the meaning set forth in the definition of “Offer to Purchase.”


 


“Offer to Purchase”
means a written offer (the “Offer”) sent by or on behalf of the Issuer
by first-class mail, postage prepaid, to each Holder at its address appearing
in the register for the Notes on the date of the Offer offering to purchase up
to the principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to this Indenture).  Unless otherwise required by applicable law,
the Offer shall specify an expiration date (the “Offer Expiration Date”)
of the Offer to Purchase, which shall be not less than 30 Business Days nor
more than 60 days after the date of such Offer, and a settlement date (the “Purchase
Date”) for purchase of Notes to occur no later than three Business Days
after the Offer Expiration Date.  The
Offer shall contain all the information required by applicable law to be
included therein.  The Offer shall also
contain information concerning the business of the Issuer and its Subsidiaries
which the Issuer in good faith believes will enable such Holders to make an
informed decision with respect to the Offer to Purchase.  Such information shall include, at a
minimum, (i) the most recent annual and quarterly financial


 


19

















 


statements and
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” contained in the document required to be delivered to Holders
pursuant to Section 4.02 (which requirements may be satisfied by delivery
of such documents together with the Offer), (ii) a description of material
developments in the Issuer’s business subsequent to the date of the latest of
such financial statements referred to in clause (i) (including a description of
the events requiring the Issuer to make the Offer to Purchase), (iii) if
applicable, appropriate pro forma financial information concerning the Offer to
Purchase and the events requiring the Issuer to make the Offer to Purchase and
(iv) any other information required by applicable law to be included
therein.  The Offer shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Offer to Purchase.  The
Offer shall also state:


 


(1)                                  the Section of this Indenture
pursuant to which the Offer to Purchase is being made;


 


(2)                                  the Offer Expiration Date and the
Purchase Date;


 


(3)                                  the aggregate principal amount of the
outstanding Notes offered to be purchased by the Issuer pursuant to the Offer
to Purchase (including, if less than 100%, the manner by which such amount has
been determined pursuant to the Section of this Indenture requiring the
Offer to Purchase) (the “Purchase Amount”);


 


(4)                                  the purchase price to be paid by the
Issuer for each $1,000 aggregate principal amount of Notes accepted for payment
(the “Purchase Price”);


 


(5)                                  that the Holder may tender all or any
portion of the Notes registered in the name of such Holder and that any portion
of a Note tendered must be tendered in an integral multiple of $1,000 principal
amount;


 


(6)                                  the place or places where Notes are to be
surrendered for tender pursuant to the Offer to Purchase;


 


(7)                                  that interest on any Note not tendered or
tendered but not purchased by the Issuer pursuant to the Offer to Purchase will
continue to accrue;


 


(8)                                  that on the Purchase Date the Purchase
Price will become due and payable upon each Note being accepted for payment
pursuant to the Offer to Purchase and that interest thereon shall cease to
accrue on and after the Purchase Date;


 


(9)                                  that each Holder electing to tender all
or any portion of a Note pursuant to the Offer to Purchase will be required to
surrender such Note, with the form entitled “Option of Holder to Elect
Purchase” on the reverse of the Note completed, at the 


 


20

















 


place or places specified
in the Offer prior to the close of business on the Offer Expiration Date (such
Note being, if the Issuer so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Issuer duly executed
by, the Holder thereof or its attorney duly authorized in writing);


 


(10)                            that Holders will be entitled to withdraw
all or any portion of Notes tendered if the Issuer receives, not later than the
close of business on the fifth Business Day preceding the Offer Expiration
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Note the Holder tendered, the
certificate number of the Note the holder tendered and a statement that such
Holder is withdrawing all or a portion of its tender;


 


(11)                            that (a) if Notes in an aggregate
principal amount less than or equal to the Purchase Amount are duly tendered
and not withdrawn pursuant to the Offer to Purchase, the Issuer shall purchase
all such Notes and (b) if Notes in an aggregate principal amount in excess of
the Purchase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Issuer shall purchase Notes having an aggregate principal amount
equal to the Purchase Amount on a pro rata basis (with such adjustments
as may be deemed appropriate so that only Notes in denominations of $1,000
principal amount or integral multiples thereof shall be purchased); and


 


(12)                            that in the case of any Holder whose Note
is purchased only in part, the Issuer shall execute and deliver to the Holder
of such Note without service charge, a new Note or Notes, of any authorized
denomination as requested by such Holder, in an aggregate principal amount
equal to and in exchange for the unpurchased portion of the Note so tendered.


 


An Offer to Purchase
shall be governed by and effected in accordance with the provisions above
pertaining to any Offer.


 


On or before the Purchase
Date, the Issuer shall (i) accept for payment Notes or portions thereof
tendered and not withdrawn pursuant to the Offer, (ii) deposit with the
Trustee U.S. Dollars sufficient to pay the Purchase Price, plus accrued
interest, if any, of all Notes to be purchased and (iii) deliver to the
Trustee Notes so accepted together with an Officers’ Certificate stating the
Notes or portions thereof being purchased by the Issuer.  The Trustee shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the Purchase Price,
plus accrued interest, if any, thereon.


 


“Offering” means
the offering of the Notes as described in the Offering Memorandum.


 


21

















 


“Offering Memorandum”
means the Offering Memorandum dated April 14, 2004 pursuant to which the
Notes were offered.


 


“Officer” means
any of the following of the Issuer:  the
Chairman of the Board of Directors, the Chief Executive Officer, the Chief
Financial Officer, the President, any Vice President, the Treasurer or the Secretary.


 


“Officers’ Certificate”
means a certificate signed by two Officers.


 


“Opinion of Counsel”
means a written opinion reasonably satisfactory in form and substance to the
Trustee from legal counsel, which counsel is reasonably acceptable to the
Trustee, stating the matters required by Section 12.05 and delivered to
the Trustee.


 


“Pari Passu
Indebtedness” means any Indebtedness of the Issuer or any Guarantor that
ranks pari passu as to payment with the Notes or the Note Guarantees, as
applicable.


 


“Permitted Business”
means the businesses engaged in by the Issuer and its Subsidiaries on the Issue
Date as described in the Offering Memorandum and businesses that are reasonably
related thereto or reasonable extensions thereof (including, without limitation,
land development, home alarm, pest control, title and other ancillary businesses).


 


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


 


“Permitted Investment”
means:


 


(1)                                  Investments by the Issuer or any
Restricted Subsidiary in (a) any Restricted Subsidiary or (b) any
Person that is or will become immediately after such Investment a Restricted
Subsidiary or that will merge or consolidate into the Issuer or a Restricted
Subsidiary;


 


(2)                                  Investments in the Issuer by any
Restricted Subsidiary;


 


(3)                                  loans and advances to directors,
employees and officers of the Issuer and the Restricted Subsidiaries for bona
fide business purposes and to purchase Equity Interests of the Issuer not in
excess of $2.0 million at any one time outstanding;


 


(4)                                  Hedging Obligations incurred pursuant to
clause (4) of the second paragraph of Section 4.06;


 


(5)                                  Cash Equivalents;


 


22

















 


(6)                                  receivables owing to the Issuer or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the Issuer
or any such Restricted Subsidiary deems reasonable under the circumstances;


 


(7)                                  Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors
or customers;


 


(8)                                  Investments made by the Issuer or any
Restricted Subsidiary as a result of consideration received in connection with
an Asset Sale made in compliance with Section 4.09;


 


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


 


(10)                            Investments made by the Issuer or a
Restricted Subsidiary for consideration consisting only of Qualified Equity
Interests of the Issuer;


 


(11)                            stock, obligations or securities received
in settlement of debts created in the ordinary course of business and owing to
the Issuer or any Restricted Subsidiary or in satisfaction of judgments;


 


(12)                            Investments in existence on the Issue
Date;


 


(13)                            Investments made by the Issuer or any
Restricted Subsidiary in joint ventures in a Permitted Business with
unaffiliated third parties in an aggregate amount at any one time outstanding
not to exceed 10% of the Issuer’s Consolidated Tangible Net Worth at such time
(with each Investment being valued as of the date made and without regard to
subsequent changes in value); and


 


(14)                            other Investments in an aggregate amount
not to exceed $5.0 million at any one time outstanding (with each Investment
being valued as of the date made and without regard to subsequent changes in
value).


 


The amount of Investments
outstanding at any time pursuant to clause (14) above shall be deemed to be
reduced:


 


(a)                                  upon the disposition or repayment of or
return on any Investment made pursuant to clause (14) above, by an amount equal
to the return of capital with respect to such Investment to the Issuer or any
Restricted Subsidiary (to the extent not included


 


23

















 


in the computation
of Consolidated Net Income), less the cost of the disposition of such
Investment and net of taxes; and


 


(b)                                 upon a Redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary, by an amount equal to the lesser of (x)
the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary
immediately following such Redesignation, and (y) the aggregate amount of
Investments in such Subsidiary that increased (and did not previously decrease)
the amount of Investments outstanding pursuant to clause (14) above.


 


“Permitted Liens”  means
the following types of Liens:


 


(1)                                  (a) statutory Liens of landlords and
Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen
and other Liens imposed by law incurred in the ordinary course of business and
(b) Liens for taxes, assessments or governmental charges or claims, in
either case, for sums not yet delinquent or being contested in good faith, if
such reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;


 


(2)                                  Liens incurred or deposits made in the
ordinary course of business in connection with workers’ compensation,
unemployment insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);


 


(3)                                  Liens upon specific items of inventory or
other goods and proceeds of any Person securing such Person’s obligations in
respect of bankers’ acceptances issued or created for the account of such
Person to facilitate the purchase, shipment or storage of such inventory or
other goods;


 


(4)                                  Liens securing reimbursement obligations
with respect to commercial letters of credit which encumber documents and other
assets relating to such letters of credit and products and proceeds thereof;


 


(5)                                  Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual or warranty
requirements of the Issuer or any Restricted Subsidiary, including rights of
offset and setoff;


 


(6)                                  bankers’ Liens, rights of setoff and
other similar Liens existing solely with respect to cash and Cash Equivalents
on deposit in one or more accounts maintained by the Issuer or any Restricted
Subsidiary, in each case granted in the ordinary 


 


24

















 


course of business
in favor of the bank or banks with which such accounts are maintained, securing
amounts owing to such bank with respect to cash management and operating account
arrangements, including those involving pooled accounts and netting
arrangements; provided that in no case shall any such Liens secure
(either directly or indirectly) the repayment of any Indebtedness;


 


(7)                                  leases or subleases (or any Liens related
thereto) granted to others that do not materially interfere with the ordinary
course of business of the Issuer or any Restricted Subsidiary;


 


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


 


(9)                                  Liens securing all of the Notes and Liens
securing any Note Guarantee;


 


(10)                            Liens existing on the Issue Date securing
Indebtedness outstanding on the Issue Date and Liens securing Refinancing
Indebtedness with respect to Indebtedness incurred pursuant to clause (2) of the
second paragraph of Section 4.06;


 


(11)                            Liens in favor of the Issuer or a
Guarantor;


 


(12)                            Liens securing Indebtedness under the
Credit Facilities incurred pursuant to clause (1) of the second paragraph
of Section 4.06;


 


(13)                            without limiting any other clause in this
definition of “Permitted Liens,” Liens securing Indebtedness of the Issuer or
any Restricted Subsidiary permitted to be incurred under this Indenture; provided
that the aggregate amount of all consolidated Indebtedness of the Issuer and
the Restricted Subsidiaries secured by Liens (including all Indebtedness
permitted to be secured by the other provisions of this definition, but
excluding Non-Recourse Indebtedness) shall not exceed 40% of Consolidated
Tangible Assets at any one time outstanding (after giving effect to the incurrence
of such Indebtedness and the use of the proceeds thereof);


 


(14)                            Liens securing Non-Recourse Indebtedness
of the Issuer or any Restricted Subsidiary permitted to be incurred under this
Indenture; provided that such Liens apply only to the property financed
out of the net proceeds of such Non-Recourse Indebtedness within 90 days after
the incurrence of such Non-Recourse Indebtedness;


 


(15)                            Liens securing Purchase Money
Indebtedness permitted to be incurred under this Indenture; provided
that such Liens apply only to the property acquired,


 


25

















 


constructed or
improved with the proceeds of such Purchase Money Indebtedness within 90 days
after the incurrence of such Purchase Money Indebtedness;


 


(16)                            Liens securing Acquired Indebtedness
permitted to be incurred under this Indenture; provided that the Liens
do not extend to assets not subject to such Lien at the time of acquisition
(other than improvements thereon) and are no more favorable to the lienholders
than those securing such Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Issuer or a Restricted Subsidiary;


 


(17)                            Liens on assets of a Person existing at
the time such Person is acquired or merged with or into or consolidated with
the Issuer or any such Restricted Subsidiary (and not created in anticipation
or contemplation thereof);


 


(18)                            Liens to secure Attributable Indebtedness
permitted to be incurred under this Indenture; provided that any such
Lien shall not extend to or cover any assets of the Issuer or any Restricted
Subsidiary other than the assets which are the subject of the Sale and
Leaseback Transaction in which the Attributable Indebtedness is incurred;


 


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


 


(20)                            easements, rights-of-way, restrictions
and other similar charges or encumbrances not materially interfering with the
ordinary course of business of the Issuer and its Subsidiaries;


 


(21)                            zoning restrictions, licenses,
restrictions on the use of real property or minor irregularities in title
thereto, which do not materially impair the use of such real property in the
ordinary course of business of the Issuer and its Subsidiaries or the value of
such real property for the purpose of such business; and


 


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


 


“Permitted
Unrestricted Subsidiary Debt” means Indebtedness of an Unrestricted Subsidiary:


 


(1)                                  as to which neither the Issuer nor any
Restricted Subsidiary (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness), (b)
is directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;


 


26

















 


(2)                                  no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit upon notice, lapse of
time or both any holder of any other Indebtedness (other than the Notes) of the
Issuer or any Restricted Subsidiary to declare a default on the other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and


 


(3)                                  as to which the lenders have been
notified in writing that they will not have any recourse to the Equity
Interests or assets of the Issuer or any Restricted Subsidiary.


 


“Person” means any
individual, corporation, partnership, limited liability company, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.


 


“Physical Notes”
means certificated Notes in registered form in substantially the form set forth
in Exhibit A.


 


“Plan of Liquidation”
with respect to any Person, means a plan that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously, in phases or otherwise):  (1) the sale, lease, conveyance or
other disposition of all or substantially all of the assets of such Person
otherwise than as an entirety or substantially as an entirety; and (2) the
distribution of all or substantially all of the proceeds of such sale, lease,
conveyance or other disposition of all or substantially all of the remaining
assets of such Person to creditors and holders of Equity Interests of such Person.


 


“Preferred Stock”
means, with respect to any Person, any and all preferred or preference stock or
other equity interests (however designated) of such Person whether now
outstanding or issued after the Issue Date.


 


“principal” means,
with respect to the Notes, the principal of, and premium, if any, on the Notes.


 


“Private Exchange”
has the meaning set forth in the Registration Rights Agreement.


 


“Private Exchange
Notes” has the meaning set forth in the Registration Rights Agreement.


 


“Private Placement
Legend” means the legend initially set forth on the Rule 144A Notes and
Other Notes that are Restricted Notes in the form set forth in Exhibit B.


 


27

















 


“Purchase Amount”
has the meaning set forth in the definition of “Offer to Purchase.”


 


“Purchase Date”
has the meaning set forth in the definition of “Offer to Purchase.”


 


“Purchase Money
Indebtedness” means Indebtedness, including Capitalized Lease Obligations,
of the Issuer or any Restricted Subsidiary incurred for the purpose of financing
all or any part of the purchase price of property, plant or equipment used in
the business of the Issuer or any Restricted Subsidiary or the cost of
installation, construction or improvement thereof; provided, however,
that (1) the amount of such Indebtedness shall not exceed such purchase price
or cost, (2) such Indebtedness shall not be secured by any asset other than the
specified asset being financed or, in the case of real property or fixtures,
including additions and improvements, the real property to which such asset is
attached and (3) such Indebtedness shall be incurred within 90 days after such
acquisition of such asset by the Issuer or such Restricted Subsidiary or such
installation, construction or improvement.


 


“Purchase Price”
has the meaning set forth in the definition of “Offer to Purchase.”


 


“Qualified Equity
Interests” means Equity Interests of the Issuer other than Disqualified
Equity Interests; provided that such Equity Interests shall not be
deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary of
the Issuer or financed, directly or indirectly, using funds (1) borrowed from
the Issuer or any Subsidiary of the Issuer until and to the extent such
borrowing is repaid or (2) contributed, extended, guaranteed or advanced by the
Issuer or any Subsidiary of the Issuer (including, without limitation, in respect
of any employee stock ownership or benefit plan).


 


“Qualified Equity
Offering” means the issuance and sale of Qualified Equity Interests of the
Issuer to Persons other than any Permitted Holder or any other Person who is
not, prior to such issuance and sale, an Affiliate of the Issuer.


 


“Qualified
Institutional Buyer” or “QIB” shall have the meaning specified in
Rule 144A promulgated under the Securities Act.


 


“Receivables” means an amount owed with respect to
completed sales of housing units, lots and parcels sold to an unaffiliated
purchaser.


 


“redeem” means to
redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire
or retire for value; and “redemption” shall have a correlative meaning.


 


28

















 


“Redemption Date”
when used with respect to any Note to be redeemed means the date fixed for such
redemption pursuant to the terms of the Notes.


 


“refinance” means
to refinance, repay, prepay, replace, renew or refund.


 


“Refinancing
Indebtedness” means Indebtedness of the Issuer or a Restricted Subsidiary
issued in exchange for, or the proceeds from the issuance and sale or disbursement
of which are used substantially concurrently to redeem or refinance in whole or
in part, or constituting an amendment of, any Indebtedness of the Issuer or any
Restricted Subsidiary (the “Refinanced Indebtedness”) in a principal
amount not in excess of the principal amount of the Refinanced Indebtedness so
repaid or amended (plus the amount of any premium paid and the amount of
reasonable expenses incurred by the Issuer or any Restricted Subsidiary in
connection with such repayment or amendment) (or, if such Refinancing
Indebtedness refinances Indebtedness under a revolving credit facility or other
agreement providing a commitment for subsequent borrowings, with a maximum
commitment not to exceed the maximum commitment under such revolving credit
facility or other agreement); provided that:


 


(1)                                  if the Refinanced Indebtedness was
subordinated to or pari passu with the Notes or the Note Guarantees, as the
case may be, then such Refinancing Indebtedness, by its terms, is expressly
pari passu with (in the case of Refinanced Indebtedness that was pari passu
with) or subordinate in right of payment to (in the case of Refinanced
Indebtedness that was subordinated to) the Notes or the Note Guarantees, as the
case may be, at least to the same extent as the Refinanced Indebtedness;


 


(2)                                  the Refinancing Indebtedness is scheduled
to mature either (a) no earlier than the Refinanced Indebtedness being repaid
or amended or (b) after the maturity date of the Notes;


 


(3)                                  the portion, if any, of the Refinancing
Indebtedness that is scheduled to mature on or prior to the maturity date of
the Notes has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is incurred that is equal to or greater than the Weighted Average
Life to Maturity of the portion of the Refinanced Indebtedness being repaid
that is scheduled to mature on or prior to the maturity date of the Notes; and


 


(4)                                  the Refinancing Indebtedness is secured
only to the extent, if at all, and by the assets, that the Refinanced
Indebtedness being repaid, extended or amended is secured.


 


“Registration Rights
Agreement” means the registration rights agreement dated as of the Issue
Date among the Issuer, the Guarantors and the Initial Purchaser.


 


29

















 


“Regulation S”
means Regulation S promulgated under the Securities Act.


 


“Responsible Officer”
when used with respect to the Trustee, means an officer or assistant officer
assigned to the corporate trust department of the Trustee (or any successor
group of the Trustee) with direct responsibility for the administration of this
Indenture and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.


 


“Restricted Note”
has the same meaning as “Restricted Security” set forth in Rule 144(a)(3)
promulgated under the Securities Act; provided, that the Trustee shall
be entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Note is a Restricted Note.


 


“Restricted Payment”
means any of the following:


 


(1)                                  the declaration or payment of any
dividend or any other distribution on Equity Interests of the Issuer or any
Restricted Subsidiary or any payment made to the direct or indirect holders (in
their capacities as such) of Equity Interests of the Issuer or any Restricted
Subsidiary, including, without limitation, any payment in connection with any
merger or consolidation involving the Issuer, but excluding (a) dividends
or distributions payable solely in Qualified Equity Interests and (b) in
the case of Restricted Subsidiaries, dividends or distributions payable to the
Issuer or to a Restricted Subsidiary and pro rata dividends or distributions
payable to minority stockholders of any Restricted Subsidiary;


 


(2)                                  the redemption of any Equity Interests of
the Issuer or any Restricted Subsidiary, including, without limitation, any
payment in connection with any merger or consolidation involving the Issuer,
but excluding any such Equity Interests held by the Issuer or any Restricted Subsidiary;


 


(3)                                  any Investment other than a Permitted
Investment; or


 


(4)                                  any redemption prior to the scheduled
maturity or prior to any scheduled repayment of principal or sinking fund
payment, as the case may be, in respect of Subordinated Indebtedness.


 


“Restricted Payments
Basket” has the meaning given to such term in clause (3) of the first
paragraph of Section 4.08.


 


“Restricted Subsidiary”
means any Subsidiary of the Issuer other than an Unrestricted Subsidiary.


 


30

















 


“Rule 144” means
Rule 144 promulgated under the Securities Act.


 


“Rule 144A” means
Rule 144A promulgated under the Securities Act.


 


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


 


“Sale and Leaseback
Transaction” means, with respect to any Person, an arrangement with any
bank, insurance company or other lender or investor or to which such lender or
investor is a party, providing for the leasing by such Person of any asset of
such Person which has been or is being sold or transferred by such Person to
such lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such asset.


 


“SEC” means the
U.S. Securities and Exchange Commission.


 


“Secretary’s
Certificate” means a certificate signed by the Secretary of the Issuer.


 


“Securities Act” means
the U.S. Securities Act of 1933, as amended.


 


“Significant
Subsidiary” means (1) any Restricted Subsidiary that would be a
“significant subsidiary” as defined in Regulation S-X promulgated pursuant to
the Securities Act as such Regulation is in effect on the Issue Date and (2)
any Restricted Subsidiary that, when aggregated with all other Restricted
Subsidiaries that are not otherwise Significant Subsidiaries and as to which
any event described in clause (7) or (8) of Section 6.01 has occurred and
is continuing, would constitute a Significant Subsidiary under clause (1) of
this definition.


 


“Subordinated
Indebtedness” means Indebtedness of the Issuer or any Restricted Subsidiary
that is subordinated in right of payment to the Notes or the Note Guarantees,
respectively.


 


“Subsidiary”
means, with respect to any Person:


 


(1)                                  any corporation, limited liability
company, association or other business entity of which more than 50% of the
total voting power of the Equity Interests entitled (without regard to the
occurrence of any contingency) to vote in the election of the Board of
Directors thereof are at the time owned or controlled, directly or indirectly,
by such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof); and


 


(2)                                  any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general 


 


31

















 


partners of which
are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).


 


Unless otherwise
specified, “Subsidiary” refers to a Subsidiary of the Issuer.


 


“Surviving Person”
means, with respect to any Person involved in or that makes any Disposition,
the Person formed by or surviving such Disposition or the Person to which such
Disposition is made.


 


“Trust Indenture Act”
or “TIA” means the Trust Indenture Act of 1939, as amended.


 


“Trustee” means
the party named as such in this Indenture until a successor replaces it
pursuant to this Indenture and thereafter means the successor.


 


“Unit” means a residence, whether single or part
of a multifamily building, whether completed or under construction, held by the
Issuer or any Restricted Subsidiary for sale or rental in the ordinary course
of business; provided, however, that the number of Units that are
rental Units at the time of determination shall not exceed 25% of the total
Units sold or rented by the Issuer and its Restricted Subsidiaries during the
immediately preceding twelve month period.


 


“Unrestricted
Subsidiary” means (1) any Subsidiary that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors of the
Issuer in accordance with Section 4.15 and (2) any Subsidiary of an
Unrestricted Subsidiary.


 


“U.S. Government
Obligations” means direct non-callable obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.


 


“Voting Stock”
with respect to any Person, means securities of any class of Equity Interests
of such Person entitling the holders thereof (whether at all times or only so
long as no senior class of stock or other relevant equity interest has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.


 


“Weighted Average Life
to Maturity” when applied to any Indebtedness at any date, means the number
of years obtained by dividing (1) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund, serial
maturity or other required payment of principal, including payment at final
maturity, in respect thereof by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of such
payment by (2) the then outstanding principal amount of such Indebtedness.


 


32

















 


“Wholly-Owned
Restricted Subsidiary” means a Restricted Subsidiary of which 100% of the
Equity Interests (except for directors’ qualifying shares or certain minority
interests owned by other Persons solely due to local law requirements that
there be more than one stockholder, but which interest is not in excess of what
is required for such purpose) are owned directly by the Issuer or through one
or more Wholly-Owned Restricted Subsidiaries.


 


SECTION 1.02.                                                                 Other Definitions.


 


The definitions of the
following terms may be found in the sections indicated as follows:


 


	
  Term

  	
   

  	
  Defined in
  Section

  
	
   

  	
   

  	
   

  	
   

  
	
  “Affiliate Transaction”

  	
   

  	
  4.10

  	
   

  
	
  “Agent Members”

  	
   

  	
  2.16

  	
  (a)

  
	
  “Business Day”

  	
   

  	
  12.07

  	
   

  
	
  “Change of Control Date”

  	
   

  	
  4.20

  	
   

  
	
  “Change of Control Offer”

  	
   

  	
  4.20

  	
   

  
	
  “Change of Control Payment Date”

  	
   

  	
  4.20

  	
   

  
	
  “Change of Control Purchase Price”

  	
   

  	
  4.20

  	
   

  
	
  “Company Bankruptcy Proceeding”

  	
   

  	
  11.02

  	
   

  
	
  “Covenant Defeasance”

  	
   

  	
  9.03

  	
   

  
	
  “Custodian”

  	
   

  	
  6.01

  	
   

  
	
  “Designation”

  	
   

  	
  4.15

  	
  (a)

  
	
  “Events of Default”

  	
   

  	
  6.01

  	
   

  
	
  “Excess Proceeds”

  	
   

  	
  4.09

  	
   

  
	
  “Global Notes”

  	
   

  	
  2.16

  	
  (a)

  
	
  “Guarantor Bankruptcy Proceeding”

  	
   

  	
  10.07

  	
   

  
	
  “Legal Defeasance”

  	
   

  	
  9.02

  	
   

  
	
  “Legal Holiday”

  	
   

  	
  12.07

  	
   

  
	
  “Note Portion of Excess Proceeds”

  	
   

  	
  4.09

  	
   

  
	
  “Other Debt”

  	
   

  	
  4.09

  	
   

  
	
  “Other Notes”

  	
   

  	
  2.02

  	
   

  
	
  “Paying Agent”

  	
   

  	
  2.04

  	
   

  
	
  “Ratio Exception”

  	
   

  	
  4.06

  	
   

  
	
  “Redesignation”

  	
   

  	
  4.15

  	
   

  
	
  “Registrar”

  	
   

  	
  2.04

  	
   

  
	
  “Regulation S Global Notes”

  	
   

  	
  2.16

  	
  (a)

  
	
  “Regulation S Notes”

  	
   

  	
  2.02

  	
   

  
	
  “Replacement Assets

  	
   

  	
  4.09

  	
   

  
	
  “Restricted Global Note”

  	
   

  	
  2.16

  	
  (a)

  



 


33

















 


	
  “Restricted Payment”

  	
   

  	
  4.08

  	
   

  
	
  “Revocation”

  	
   

  	
  4.15

  	
  (c)

  
	
  “Rule 144A Notes”

  	
   

  	
  2.02

  	
   

  



 


SECTION 1.03.                                                                 Incorporation by Reference of Trust
Indenture Act.


 


Whenever this Indenture
refers to a provision of the TIA, the portion of such provision required to be
incorporated herein in order for this Indenture to be qualified under the TIA
is incorporated by reference in and made a part of this Indenture.  The following TIA terms used in this
Indenture have the following meanings:


 


“indenture
securities” means the Notes.


 


“indenture
securityholder” means a Holder or Noteholder.


 


“indenture
to be qualified” means this Indenture.


 


“indenture
trustee” or “institutional trustee” means the Trustee.


 


“obligor
on the indenture securities” means the Issuer, the Guarantors or any other
obligor on the Notes.


 


All other terms used in
this Indenture that are defined by the TIA, defined in the TIA by reference to
another statute or defined by SEC rule have the meanings therein assigned to
them.


 


SECTION 1.04.                                                                 Rules of Construction.


 


Unless the context
otherwise requires:


 


(1)                                  a term has the meaning assigned to it
herein, whether defined expressly or by reference;


 


(2)                                  “or” is not exclusive;


 


(3)                                  words in the singular include the plural,
and in the plural include the singular;


 


(4)                                  words used herein implying any gender
shall apply to both genders;


 


(5)                                  “herein”, “hereof” and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other Subsection;


 


34

















 


(6)                                  unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required
to be delivered hereunder shall be prepared in accordance with GAAP as in
effect from time to time, applied on a basis consistent with the most recent
audited consolidated financial statements of the Issuer;


 


(7)                                  “$,” “U.S. Dollars” and “United States
Dollars” each refer to United States dollars, or such other money of the United
States that at the time of payment is legal tender for payment of public and
private debts; and


 


(8)                                  whenever in this Indenture there is
mentioned, in any context, principal, interest or any other amount payable
under or with respect to any Note, such mention shall be deemed to include
mention of the payment of Additional Interest to the extent that, in such
context, Additional Interest is, was or would be payable in respect thereof.


 


ARTICLE TWO


 


THE NOTES


 


SECTION 2.01.                                                                 Amount of Notes.


 


The Trustee shall
authenticate (i) Notes for original issue on the Issue Date in the
aggregate principal amount not to exceed $130,000,000 and (ii) subject to
Section 4.06, Additional Notes in an unlimited principal amount, upon a
written order of the Issuer in the form of an Officers’ Certificate of the
Issuer.  The Officers’ Certificate shall
specify the amount of Notes to be authenticated and the date on which the Notes
are to be authenticated.


 


Upon receipt of a written
order of the Issuer in the form of an Officers’ Certificate, the Trustee shall
authenticate Notes in substitution for Notes originally issued to reflect any
name change of the Issuer.  Any
Additional Notes shall be part of the same issue as the Notes being issued on
the date hereof and will vote on all matters as one class with the Notes being
issued on the date hereof, including, without limitation, waivers, amendments,
redemptions and Offers to Purchase.  For
the purposes of this Indenture, except for Section 4.06, references to the
Notes include Additional Notes, if any.


 


Upon receipt of an Issuer
Request and an Officers’ Certificate certifying that a registration statement
relating to an exchange offer specified in the Registration Rights Agreement or
any registration rights agreement relating to the Additional Notes is effective
or that the conditions precedent to a private exchange thereunder have been
met, the Trustee shall authenticate an additional series of Notes for issuance
in exchange for the Notes tendered 


 


35

















 


for exchange pursuant to
such exchange offer registered under the Securities Act or pursuant to a
Private Exchange.  Exchange Notes or
Private Exchange Notes may have such distinctive series designations and such
changes in the form thereof as are specified in the Issuer Request referred to
in the preceding sentence.


 


SECTION 2.02.                                                                 Form and Dating.


 


The Notes and the
Trustee’s certificate of authentication with respect thereto shall be
substantially in the form set forth in Exhibit A, which is incorporated
in and forms a part of this Indenture. 
The Notes may have notations, legends or endorsements required by law,
rule or usage to which the Issuer is subject. 
Without limiting the generality of the foregoing, Notes offered and sold
to Qualified Institutional Buyers in reliance on Rule 144A (“Rule 144A Notes”)
shall bear the legend and include the form of assignment set forth in Exhibit
B, Notes offered and sold in offshore transactions in reliance on
Regulation S (“Regulation S Notes”) shall bear the legend and include
the form of assignment set forth in Exhibit C, and Notes offered
and sold to Institutional Accredited Investors in transactions exempt from registration
under the Securities Act not made in reliance on Rule 144A or Regulation S (“Other
Notes”) may be represented by a Restricted Global Note or, if such an
investor may not hold an interest in the Restricted Global Note, a Physical
Note, in each case, bearing the Private Placement Legend.  Each Note shall be dated the date of its authentication.


 


The terms and provisions
contained in the Notes shall constitute, and are expressly made, a part of this
Indenture and, to the extent applicable, the Issuer, the Guarantors and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and agree to be bound thereby.


 


The Notes may be
presented for registration of transfer and exchange at the offices of the
Registrar.


 


SECTION 2.03.                                                                 Execution and Authentication.


 


Two Officers shall sign,
or one Officer shall sign and one Officer (each of whom shall, in each case,
have been duly authorized by all requisite corporate actions) shall attest to,
the Notes for the Issuer by manual or facsimile signature.


 


If an Officer whose
signature is on a Note was an Officer at the time of such execution but no longer
holds that office at the time the Trustee authenticates the Note, the Note
shall be valid nevertheless.


 


No Note shall be entitled
to any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Note a certificate of authentication substantially
in the form provided for herein executed by the Trustee by manual signature,
and 


 


36

















 


such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.  Notwithstanding the foregoing, if any Note shall have been
authenticated and delivered hereunder but never issued and sold by the Issuer,
and the Issuer shall deliver such Note to the Trustee for cancellation as
provided in Section 2.12, for all purposes of this Indenture such Note
shall be deemed never to have been authenticated and delivered hereunder and
shall never be entitled to the benefits of this Indenture.


 


The Trustee may appoint
an authenticating agent reasonably acceptable to the Issuer to authenticate the
Notes.  Unless otherwise provided in the
appointment, an authenticating agent may authenticate the Notes whenever the
Trustee may do so.  Each reference in
this Indenture to authentication by the Trustee includes authentication by such
agent.  An authenticating agent has the
same rights as an Agent to deal with the Issuer and Affiliates of the
Issuer.  Each Paying Agent is designated
as an authenticating agent for purposes of this Indenture.


 


The Notes shall be
issuable only in registered form without coupons in denominations of $1,000 and
any integral multiple thereof.


 


SECTION 2.04.                                                                 Registrar and Paying Agent.


 


The Issuer shall maintain
an office or agency (which shall be located in the Borough of Manhattan in The
City of New York, State of New York) where Notes may be presented for
registration of transfer or for exchange (the “Registrar”), and an
office or agency where Notes may be presented for payment (the “Paying Agent”)
and an office or agency where notices and demands to or upon the Issuer, if
any, in respect of the Notes and this Indenture may be served.  The Registrar shall keep a register of the
Notes and of their transfer and exchange. 
The Issuer may have one or more additional Paying Agents.  The term “Paying Agent” includes any
additional Paying Agent.  Neither the
Issuer nor any Affiliate thereof may act as Paying Agent.


 


The Issuer shall enter
into an appropriate agency agreement, which shall incorporate the provisions of
the TIA, with any Agent that is not a party to this Indenture.  The agreement shall implement the provisions
of this Indenture that relate to such Agent. 
The Issuer shall notify the Trustee of the name and address of any such
Agent.  If the Issuer fails to maintain
a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.07.


 


The Issuer initially
appoints the Trustee as Registrar, Paying Agent and Agent for service of
notices and demands in connection with the Notes and this Indenture.


 


37



















 


SECTION 2.05.                                                                 Paying Agent To Hold Money in Trust.


 


Each Paying Agent shall
hold in trust for the benefit of the Holders or the Trustee all money held by
the Paying Agent for the payment of principal of or premium or interest on the
Notes (whether such money has been paid to it by the Issuer or any other
obligor on the Notes or the Guarantors), and the Issuer and the Paying Agent
shall notify the Trustee of any default by the Issuer (or any other obligor on
the Notes) in making any such payment. 
Money held in trust by the Paying Agent need not be segregated except as
required by law and in no event shall the Paying Agent be liable for any
interest on any money received by it hereunder.  The Issuer at any time may require the Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any Event of Default
specified in Section 6.01 (1) or (2), upon written request to the Paying
Agent, require such Paying Agent to pay forthwith all money so held by it to
the Trustee and to account for any funds disbursed.  Upon making such payment, the Paying Agent shall have no further
liability for the money delivered to the Trustee.


 


SECTION 2.06.                                                                 Holder Lists.


 


The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of the Holders.  If the Trustee is not the Registrar, the
Issuer shall furnish to the Trustee at least five Business Days before each
Interest Payment Date, and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of the Holders.


 


SECTION 2.07.                                                                 Transfer and Exchange.


 


Subject to Sections 2.16
and 2.17, when Notes are presented to the Registrar with a request from the
Holder of such Notes to register a transfer or to exchange them for an equal
principal amount of Notes of other authorized denominations, the Registrar
shall register the transfer as requested. 
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed or be accompanied by a written instrument of
transfer in form satisfactory to the Issuer and the Registrar, duly executed by
the Holder thereof or his attorneys duly authorized in writing.  To permit registrations of transfers and
exchanges, the Issuer shall issue and execute and the Trustee shall
authenticate new Notes (and the Guarantors shall execute the guarantee thereon)
evidencing such transfer or exchange at the Registrar’s request.  No service charge shall be made to the
Holder for any registration of transfer or exchange.  The Issuer may require from the Holder payment of a sum
sufficient to cover any transfer taxes or other governmental charge that may be
imposed in relation to a transfer or exchange, but this provision shall not
apply to any exchange pursuant to Section 2.11, 3.06, 4.09, 4.20 or 8.05
(in which events the Issuer shall be responsible for the payment of such taxes).  The Registrar shall not be required to exchange
or register a transfer of any Note for a


 


38

















 


period of 15 days
immediately preceding the mailing of notice of redemption of Notes to be
redeemed or of any Note selected, called or being called for redemption except
the unredeemed portion of any Note being redeemed in part.


 


Any Holder of the Global
Note shall, by acceptance of such Global Note, agree that transfers of the
beneficial interests in such Global Note may be effected only through a book
entry system maintained by the Holder of such Global Note (or its agent), and
that ownership of a beneficial interest in the Global Note shall be required to
be reflected in a book entry.


 


Each Holder of a Note
agrees to indemnify the Issuer and the Trustee against any liability that may
result from the transfer, exchange or assignment of such Holder’s Note in
violation of any provision of this Indenture and/or applicable U.S. Federal or
state securities law.


 


Except as expressly
provided herein, neither the Trustee nor the Registrar shall have any duty to
monitor the Issuer’s compliance with or have any responsibility with respect to
the Issuer’s compliance with any Federal or state securities laws.


 


SECTION 2.08.                                                                 Replacement Notes.


 


If a mutilated Note is
surrendered to the Registrar or the Trustee, or if the Holder of a Note claims
that the Note has been lost, destroyed or wrongfully taken, the Issuer shall
issue and the Trustee shall authenticate a replacement Note (and the Guarantors
shall execute the guarantee thereon) if the Holder of such Note furnishes to
the Issuer and the Trustee evidence reasonably acceptable to them of the
ownership and the destruction, loss or theft of such Note and if the requirements
of Section 8-405 of the New York Uniform Commercial Code as in effect on
the date of this Indenture are met.  If
required by the Trustee or the Issuer, an indemnity bond shall be posted,
sufficient in the judgment of both to protect the Issuer, the Guarantors, the
Trustee or any Paying Agent from any loss that any of them may suffer if such
Note is replaced.  The Issuer may charge
such Holder for the Issuer’s reasonable out-of-pocket expenses in replacing
such Note and the Trustee may charge the Issuer for the Trustee’s expenses
(including, without limitation, attorneys’ fees and disbursements) in replacing
such Note.  Every replacement Note shall
constitute a contractual obligation of the Issuer.


 


SECTION 2.09.                                                                 Outstanding Notes.


 


The Notes outstanding at
any time are all Notes that have been authenticated by the Trustee except for
(a) those cancelled by it, (b) those delivered to it for
cancellation, (c) to the extent set forth in Sections 9.01 and 9.02,
on or after the date on which the conditions set forth in Section 9.01 or
9.02 have been satisfied, those Notes theretofore authenticated


 


39

















 


and delivered by the
Trustee hereunder and (d) those described in this Section 2.09 as not
outstanding.  Subject to
Section 2.10, a Note does not cease to be outstanding because the Issuer
or one of its Affiliates holds the Note.


 


If a Note is replaced
pursuant to Section 2.08, it ceases to be outstanding unless the Trustee
receives proof satisfactory to it that the replaced Note is held by a bona fide
purchaser in whose hands such Note is a legal, valid and binding obligation of
the Issuer.


 


If the Paying Agent
holds, in its capacity as such, on any maturity date, money sufficient to pay
all accrued interest and principal with respect to the Notes payable on that
date and is not prohibited from paying such money to the Holders thereof
pursuant to the terms of this Indenture, then on and after that date such Notes
cease to be outstanding and interest on them ceases to accrue.


 


SECTION 2.10.                                                                 Treasury Notes.


 


In determining whether
the Holders of the required principal amount of Notes have concurred in any
declaration of acceleration or notice of default or direction, waiver or
consent or any amendment, modification or other change to this Indenture, Notes
owned by the Issuer or any other Affiliate of the Issuer shall be disregarded
as though they were not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent or any amendment, modification or other change to
this Indenture, only Notes as to which a Responsible Officer of the Trustee has
received an Officers’ Certificate stating that such Notes are so owned shall be
so disregarded.  Notes so owned which
have been pledged in good faith shall not be disregarded if the pledgee
established to the satisfaction of the Trustee the pledgee’s right so to act
with respect to the Notes and that the pledgee is not the Issuer, a Guarantor,
any other obligor on the Notes or any of their respective Affiliates.


 


SECTION 2.11.                                                                 Temporary Notes.


 


Until definitive Notes
are prepared and ready for delivery, the Issuer may prepare and the Trustee
shall authenticate temporary Notes. 
Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Issuer considers appropriate for temporary
Notes.  Without unreasonable delay, the
Issuer shall prepare and the Trustee shall authenticate definitive Notes in
exchange for temporary Notes.  Until
such exchange, temporary Notes shall be entitled to the same rights, benefits
and privileges as definitive Notes.


 


40

















 


SECTION 2.12.                                                                 Cancellation.


 


The Issuer at any time
may deliver Notes to the Trustee for cancellation.  The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or
payment.  The Trustee shall cancel all
Notes surrendered for registration of transfer, exchange, payment, replacement
or cancellation and shall (subject to the record-retention requirements of the
Exchange Act) destroy cancelled Notes. 
The Issuer may not reissue or resell, or issue new Notes to replace,
Notes that the Issuer has redeemed or paid, or that have been delivered to the
Trustee for cancellation.


 


SECTION 2.13.                                                                 Defaulted Interest.


 


If the Issuer defaults on
a payment of interest on the Notes, it shall pay the defaulted interest, plus
(to the extent permitted by law) any interest payable on the defaulted interest,
in accordance with the terms hereof, to the Persons who are Holders on a subsequent
special record date, which date shall be at least five Business Days prior to
the payment date.  The Issuer shall fix
such special record date and payment date in a manner satisfactory to the
Trustee.  At least 10 days before such
special record date, the Issuer shall mail to each Holder a notice that states
the special record date, the payment date and the amount of defaulted interest,
and interest payable on defaulted interest, if any, to be paid.  The Issuer may make payment of any defaulted
interest in any other lawful manner not inconsistent with the requirements (if
applicable) of any securities exchange on which the Notes may be listed and,
upon such notice as may be required by such exchange, if, after written notice
given by the Issuer to the Trustee of the proposed payment pursuant to this
sentence, such manner of payment shall be deemed practicable by the Trustee.


 


SECTION 2.14.                                                                 CUSIP Number.


 


The Issuer in issuing the
Notes may use a “CUSIP” number, and if so, such CUSIP number shall be included
in notices of redemption or exchange as a convenience to Holders; provided,
that any such notice may state that no representation is made as to the correctness
or accuracy of the CUSIP number printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes.  The Issuer shall promptly notify
the Trustee of any such CUSIP number used by the Issuer in connection with the
issuance of the Notes and of any change in the CUSIP number.


 


SECTION 2.15.                                                                 Deposit of Moneys.


 


Prior to 10:00 a.m., New
York City time, on each Interest Payment Date and maturity date, the Issuer
shall have deposited with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date or
maturity date, as the case may be, in a timely manner which permits the Trustee
to remit payment


 


41

















 


to the Holders on such
Interest Payment Date or maturity date, as the case may be.  The principal and interest on Global Notes
shall be payable to the Depository or its nominee, as the case may be, as the
sole registered owner and the sole holder of the Global Notes represented
thereby.  The principal and interest on
Physical Notes shall be payable, either in person or by mail, at the office of
the Paying Agent.


 


SECTION 2.16.                                                                 Book-Entry Provisions for Global Notes.


 


(a)  Rule 144A
Notes initially shall be represented by one or more notes in registered, global
form without interest coupons (collectively, the “Restricted Global Note”).  Regulation S Notes initially shall be
represented by one or more notes in registered, global form without interest
coupons (collectively, the “Regulation S Global Note,” and, together
with the Restricted Global Note and any other global notes representing Notes,
the “Global Notes”).  The Global
Notes shall bear legends as set forth in Exhibit D.  The Global Notes initially shall (i) be
registered in the name of the Depository or the nominee of such Depository, in
each case for credit to an account of an Agent Member (or, in the case of the
Regulation S Global Notes, of Euroclear System and Cedel Bank, S.A.), (ii) be
delivered to the Trustee as custodian for such Depository and (iii) bear
legends as set forth in Exhibit B with respect to Restricted Global
Notes and Exhibit C with respect to Regulation S Global Notes.


 


Members of, or direct or
indirect participants in, the Depository (“Agent Members”) shall have no
rights under this Indenture with respect to any Global Note held on their
behalf by the Depository, or the Trustee as its custodian, or under the Global
Notes, and the Depository may be treated by the Issuer, the Trustee and any
agent of the Issuer or the Trustee as the absolute owner of the Global Note for
all purposes whatsoever. 
Notwithstanding the foregoing, nothing herein shall prevent the Issuer,
the Trustee or any agent of the Issuer or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.


 


(b)  Transfers
of Global Notes shall be limited to transfer in whole, but not in part, to the
Depository, its successors or their respective nominees.  Interests of beneficial owners in the Global
Notes may be transferred or exchanged for Physical Notes in accordance with the
rules and procedures of the Depository and the provisions of
Section 2.17.  In addition, a
Global Note shall be exchangeable for Physical Notes if (i) the Depository (x)
notifies the Issuer that it is unwilling or unable to continue as depository
for such Global Note and the Issuer thereupon fails to appoint a successor depository
or (y) has ceased to be a clearing agency registered under the Exchange Act or
(ii) there shall have occurred and be continuing an Event of Default with
respect to the Notes.  In all cases,
Physical Notes delivered in exchange for any Global Note or beneficial interests
therein shall be registered in the names, and


 


42

















 


issued in any approved
denominations, requested by or on behalf of the Depository (in accordance with
its customary procedures).


 


(c)  In
connection with any transfer or exchange of a portion of the beneficial
interest in any Global Note to beneficial owners pursuant to paragraph (b), the
Registrar shall (if one or more Physical Notes are to be issued) reflect on its
books and records the date and a decrease in the principal amount of the Global
Note in an amount equal to the principal amount of the beneficial interest in
the Global Note to be transferred, and the Issuer shall execute, and the
Trustee shall upon receipt of a written order from the Issuer authenticate and
make available for delivery, one or more Physical Notes of like tenor and
amount.


 


(d)  In connection
with the transfer of Global Notes as an entirety to beneficial owners pursuant
to paragraph (b), the Global Notes shall be deemed to be surrendered to the
Trustee for cancellation, and the Issuer shall execute, and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the Depository
in writing in exchange for its beneficial interest in the Global Notes, an
equal aggregate principal amount of Physical Notes of authorized denominations.


 


(e)  Any
Physical Note constituting a Restricted Note delivered in exchange for an
interest in a Global Note pursuant to paragraph (b), (c) or (d) shall, except
as otherwise provided by paragraphs (a)(i)(x) and (c) of Section 2.17,
bear the Private Placement Legend or, in the case of the Regulation S Global
Note, the legend set forth in Exhibit C, in each case, unless the Issuer
determines otherwise in compliance with applicable law.


 


(f)  On or
prior to the 40th day after the later of the commencement of the offering of
the Notes represented by the Regulation S Global Note and the issue date of
such Notes (such period through and including such 40th day, the “Restricted
Period”), a beneficial interest in a Regulation S Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
corresponding Restricted Global Note only upon receipt by the Trustee of a
written certification from the transferor to the effect that such transfer is
being made (i)(a) to a Person whom the transferor reasonably believes is a Qualified
Institutional Buyer in a transaction meeting the requirements of Rule 144A or
(b) pursuant to another exemption from the registration requirements under the
Securities Act which is accompanied by an Opinion of Counsel regarding the
availability of such exemption and (ii) in accordance with all applicable
securities laws of any state of the United States or any other jurisdiction.


 


(g)  Beneficial
interests in the Restricted Global Note may be transferred to a Person who
takes delivery in the form of an interest in the Regulation S Global Note,
whether before or after the expiration of the Restricted Period, only if the
transferor first delivers to the Trustee a written certificate to the effect
that such transfer is being made in accordance with Rule 903 or 904 of
Regulation S or Rule 144 (if available).


 


43

















 


(h)  Any
beneficial interest in one of the Global Notes that is transferred to a Person
who takes delivery in the form of an interest in another Global Note shall,
upon transfer, cease to be an interest in such Global Note and become an
interest in such other Global Note and, accordingly, shall thereafter be
subject to all transfer restrictions and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such
an interest.


 


(i)  The Holder
of any Global Note may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take under this
Indenture or the Notes.


 


SECTION 2.17.                                                                 Special Transfer Provisions.


 


(a)  Transfers
to Non-QIB Institutional Accredited Investors and Non-U.S. Persons.  The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Note to any Institutional Accredited Investor which is not a QIB or
to any Non-U.S. Person:


 


(i)                                     the Registrar shall register the transfer
of any Note constituting a Restricted Note, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after April 21,
2006 or such other date as such Note shall be freely transferable under Rule
144 as certified in an Officers’ Certificate or (y) (1) in the case
of a transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit E hereto or
(2) in the case of a transfer to a Non-U.S. Person (including a QIB), the
proposed transferor has delivered to the Registrar a certificate substantially
in the form of Exhibit F hereto; provided that in the case of any
transfer of a Note bearing the Private Placement Legend for a Note not bearing
the Private Placement Legend, the Registrar has received an Officers’
Certificate authorizing such transfer; and


 


(ii)                                  if the proposed transferor is an Agent
Member holding a beneficial interest in a Global Note, upon receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i) above and
(y) instructions given in accordance with the Depository’s and the Registrar’s
procedures,


 


whereupon (a) the
Registrar shall reflect on its books and records the date and (if the transfer
does not involve a transfer of outstanding Physical Notes) a decrease in the
principal amount of a Global Note in an amount equal to the principal amount of
the beneficial interest in a Global Note to be transferred, and (b) the
Registrar shall reflect on its books and records the date and an increase in
the principal amount of a Global Note in an amount equal to the principal 


 


44

















 


amount of the beneficial
interest in the Global Note transferred or the Issuer shall execute and the
Trustee shall authenticate and make available for delivery one or more Physical
Notes of like tenor and amount.


 


(b)  Transfers
to QIBs.  The following provisions
shall apply with respect to the registration or any proposed registration of
transfer of a Note constituting a Restricted Note to a QIB (excluding transfers
to Non-U.S. Persons):


 


(i)                                     the Registrar shall register the transfer
if such transfer is being made by a proposed transferor who has checked the box
provided for on such Holder’s Note stating, or has otherwise advised the Issuer
and the Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the certification
provided for on such Holder’s Note stating, or has otherwise advised the Issuer
and the Registrar in writing, that it is purchasing the Note for its own
account or an account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule 144A, and
is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Issuer as it
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A; and


 


(ii)                                  if the proposed transferee is an Agent
Member, and the Notes to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in the Global Note, upon receipt by
the Registrar of instructions given in accordance with the Depository’s and the
Registrar’s procedures, the Registrar shall reflect on its books and records
the date and an increase in the principal amount of the Global Note in an
amount equal to the principal amount of the Physical Notes to be transferred,
and the Trustee shall cancel the Physical Notes so transferred.


 


(c)  Private
Placement Legend.  Upon the
registration of transfer, exchange or replacement of Notes not bearing the
Private Placement Legend, the Registrar shall deliver Notes that do not bear
the Private Placement Legend.  Upon the
registration of transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless (i) it has received the Officers’ Certificate
required by paragraph (a)(i)(y) of this Section 2.17, (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the
Issuer and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (iii) such Note has been sold pursuant to
an effective registration statement under the Securities Act and the Registrar
has received an Officers’ Certificate from the Issuer to such effect.


 


45

















 


(d)  General.  By its acceptance of any Note bearing the
Private Placement Legend, each Holder of such Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture.


 


The Registrar shall
retain for a period of two years copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this
Section 2.17.  The Issuer shall
have the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
notice to the Registrar.


 


SECTION 2.18.                                                                 Computation of Interest.


 


Interest on the Notes
shall be computed on the basis of a 360-day year of twelve 30-day months.


 


ARTICLE THREE


 


REDEMPTION


 


SECTION 3.01.                                                                 Election To Redeem; Notices to Trustee.


 


If the Issuer elects to
redeem Notes pursuant to paragraph 6 of the Notes, at least 45 days prior to
the Redemption Date (unless a shorter notice shall be agreed to in writing by
the Trustee) but not more than 65 days before the Redemption Date, the Issuer
shall notify the Trustee in writing of the Redemption Date, the principal
amount of Notes to be redeemed and the redemption price, and deliver to the
Trustee an Officers’ Certificate stating that such redemption will comply with
the conditions contained in paragraph 6 of the Notes.  Notice given to the Trustee pursuant to this Section 3.01
may not be revoked after the time that notice is given to Holders pursuant to
Section 3.03.


 


SECTION 3.02.                                                                 Selection by Trustee of Notes To Be
Redeemed.


 


In the event that less
than all of the Notes are to be redeemed pursuant to a redemption made pursuant
to paragraph 6 of the Notes, selection of the Notes for redemption shall
be made by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not then listed on a national security exchange, on a pro  rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate;
provided, however, that no Notes of a principal amount of $1,000
or less shall be redeemed in part.  If a
partial redemption is made pursuant to the second paragraph 


 


46

















 


of paragraph 6 of the
Notes, selection of the Notes or portions thereof for redemption shall be made
by the Trustee only on a pro  rata basis or on as nearly a pro
rata basis as is practicable (subject to the procedures of the
Depository), unless that method is otherwise prohibited.  The Trustee shall promptly notify the Issuer
of the Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.  The Trustee may select for redemption
portions of the principal of the Notes that have denominations larger than
$1,000.  For all purposes of this
Indenture unless the context otherwise requires, provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes
called for redemption.  The Issuer may
acquire Notes by means other than redemption, whether pursuant to an Issuer
tender offer, open market purchase or otherwise provided such
acquisition does not otherwise violate the other terms of this Indenture.


 


SECTION 3.03.                                                                 Notice of Redemption.


 


At least 30 days, and no
more than 60 days, before a Redemption Date, the Issuer shall mail, or cause to
be mailed, a notice of redemption by first-class mail to each Holder of Notes
to be redeemed at his or her last address as the same appears on the registry
books maintained by the Registrar pursuant to Section 2.04.


 


The notice shall identify
the Notes to be redeemed (including the CUSIP numbers thereof) and shall state:


 


(1)                                  the Redemption Date;


 


(2)                                  the redemption price and the amount of
premium and accrued interest to be paid;


 


(3)                                  if any Note is being redeemed in part,
the portion of the principal amount of such Note to be redeemed and that, after
the Redemption Date and upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;


 


(4)                                  the name and address of the Paying Agent;


 


(5)                                  that Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;


 


(6)                                  that unless the Issuer defaults in making
the redemption payment, interest on Notes called for redemption ceases to
accrue on and after the Redemption Date;


 


47

















 


(7)                                  the provision of paragraph 6 of the
Notes, as the case may be, pursuant to which the Notes called for redemption
are being redeemed; and


 


(8)                                  the aggregate principal amount of Notes
that are being redeemed.


 


At the Issuer’s written
request made at least five Business Days prior to the date on which notice is
to be given, the Trustee shall give the notice of redemption in the Issuer’s
name and at the Issuer’s sole expense.


 


SECTION 3.04.                                                                 Effect of Notice of Redemption.


 


Once the notice of
redemption described in Section 3.03 is mailed, Notes called for
redemption become due and payable on the Redemption Date and at the redemption
price, including any premium, plus interest accrued to the Redemption
Date.  Upon surrender to the Paying
Agent, such Notes shall be paid at the redemption price, including any premium,
plus interest accrued to the Redemption Date, provided that if the Redemption
Date is after a regular record date and on or prior to the Interest Payment
Date, the accrued interest shall be payable to the Holder of the redeemed Notes
registered on the relevant record date, and provided, further,
that if a Redemption Date is a Legal Holiday, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from such
Redemption Date to such succeeding Business Day.


 


SECTION 3.05.                                                                 Deposit of Redemption Price.


 


On or prior to
10:00 A.M., New York City time, on each Redemption Date, the Issuer shall
deposit with the Paying Agent in immediately available funds money sufficient
to pay the redemption price of, including premium, if any, and accrued interest
on all Notes to be redeemed on that date other than Notes or portions thereof
called for redemption on that date which have been delivered by the Issuer to
the Trustee for cancellation.


 


On and after any
Redemption Date, if money sufficient to pay the redemption price of, including
premium, if any, and accrued interest on Notes called for redemption shall have
been made available in accordance with the preceding paragraph, the Notes called
for redemption will cease to accrue interest and the only right of the Holders
of such Notes will be to receive payment of the redemption price of and,
subject to the first proviso in Section 3.04, accrued and unpaid interest
on such Notes to the Redemption Date. 
If any Note surrendered for redemption shall not be so paid, interest
will be paid, from the Redemption Date until such redemption payment is made,
on the unpaid principal of the Note and any interest not paid on such unpaid
principal, in each case, at the rate and in the manner provided in the Notes.


 


48

















 


SECTION 3.06.                                                                 Notes Redeemed in Part.


 


Upon surrender of a Note
that is redeemed in part, the Trustee shall authenticate for the Holder thereof
a new Note equal in principal amount to the unredeemed portion of the Note
surrendered.


 


ARTICLE FOUR


 


COVENANTS


 


SECTION 4.01.                                                                 Payment of Notes.


 


The Issuer shall pay the
principal of and interest (including all Additional Interest as provided in the
Registration Rights Agreement) on the Notes on the dates and in the manner
provided in the Notes and this Indenture. 
An installment of principal or interest shall be considered paid on the
date it is due if the Trustee or Paying Agent holds on that date money
designated for and sufficient to pay such installment.


 


The Issuer shall pay
interest on overdue principal (including post-petition interest in a proceeding
under any Bankruptcy Law), and overdue interest, to the extent lawful, at the
rate specified in the Notes.


 


SECTION 4.02.                                                                 Reports to Holders.


 


Whether or not required
by the SEC, so long as any Notes are outstanding, the Issuer shall furnish to
the Holders of Notes, within the time periods specified in the SEC’s rules and
regulations (including any grace periods or extensions permitted by the SEC):


 


(1)                                  all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Issuer were required to file these Forms, including
a “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and, with respect to the annual information only, a report on the
annual financial statements by the Issuer’s certified independent accountants;
and


 


(2)                                  all current reports that would be
required to be filed with the SEC on Form 8-K if the Issuer were required to
file these reports.


 


In addition, whether or not required by the SEC, the
Issuer shall file a copy of all of the information and reports referred to in
clauses (1) and (2) above with the SEC for public availability within the time
periods specified in the SEC’s rules and regulations (unless 


 


49

















 


the SEC will not accept
the filing) and make the information available to securities analysts and
prospective investors upon request.  For
so long as any Notes remain outstanding, the Issuer shall furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.


 


SECTION 4.03.                                                                 Waiver of Stay, Extension or Usury Laws.


 


Each of the Issuer and
the Guarantors covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, or plead (as a defense or otherwise) or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive any
of the Issuer and the Guarantors from paying all or any portion of the
principal of, premium, if any, and/or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that they may lawfully do so) each of the Issuer and the Guarantors hereby
expressly waives all benefit or advantage of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.


 


SECTION 4.04.                                                                 Compliance Certificate.


 


(a)  The Issuer
shall deliver to the Trustee, within 90 days after the end of each fiscal year,
an Officers’ Certificate stating that a review of the activities of the Issuer
and its Subsidiaries during such fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Issuer and the Guarantors have kept, observed, performed and fulfilled their obligations
under this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge, the Issuer and the
Guarantors have kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and are not in default in the performance or observance
of any of the terms, provisions and conditions hereof (or, if a Default shall
have occurred, describing all such Defaults of which he or she may have
knowledge and what action they are taking or propose to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest, if any, on the Notes is prohibited or if such event has occurred,
a description of the event and what action the Issuer and the Guarantors is
taking or propose to take with respect thereto.


 


(b)  The Issuer
and the Guarantors shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default, an
Officers’ Certificate specifying such Default and what action the Issuer and
the Guarantors are taking or propose to take with respect thereto.


 


50

















 


(c)  The
Issuer’s fiscal year currently ends on December 31.  The Issuer will provide written notice to
the Trustee of any change in its fiscal year.


 


SECTION 4.05.                                                                 Taxes.


 


The Issuer and the
Guarantors shall, and shall cause each of their Subsidiaries to, pay prior to
delinquency all material taxes, assessments, and governmental levies except as
contested in good faith and by appropriate proceedings.


 


SECTION 4.06.                                                                 Limitations on Additional Indebtedness.


 


The Issuer shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, incur
any Indebtedness; provided that the Issuer or any Restricted Subsidiary
may incur additional Indebtedness (including Acquired Indebtedness) if no
Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of the Indebtedness and if, after giving effect
thereto, either (a) the Consolidated Fixed Charge Coverage Ratio would be
at least 2.00 to 1.00 or (b) the ratio of Consolidated Indebtedness to
Consolidated Tangible Net Worth would be less than 3.00 to 1.00 (either (a) or
(b), the “Ratio Exception”).


 


Notwithstanding the
above, so long as no Default shall have occurred and be continuing at the time
of or as a consequence of the incurrence of the following Indebtedness, each of
the following shall be permitted (the “Permitted Indebtedness”):


 


(1)                                  Indebtedness of the Issuer and any
Restricted Subsidiary under the Credit Facilities in an aggregate amount at any
time outstanding (whether incurred under the Ratio Exception or as Permitted
Indebtedness) not to exceed the greater of (x) $165.0 million and
(y) the amount of the Borrowing Base as of the date of such incurrence;


 


(2)                                  the Notes and the Note Guarantees issued
on the Issue Date;


 


(3)                                  Indebtedness of the Issuer and the
Restricted Subsidiaries to the extent outstanding on the Issue Date (other than
Indebtedness referred to in clauses (1) and (2) above, and after
giving effect to the intended use of proceeds of the Notes);


 


(4)                                  Indebtedness of the Issuer and the Restricted
Subsidiaries under Hedging Obligations; provided that (a) such
Hedging Obligations relate to payment obligations on Indebtedness otherwise
permitted to be incurred by this Section 4.06, and (b) the notional
principal amount of such Hedging Obligations at the time incurred does not
exceed the principal amount of the Indebtedness to which such Hedging Obligations
relate;


 


51

















 


(5)                                  Indebtedness of the Issuer owed to a
Restricted Subsidiary and Indebtedness of any Restricted Subsidiary owed to the
Issuer or any other Restricted Subsidiary; provided, however,
that (a) any Indebtedness of the Issuer owed to a Restricted Subsidiary is
unsecured and subordinated, pursuant to a written agreement, to the Issuer’s
obligation, under this Indenture and the Notes and (b) upon any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or such
Indebtedness being owed to any Person other than the Issuer or a Restricted
Subsidiary, the Issuer or such Restricted Subsidiary, as applicable, shall be
deemed to have incurred Indebtedness not permitted by this clause (5);


 


(6)                                  Indebtedness in respect of bid,
performance or surety bonds issued for the account of the Issuer or any
Restricted Subsidiary in the ordinary course of business, including guarantees
or obligations of the Issuer or any Restricted Subsidiary with respect to
letters of credit supporting such bid, performance or surety obligations (in
each case other than for an obligation for money borrowed);


 


(7)                                  Purchase Money Indebtedness incurred by
the Issuer or any Restricted Subsidiary, in an aggregate amount not to exceed
at any time outstanding $15.0 million;


 


(8)                                  Non-Recourse Indebtedness of the Issuer
or any Restricted Subsidiary incurred for the acquisition, development and/or
improvement of real property and secured by Liens only on such real property;


 


(9)                                  Indebtedness arising from the honoring by
a bank or other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within five Business Days of incurrence;


 


(10)                            Indebtedness arising in connection with
endorsement of instruments for deposit in the ordinary course of business;


 


(11)                            Refinancing Indebtedness with respect to
Indebtedness incurred pursuant to the Ratio Exception or clause (2) or (3)
above; and


 


(12)                            Indebtedness of the Issuer or any
Restricted Subsidiary in an aggregate amount not to exceed $15.0 million at any
time outstanding.


 


For purposes of
determining compliance with this Section 4.06, in the event that an item
of Indebtedness meets the criteria of more than one of the categories of Permitted
Indebtedness described in clauses (1) through (12) above or is entitled to be
incurred pursuant 


 


52

















 


to the Ratio Exception,
the Issuer shall, in its sole discretion, classify such item of Indebtedness
and may divide and classify such Indebtedness in more than one of the types of
Indebtedness described, except that Indebtedness outstanding under the Credit
Facilities on the Issue Date shall be deemed to have been incurred under clause
(1) above.


 


SECTION 4.07.                                                                 Limitations on Layering Indebtedness.


 


The Issuer shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, incur
any Indebtedness that is or purports to be by its terms (or by the terms of any
agreement governing such Indebtedness) contractually subordinated to any other
Indebtedness of the Issuer or of such Restricted Subsidiary, as the case may
be, unless such Indebtedness is also by its terms (or by the terms of any
agreement governing such Indebtedness) contractually made expressly subordinate
to the Notes or the Note Guarantee of such Restricted Subsidiary, to the same
extent and in the same manner as such Indebtedness is contractually
subordinated to such other Indebtedness of the Issuer or such Restricted Subsidiary,
as the case may be.


 


SECTION 4.08.                                                                 Limitations on Restricted Payments.


 


The Issuer shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, make any
Restricted Payment if at the time of such Restricted Payment:


 


(1)                                  a Default shall have occurred and be
continuing or shall occur as a consequence thereof;


 


(2)                                  the Issuer cannot incur $1.00 of
additional Indebtedness pursuant to the Ratio Exception; or


 


(3)                                  the amount of such Restricted Payment,
when added to the aggregate amount of all other Restricted Payments made after
the Measurement Date (other than Restricted Payments made pursuant to clause
(2), (3) or (5) of the next paragraph), exceeds the sum (the “Restricted
Payments Basket”) of (without duplication):


 


(a)                                  50% of Consolidated Net Income for the
period (taken as one accounting period) commencing on the first day of the
first full fiscal quarter commencing after the Measurement Date to and
including the last day of the fiscal quarter ended immediately prior to the
date of such calculation for which consolidated financial statements are
available (or, if such Consolidated Net Income shall be a deficit, minus 100%
of such aggregate deficit), plus


 


(b)                                 100% of the aggregate net cash proceeds
or the Fair Market Value of any assets to be used in a Permitted Business
(other than securities)


 


53

















 


received by the
Issuer either (x) as contributions to the common equity of the Issuer
after the Measurement Date or (y) from the issuance and sale of Qualified
Equity Interests after the Measurement Date, other than to the extent any such
proceeds are used to redeem Notes in accordance with Section 6(b) of the
Notes, plus


 


(c)                                  the aggregate amount by which
Indebtedness of the Issuer or any Restricted Subsidiary is reduced on the
Issuer’s balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Issuer) subsequent to the Measurement Date into Qualified
Equity Interests (less the amount of any cash, or the fair value of assets, distributed
by the Issuer or any Restricted Subsidiary upon such conversion or exchange), plus


 


(d)                                 in the case of the disposition or
repayment of or return on any Investment that was treated as a Restricted
Payment made after the Measurement Date, an amount (to the extent not included
in the computation of Consolidated Net Income) equal to the lesser of
(i) the return of capital with respect to such Investment and
(ii) the amount of such Investment that was treated as a Restricted
Payment, in either case, less the cost of the disposition of such Investment
and net of taxes, plus


 


(e)                                  upon a Redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary, the lesser of (i) the Fair Market
Value of the Issuer’s proportionate interest in such Subsidiary immediately
following such Redesignation, and (ii) the aggregate amount of the Issuer’s
Investments in such Subsidiary to the extent such Investments reduced the
amount available for subsequent Restricted Payments under this clause
(3) and were not previously repaid or otherwise reduced, plus


 


(f)                                    $10.0 million.


 


The foregoing provisions
will not prohibit:


 


(1)                                  the payment by the Issuer or any
Restricted Subsidiary of any dividend within 60 days after the date of
declaration thereof, if on the date of declaration the payment would have
complied with the provisions of this Indenture;


 


(2)                                  so long as no Default shall have occurred
and be continuing at the time of or as a consequence of such redemption, the
redemption of any Equity Interests of the Issuer or any Restricted Subsidiary
in exchange for, or out of the proceeds of the substantially concurrent
issuance and sale of, Qualified Equity Interests;


 


54

















 


(3)                                  so long as no Default shall have occurred
and be continuing at the time of or as a consequence of such redemption, the
redemption of Subordinated Indebtedness of the Issuer or any Restricted
Subsidiary (a) in exchange for, or out of the proceeds of the substantially
concurrent issuance and sale of, Qualified Equity Interests or (b) in exchange
for, or out of the proceeds of the substantially concurrent incurrence of,
Refinancing Indebtedness permitted to be incurred under Section 4.06 and
the other terms of this Indenture;


 


(4)                                  so long as no Default shall have occurred
and be continuing at the time of or as a consequence of such redemption, the
redemption of Equity Interests of the Issuer held by officers, directors or
employees or former officers, directors or employees (or their transferees,
estates or beneficiaries under their estates), upon their death, disability,
retirement, severance or termination of employment or service; provided
that the aggregate cash consideration paid for all such redemptions shall not
exceed $2.0 million during any calendar year (with unused amounts in any
calendar year being carried over to succeeding calendar years subject to a
maximum of $4.0 million in any calendar year); or


 


(5)                                  repurchases of Equity Interests deemed to
occur upon the exercise of stock options if the Equity Interests represents a
portion of the exercise price thereof;


 


provided that no issuance and sale of Qualified
Equity Interests pursuant to clause (2) or (3) above shall increase the
Restricted Payments Basket, except to the extent the proceeds thereof exceed
the amounts used to effect the transactions described therein.


 


SECTION 4.09.                                                                 Limitations on Asset Sales.


 


The Issuer shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Sale unless:


 


(1)                                  the Issuer or such Restricted Subsidiary
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the assets included in such Asset Sale; and


 


(2)                                  at least 75% of the total consideration
received in such Asset Sale or series of related Asset Sales consists of cash
or Cash Equivalents.


 


For purposes of clause
(2), the following shall be deemed to be cash:


 


(a)                                  the amount (without duplication) of any
Indebtedness (other than Subordinated Indebtedness) of the Issuer or such Restricted
Subsidiary that is expressly assumed by the transferee in such Asset Sale and
with respect to which the Issuer or 


 


55

















 


such Restricted
Subsidiary, as the case may be, is unconditionally released by the holder of
such Indebtedness,


 


(b)                                 the amount of any obligations received
from such transferee that are within 30 days converted by the Issuer or such
Restricted Subsidiary to cash (to the extent of the cash actually so received),
and


 


(c)                                  the Fair Market Value of any assets
(other than securities, unless such securities represent Equity Interests in an
entity engaged solely in a Permitted Business, such entity becomes a Restricted
Subsidiary and the Issuer or a Restricted Subsidiary acquires voting and management
control of such entity) received by the Issuer or any Restricted Subsidiary to
be used by it in the Permitted Business.


 


If at any time any
non-cash consideration received by the Issuer or any Restricted Subsidiary of
the Issuer, as the case may be, in connection with any Asset Sale is repaid or
converted into or sold or otherwise disposed of for cash (other than interest received
with respect to any such non-cash consideration), then the date of such
repayment, conversion or disposition shall be deemed to constitute the date of
an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied
in accordance with this Section 4.09.


 


If the Issuer or any
Restricted Subsidiary engages in an Asset Sale, the Issuer or such Restricted
Subsidiary shall, no later than one year following the consummation thereof,
apply all or any of the Net Available Proceeds therefrom to:


 


(1)                                  repay any Indebtedness under the Credit
Facilities;


 


(2)                                  repay any Indebtedness which was secured
by the assets sold in such Asset Sale; and/or


 


(3)                                  invest all or any part of the Net
Available Proceeds thereof in the purchase of assets (other than securities,
unless such securities represent Equity Interests in an entity engaged solely
in a Permitted Business, such entity becomes a Restricted Subsidiary and the
Issuer or a Restricted Subsidiary acquires voting and management control of
such entity) to be used by the Issuer or any Restricted Subsidiary in the
Permitted Business.


 


The amount of Net
Available Proceeds not applied or invested as provided in this paragraph will
constitute “Excess Proceeds.”


 


When the aggregate amount
of Excess Proceeds equals or exceeds $10.0 million, the Issuer shall be
required to make an Offer to Purchase from all Holders and, if applicable, redeem
(or make an offer to do so) any Pari Passu Indebtedness of the Issuer the


 


56

















 


provisions of which
require the Issuer to redeem such Indebtedness with the proceeds from any Asset
Sales (or offer to do so), in an aggregate principal amount of Notes and such
Pari Passu Indebtedness equal to the amount of such Excess Proceeds as follows:


 


(1)                                  the Issuer shall (a) make an Offer to
Purchase (a “Net Proceeds Offer”) to all Holders, and (b) redeem (or
make an offer to do so) any such other Pari Passu Indebtedness, pro rata in
proportion to the respective principal amounts of the Notes and such other
Indebtedness required to be redeemed, the maximum principal amount of Notes and
Pari Passu Indebtedness that may be redeemed out of the amount (the “Payment
Amount”) of such Excess Proceeds;


 


(2)                                  the offer price for the Notes shall be
payable in cash in an amount equal to 100% of the principal amount of the Notes
tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest
thereon, if any, to the date such Net Proceeds Offer is consummated (the “Offered
Price”), and the redemption price for such Pari Passu Indebtedness (the “Pari
Passu Indebtedness Price”) shall be as set forth in the related documentation
governing such Indebtedness;


 


(3)                                  if the aggregate Offered Price of Notes
validly tendered and not withdrawn by Holders thereof exceeds the pro rata
portion of the Payment Amount allocable to the Notes, Notes to be purchased
shall be selected on a pro rata basis; and


 


(4)                                  upon completion of such Net Proceeds
Offer in accordance with the foregoing provisions, the amount of Excess
Proceeds with respect to which such Net Proceeds Offer was made shall be deemed
to be zero.


 


To the extent that the
sum of the aggregate Offered Price of Notes tendered pursuant to a Net Proceeds
Offer and the aggregate Pari Passu Indebtedness Price paid to the holders of
such Pari Passu Indebtedness is less than the Payment Amount relating thereto
(such shortfall constituting a “Net Proceeds Deficiency”), the Issuer
may use the Net Proceeds Deficiency, or a portion thereof, for general
corporate purposes, subject to the provisions of this Indenture.


 


In the event of the
transfer of substantially all (but not all) of the assets of the Issuer and the
Restricted Subsidiaries as an entirety to a Person in a transaction covered by
and effected in accordance with Section 5.01 the successor corporation
shall be deemed to have sold for cash at Fair Market Value the assets of the Issuer
and the Restricted Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale (with such Fair Market Value being
deemed to be Net Available Proceeds for such purpose).


 


57

















 


The Issuer shall comply
with applicable tender offer rules, including the requirements of Rule 14e-1
under the Exchange Act and any other applicable laws and regulations in connection
with the purchase of Notes pursuant to a Net Proceeds Offer.  To the extent that the provisions of any
securities laws or regulations conflict with this Section 4.09, the Issuer
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 4.09 by
virtue of this compliance.


 


SECTION 4.10.                                                                 Limitations on Transactions with
Affiliates.


 


The Issuer shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, in one
transaction or a series of related transactions, sell, lease, transfer or otherwise
dispose of any of its assets to, or purchase any assets from, or enter into any
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate involving aggregate consideration in excess of
$60,000 (an “Affiliate Transaction”), unless:


 


(1)                                  such Affiliate Transaction is on terms
that are no less favorable to the Issuer or the relevant Restricted Subsidiary
than those that may have been obtained in a comparable transaction at such time
on an arm’s-length basis by the Issuer or that Restricted Subsidiary from a
Person that is not an Affiliate of the Issuer or that Restricted Subsidiary;
and


 


(2)                                  the Issuer delivers to the Trustee:


 


(a)                                  with respect to any Affiliate Transaction
involving aggregate value of $1.0 million or more, an Officers’ Certificate
certifying that such Affiliate Transaction complies with clause (1) above;


 


(b)                                 with respect to any Affiliate Transaction
involving aggregate value in excess of $2.0 million, an Officers’
Certificate certifying that such Affiliate Transaction complies with clause
(1) above and a Secretary’s Certificate which sets forth and authenticates
a resolution that has been adopted by the Independent Directors approving such
Affiliate Transaction; and


 


(c)                                  with respect to any Affiliate Transaction
involving aggregate value of $10.0 million or more, the certificates described
in the preceding clause (b) and (x) a written opinion as to the fairness
of such Affiliate Transaction to the Issuer or such Restricted Subsidiary from
a financial point of view or (y) a written appraisal supporting the value
of such Affiliate Transaction, in either case, issued by an Independent
Financial Advisor.


 


The foregoing
restrictions shall not apply to:


 


58

















 


(1)                                  transactions exclusively between or among
(a) the Issuer and one or more Restricted Subsidiaries or
(b) Restricted Subsidiaries; provided, in each case, that no
Affiliate of the Issuer (other than another Restricted Subsidiary) owns Equity
Interests of any such Restricted Subsidiary;


 


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


 


(3)                                  loans and advances permitted by clause
(3) of the definition of “Permitted Investments”;


 


(4)                                  any agreement as in effect as of the
Issue Date or any extension, amendment or modification thereto (so long as any
such extension, amendment or modification satisfies the requirements set forth
in clause (1) of the first paragraph of this Section 4.10) or any
transaction contemplated thereby;


 


(5)                                  Restricted Payments of the type described
in clause (1), (2) or (4) of the definition of “Restricted Payment” and which
are made in accordance with Section 4.08; or


 


(6)                                  sales of Qualified Equity Interests for
cash by the Issuer to an Affiliate.


 


SECTION 4.11.                                                                 Limitations on Liens.


 


The Issuer shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, create,
incur, assume or permit or suffer to exist any Lien of any nature whatsoever
against (other than Permitted Liens) any assets of the Issuer or any Restricted
Subsidiary (including Equity Interests of a Restricted Subsidiary), whether
owned at the Issue Date or thereafter acquired, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom,
which Lien secures Indebtedness or trade payables, unless contemporaneously
therewith:


 


(1)                                  in the case of any Lien securing an
obligation that ranks pari passu with the Notes or a Note Guarantee,
effective provision is made to secure the Notes or such Note Guarantee, as the
case may be, at least equally and ratably with or prior to such obligation with
a Lien on the same collateral; and


 


(2)                                  in the case of any Lien securing an
obligation that is subordinated in right of payment to the Notes or a Note
Guarantee, effective provision is made to secure the Notes or such Note
Guarantee, as the case may be, with a Lien on the same collateral that is prior
to the Lien securing such subordinated obligation,


 


59

















 


in each case, for so long
as such obligation is secured by such Lien.


 


SECTION 4.12.                                                                 Conduct of Business.


 


The Issuer will not, and
will not permit any Restricted Subsidiary to, engage in any business other than
the Permitted Business.


 


SECTION 4.13.                                                                 Additional Note Guarantees.


 


If, after the Issue Date,
(a) the Issuer or any Restricted Subsidiary shall acquire or create another
Subsidiary (other than a Subsidiary that has been designated an Unrestricted
Subsidiary) or (b) any Unrestricted Subsidiary is redesignated a Restricted Subsidiary,
then, in each such case, the Issuer shall cause such Restricted Subsidiary to:


 


(1)                                  execute and deliver to the Trustee (a) a
supplemental indenture in form and substance satisfactory to the Trustee
pursuant to which such Restricted Subsidiary shall unconditionally guarantee
all of the Issuer’s obligations under the Notes and this Indenture and (b) a
notation of guarantee in respect of its Note Guarantee; and


 


(2)                                  deliver to the Trustee one or more
Opinions of Counsel that such supplemental indenture (a) has been duly
authorized, executed and delivered by such Restricted Subsidiary and (b)
constitutes a valid and legally binding obligation of such Restricted
Subsidiary in accordance with its terms.


 


SECTION 4.14.                                                                 Limitations on Dividend and Other
Restrictions Affecting Restricted Subsidiaries.


 


The Issuer shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any Restricted Subsidiary
to:


 


(a)                                  pay dividends or make any other
distributions on or in respect of its Equity Interests;


 


(b)                                 make loans or advances or pay any
Indebtedness or other obligation owed to the Issuer or any other Restricted
Subsidiary; or


 


(c)                                  transfer any of its assets to the Issuer
or any other Restricted Subsidiary;


 


60

















 


except for:


 


(1)                                  encumbrances or restrictions existing
under or by reason of applicable law;


 


(2)                                  encumbrances or restrictions existing
under this Indenture, the Notes and the Note Guarantees;


 


(3)                                  non-assignment provisions of any contract
or any lease entered into in the ordinary course of business;


 


(4)                                  encumbrances or restrictions existing
under agreements existing on the date hereof (including, without limitation,
the Credit Facilities) as in effect on the date hereof;


 


(5)                                  restrictions on the transfer of assets
subject to any Lien permitted under this Indenture imposed by the holder of
such Lien;


 


(6)                                  restrictions on the transfer of assets
imposed under any agreement to sell such assets permitted under this Indenture
to any Person pending the closing of such sale;


 


(7)                                  any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any Person,
or the assets of any Person, other than the Person or the assets so acquired;


 


(8)                                  encumbrances or restrictions arising in
connection with Refinancing Indebtedness; provided, however, that
any such encumbrances and restrictions are not materially more restrictive with
respect to any Restricted Subsidiary than those in effect on the Issue Date
with respect to that Restricted Subsidiary pursuant to the agreements creating
or evidencing the Indebtedness being refinanced;


 


(9)                                  customary provisions in leases,
partnership agreements, limited liability company organizational governance
documents, joint venture agreements and other similar agreements entered into
in the ordinary course of business that restrict the transfer of leasehold
interests or ownership interests in such partnership, limited liability
company, joint venture or similar Person;


 


(10)                            Purchase Money Indebtedness incurred in
compliance with Section 4.06 that impose restrictions of the nature
described in clause (c) above on the assets acquired; and


 


61

















 


(11)                            any encumbrances or restrictions imposed
by any amendments or refinancings of the contracts, instruments or obligations
referred to in clauses (1) through (10) above; provided that such
amendments or refinancings are, in the good faith judgment of the Issuer’s
Board of Directors, no more materially restrictive with respect to such
encumbrances and restrictions than those prior to such amendment or refinancing.


 


SECTION 4.15.                                                                 Limitations on Designation of
Unrestricted Subsidiaries.


 


The Issuer may designate
any Subsidiary of the Issuer as an “Unrestricted Subsidiary” under this
Indenture (a “Designation”) only if:


 


(1)                                  no Default shall have occurred and be
continuing at the time of or after giving effect to such Designation; and


 


(2)                                  the Issuer would be permitted to make, at
the time of such Designation, (a) a Permitted Investment or (b) an Investment
pursuant to the first paragraph of Section 4.08, in either case, in an
amount (the “Designation Amount”) equal to the Fair Market Value of the
Issuer’s proportionate interest in such Subsidiary on such date.


 


No Subsidiary shall be
Designated as an “Unrestricted Subsidiary” unless such Subsidiary:


 


(1)                                  has no Indebtedness other than Permitted
Unrestricted Subsidiary Debt;


 


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


 


(3)                                  is a Person with respect to which neither
the Issuer nor any Restricted Subsidiary has any direct or indirect obligation
(a) to subscribe for additional Equity Interests or (b) to maintain or preserve
the Person’s financial condition or to cause the Person to achieve any
specified levels of operating results; and


 


(4)                                  has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of the Issuer or any
Restricted Subsidiary, except for any guarantee given solely to support the
pledge by the Issuer or any Restricted Subsidiary of the Equity Interests of
such Unrestricted Subsidiary, which guarantee is not recourse


 


62

















 


to the Issuer or
any Restricted Subsidiary, and except to the extent the amount thereof
constitutes a Restricted Payment permitted pursuant to Section 4.08.


 


If, at any time, any
Unrestricted Subsidiary fails to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes
of this Indenture and any Indebtedness of the Subsidiary and any Liens on
assets of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary as of the date and, if the Indebtedness is not permitted to be
incurred under Section 4.06 or the Lien is not permitted under Section 4.11,
the Issuer shall be in default of the applicable covenant.


 


As of the Issue Date, the
Issuer shall be deemed to have Designated MTH Mortgage, LLC and Texas Home
Mortgage Company as Unrestricted Subsidiaries.


 


The Issuer may
redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a “Redesignation”)
only if:


 


(1)                                  no Default shall have occurred and be
continuing at the time of and after giving effect to such Redesignation; and


 


(2)                                  all Liens, Indebtedness and Investments
of such Unrestricted Subsidiary outstanding immediately following such
Redesignation would, if incurred or made at such time, have been permitted to
be incurred or made for all purposes of this Indenture.


 


All Designations and
Redesignations must be evidenced by resolutions of the Board of Directors of
the Issuer, delivered to the Trustee certifying compliance with the foregoing
provisions.


 


SECTION 4.16.                                                                 Maintenance of Consolidated Tangible Net
Worth.


 


If the Issuer’s
Consolidated Tangible Net Worth declines below $60.0 million (the “Minimum
Tangible Net Worth”) at the end of any fiscal quarter, the Issuer must
deliver an Officers’ Certificate to the Trustee within 55 days after the end of
that fiscal quarter (110 days after the end of any fiscal year) to notify the
Trustee.  If, on the last day of each of
any two consecutive fiscal quarters (the last day of the second fiscal quarter
being referred to as a “Deficiency Date”), the Issuer’s Consolidated
Tangible Net Worth is less than the Minimum Tangible Net Worth of the Issuer,
then the Issuer must make an Offer to Purchase (a “Net Worth Offer”) to
all Holders of Notes to purchase 10% of the aggregate principal amount of the
Notes originally issued (the “Net Worth Offer Amount”) at a purchase
price equal to 100% of the principal amount of the Notes, plus accrued and unpaid
interest thereon, if any, to the date of purchase; provided, however,
that no such Net Worth Offer shall be required if, after the Deficiency Date
but prior to the date the Issuer is required to make the Net Worth 


 


63

















 


Offer, capital in cash or
Cash Equivalents is contributed for Qualified Equity Interests of the Issuer
sufficient to increase the Issuer’s Consolidated Tangible Net Worth after
giving effect to such contribution to an amount equal to or above the Minimum
Tangible Net Worth.


 


The Issuer must make the
Net Worth Offer no later than 65 days after each Deficiency Date (120 days if
such Deficiency Date is the last day of the Issuer’s fiscal year).  The Net Worth Offer is required to remain
open for a period of 20 Business Days following its commencement or for such
longer period as required by law.  The
Issuer is required to purchase the Net Worth Offer Amount of the Notes on a
designated date no later than five Business Days after the termination of the
Net Worth Offer, or if less than the Net Worth Offer Amount of Notes shall have
been tendered, all Notes then tendered.


 


If the aggregate
principal amount of Notes tendered exceeds the Net Worth Offer Amount, the
Issuer is required to purchase the Notes tendered to it pro rata among
the Notes tendered (with such adjustments as may be appropriate so that only
Notes in denominations of $1,000 and integral multiples thereof shall be
purchased).


 


In no event shall the
failure of the Issuer’s Consolidated Tangible Net Worth to equal or exceed the
Minimum Tangible Net Worth at the end of any fiscal quarter be counted toward
the requirement to make more than one Net Worth Offer.  The Issuer may reduce the principal amount
of Notes to be purchased pursuant to the Net Worth Offer by subtracting 100% of
the principal amount (excluding premium) of the Notes redeemed by the Issuer
prior to the purchase (otherwise than under this provision).  The Issuer, however, may not credit Notes
that have been previously used as a credit against any obligation to repurchase
Notes pursuant to this provision.


 


The Issuer shall comply
with applicable tender offer rules, including the requirements of Rule 14e-1
under the Exchange Act and any other applicable laws and regulations in
connection with the purchase of Notes pursuant to a Net Worth Offer.  To the extent that the provisions of any
securities laws or regulations conflict with this Section 4.16, the Issuer
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 4.16 by
virtue of this compliance.


 


SECTION 4.17.                                                                 Maintenance of Properties; Insurance;
Compliance with Law.


 


(a)  The Issuer
shall, and shall cause each of its Restricted Subsidiaries to, at all times
cause all properties used or useful in the conduct of their business to be
maintained and kept in good condition, repair and working order (reasonable
wear and tear excepted) and supplied with all necessary equipment, and shall
cause to be made all necessary repairs, renewals, replacements, necessary
betterments and necessary improvements thereto.


 


64

















 


(b)  The Issuer
shall maintain, and shall cause to be maintained for each of its Restricted
Subsidiaries, insurance covering such risks as are usually and customarily insured
against by corporations similarly situated in the markets where the Issuer and
the Restricted Subsidiaries conduct homebuilding operations, in such amounts as
shall be customary for corporations similarly situated and with such
deductibles and by such methods as shall be customary and reasonably consistent
with past practice.


 


(c)  The Issuer
shall, and shall cause each of its Subsidiaries to, comply with all statutes,
laws, ordinances or government rules and regulations to which they are subject,
non-compliance with which would materially adversely affect the business,
earnings, properties, assets or financial condition of the Issuer and their
Subsidiaries taken as a whole.


 


SECTION 4.18.                                                                 Payments for Consent.


 


The Issuer shall not, and
shall not cause or permit any of its Subsidiaries to, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of this Indenture or the
Notes unless such consideration is offered to be paid or agreed to be paid to
all Holders which so consent, waive or agree to amend in the time frame set
forth in solicitation documents relating to such consent, waiver or agreement.


 


SECTION 4.19.                                                                 Legal Existence.


 


Subject to
Article Five, the Issuer shall do or cause to be done all things necessary
to preserve and keep in full force and effect (i) its legal existence, and the
corporate, partnership or other existence of each Restricted Subsidiary, in
accordance with the respective organizational documents (as the same may be
amended from time to time) of each Restricted Subsidiary and the rights
(charter and statutory), licenses and franchises of the Issuer and its
Restricted Subsidiaries; provided that the Issuer shall not be required
to preserve any such right, license or franchise, or the corporate, partnership
or other existence of any of its Restricted Subsidiaries if the Board of
Directors of the Issuer shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Issuer and its Restricted
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders.


 


SECTION 4.20.                                                                 Change of Control Offer.


 


Upon the occurrence of a
Change of Control, the Issuer shall be obligated to make an Offer to Purchase
(the “Change of Control Offer”), and shall purchase, on a Business Day
(the “Change of Control Payment Date”) not more than 60 nor less than 30
days following the occurrence of the Change of Control, all of the then
outstanding Notes at a purchase


 


65

















 


price (the “Change of
Control Purchase Price”) equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the Change of Control
Payment Date.  The Change of Control
Offer shall remain open for at least 20 Business Days and until the close of
business on the Change of Control Payment Date.


 


Within 30 days following
the date upon which a Change of Control occurs (the “Change of Control Date”),
the Issuer shall send, by first class mail, a notice to each Holder, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer.  The notice to the
Holders shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Change of Control Offer.


 


Any amounts remaining
after the purchase of Notes pursuant to a Change of Control Offer shall be
returned by the Trustee to the Issuer.


 


The Issuer’s obligation
to make a Change of Control Offer will be satisfied if a third party makes the
Change of Control Offer in the manner and at the times and otherwise in
compliance with the requirements applicable to a Change of Control Offer made
by the Issuer and purchases all Notes properly tendered and not withdrawn under
the Change of Control Offer.


 


The Issuer shall comply
with applicable tender rules, including the requirements of Rule 14e-1
under the Exchange Act and any other applicable laws and regulations in
connection with the purchase of Notes pursuant to a Change of Control
Offer.  To the extent the provisions of
any securities laws or regulations conflict with the provisions under this
Section 4.20, the Issuer shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 4.20 by virtue thereof.


 


ARTICLE FIVE


 


SUCCESSOR CORPORATION


 


SECTION 5.01.                                                                 Limitations on Mergers, Consolidations,
Etc.


 


The Issuer shall not,
directly or indirectly, in a single transaction or a series of related
transactions, (a) consolidate or merge with or into (other than a merger that
satisfies the requirements of clause (1) below with a Wholly-Owned Restricted
Subsidiary solely for the purpose of changing the Issuer’s jurisdiction of
incorporation to another State of the United States), or sell, lease, transfer,
convey or otherwise dispose of or assign all or substantially all of the assets
of the Issuer or the Issuer and the Restricted Subsidiaries (taken as a whole)
or (b) adopt a Plan of Liquidation unless, in either case:


 


66

















 


(1)                                  either:


 


(a)                                  the Issuer will be the surviving or
continuing Person; or


 


(b)                                 the Person formed by or surviving such
consolidation or merger or to which such sale, lease, conveyance or other disposition
shall be made (or, in the case of a Plan of Liquidation, any Person to which
assets are transferred) (collectively, the “Successor”) is a corporation
or limited liability company organized and existing under the laws of any State
of the United States of America or the District of Columbia, and the Successor
expressly assumes, by supplemental indenture in form and substance satisfactory
to the Trustee, all of the obligations of the Issuer under the Notes, this
Indenture and the Registration Rights Agreement; provided that at any time
the Successor is a limited liability company, there shall be a co-issuer of the
Notes that is a corporation;


 


(2)                                  immediately prior to and immediately
after giving effect to such transaction and the assumption of the obligations
as set forth in clause (1)(b) above and the incurrence of any Indebtedness
to be incurred in connection therewith, no Default shall have occurred and be
continuing; and


 


(3)                                  immediately after and giving effect to
such transaction and the assumption of the obligations set forth in clause
(1)(b) above and the incurrence of any Indebtedness to be incurred in
connection therewith, and the use of any net proceeds therefrom on a pro forma
basis, (a) the Consolidated Net Worth of the Issuer or the Successor, as
the case may be, would be at least equal to the Consolidated Net Worth of the
Issuer immediately prior to such transaction and (b) the Issuer or the
Successor, as the case may be, could incur $1.00 of additional Indebtedness
pursuant to the Ratio Exception.


 


For purposes of this
Section 5.01, any Indebtedness of the Successor which was not Indebtedness
of the Issuer immediately prior to the transaction shall be deemed to have been
incurred in connection with such transaction.


 


Except as provided under
Section 10.04 no Guarantor may consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another Person, whether
or not affiliated with such Guarantor, unless:


 


(1)                                  either:


 


(a)                                  such Guarantor will be the surviving or
continuing Person; or


 


67

















 


(b)                                 the Person formed by or surviving any
such consolidation or merger assumes, by supplemental indenture in form and
substance satisfactory to the Trustee, all of the obligations of such Guarantor
under the Note Guarantee of such Guarantor, this Indenture and the Registration
Rights Agreement; and


 


(2)                                  immediately after giving effect to such
transaction, no Default shall have occurred and be continuing.


 


For purposes of the
foregoing, the transfer (by lease, assignment, sale or otherwise, in a single
transaction or series of transactions) of all or substantially all of the
assets of one or more Restricted Subsidiaries, the Equity Interests of which
constitute all or substantially all of the assets of the Issuer, will be deemed
to be the transfer of all or substantially all of the assets of the Issuer.


 


Upon any consolidation,
combination or merger of the Issuer or a Guarantor, or any transfer of all or
substantially all of the assets of the Issuer in accordance with the foregoing,
in which the Issuer or such Guarantor is not the continuing obligor under the
Notes or its Note Guarantee, the surviving entity formed by such consolidation
or into which the Issuer or such Guarantor is merged or to which the
conveyance, lease or transfer is made will succeed to, and be substituted for,
and may exercise every right and power of, the Issuer or such Guarantor under
this Indenture, the Notes and the Note Guarantees with the same effect as if such
surviving entity had been named therein as the Issuer or such Guarantor and,
except in the case of a conveyance, transfer or lease, the Issuer or such
Guarantor, as the case may be, will be released from the obligation to pay the
principal of and interest on the Notes or in respect of its Note Guarantee, as
the case may be, and all of the Issuer’s or such Guarantor’s other obligations
and covenants under the Notes, this Indenture and its Note Guarantee, if applicable.


 


Notwithstanding the
foregoing, any Restricted Subsidiary may merge into the Issuer or another
Restricted Subsidiary.


 


SECTION 5.02.                                                                 Successor Person Substituted.


 


Upon any consolidation or
merger, or any transfer of all or substantially all of the assets of the Issuer
or any Restricted Subsidiary in accordance with Section 5.01, the successor
corporation formed by such consolidation or into which the Issuer is merged or
to which such transfer is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Issuer or such Restricted Subsidiary
under this Indenture with the same effect as if such successor corporation had
been named as the Issuer or such Restricted Subsidiary herein, and thereafter
the predecessor corporation shall be relieved of all obligations and covenants
under this Indenture and the Notes.


 


68

















 


ARTICLE SIX


 


DEFAULTS AND REMEDIES


 


SECTION 6.01.                                                                 Events of Default.


 


Each of the following is
an “Event of Default”:


 


(1)                                  failure by the Issuer to pay interest on
any of the Notes when it becomes due and payable and the continuance of any
such failure for 30 days;


 


(2)                                  failure by the Issuer to pay the
principal on any of the Notes when it becomes due and payable, whether at
stated maturity, upon redemption, upon purchase, upon acceleration or
otherwise;


 


(3)                                  failure by the Issuer to comply with
Section 5.01 or in respect of its obligations to make a Change of Control
Offer;


 


(4)                                  failure by the Issuer to comply with any
other agreement or covenant in this Indenture and continuance of this failure
for 30 days after notice of the failure has been given to the Issuer by the
Trustee or by the Holders of at least 25% of the aggregate principal amount of
the Notes then outstanding;


 


(5)                                  default under any mortgage, indenture or
other instrument or agreement under which there may be issued or by which there
may be secured or evidenced Indebtedness of the Issuer or any Restricted
Subsidiary, whether such Indebtedness now exists or is incurred after the Issue
Date, which default:


 


(a)                        is caused by a failure to pay when due
principal on such Indebtedness within the applicable express grace period,


 


(b)                       results in the acceleration of such
Indebtedness prior to its express final maturity or


 


(c)                        results in the commencement of judicial
proceedings to foreclose upon, or to exercise remedies under applicable law or
applicable security documents to take ownership of, the assets securing such
Indebtedness, and


 


in each case, the
principal amount of such Indebtedness, together with any other Indebtedness
with respect to which an event described in clause (a), (b) or (c) has occurred
and is continuing, aggregates $10.0 million or more;


 


69

















 


(6)                                  one or more judgments or orders that exceed
$10.0 million in the aggregate (net of amounts covered by insurance or bonded)
for the payment of money have been entered by a court or courts of competent
jurisdiction against the Issuer or any Restricted Subsidiary and such judgment
or judgments have not been satisfied, stayed, annulled or rescinded within 60
days of being entered;


 


(7)                                  the Issuer or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:


 


(a)                        commences a voluntary case,


 


(b)                       consents to the entry of an order for
relief against it in an involuntary case,


 


(c)                        consents to the appointment of a
Custodian of it or for all or substantially all of its assets, or


 


(d)                       makes a general assignment for the
benefit of its creditors;


 


(8)                                  a court of competent jurisdiction enters
an order or decree under any Bankruptcy Law that:


 


(a)                        is for relief against the Issuer or any
Significant Subsidiary as debtor in an involuntary case,


 


(b)                       appoints a Custodian of the Issuer or any
Significant Subsidiary or a Custodian for all or substantially all of the
assets of the Issuer or any Significant Subsidiary, or


 


(c)                        orders the liquidation of the Issuer or
any Significant Subsidiary,


 


and the order or
decree remains unstayed and in effect for 60 days; or


 


(9)                                  any Note Guarantee of any Significant
Subsidiary ceases to be in full force and effect (other than in accordance with
the terms of such Note Guarantee and this Indenture) or is declared null and
void and unenforceable or found to be invalid or any Guarantor denies its
liability under its Note Guarantee (other than by reason of release of a
Guarantor from its Note Guarantee in accordance with the terms of this Indenture
and the Note Guarantee).


 


Subject to Sections 7.01
and 7.02, the Trustee shall not be charged with knowledge of any Default, Event
of Default, Change of Control or Asset Sale or the requirement for 


 


70

















 


payment of Liquidated
Damages unless written notice thereof shall have been given to a Responsible
Officer at the Corporate Trust Office of the Trustee by the Issuer or any other
Person.


 


SECTION 6.02.                                                                 Acceleration.


 


If an Event of Default
(other than an Event of Default specified in clause (7) or (8) of
Section 6.01 with respect to the Issuer), shall have occurred and be
continuing, the Trustee, by written notice to the Issuer, or the Holders of at
least 25% in aggregate principal amount of the Notes then outstanding by
written notice to the Issuer and the Trustee, may declare all amounts owing
under the Notes to be due and payable immediately.  Upon such declaration of acceleration, the aggregate principal of
and accrued and unpaid interest on the outstanding Notes shall immediately
become due and payable; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of such outstanding Notes
may rescind and annul such acceleration if all Events of Default, other than
the nonpayment of accelerated principal and interest, have been cured or waived
as provided in this Indenture.  If an
Event of Default specified in clause (7) or (8) of Section 6.01 with
respect to the Issuer occurs, all outstanding Notes shall become due and
payable without any further action or notice.


 


SECTION 6.03.                                                                 Other Remedies.


 


If an Event of Default
occurs and is continuing, the Trustee may pursue any available remedy by
proceeding at law or in equity to collect the payment of principal of, or
premium, if any, and interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture and may take any necessary action
requested of it as Trustee to settle, compromise, adjust or otherwise conclude
any proceedings to which it is a party.


 


The Trustee may maintain
a proceeding even if it does not possess any of the Notes or does not produce
any of them in the proceeding.  A delay
or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or constitute
a waiver of or acquiescence in the Event of Default.  No remedy is exclusive of any other remedy.  All available remedies are cumulative.  Any costs associated with actions taken by
the Trustee under this Section 6.03 shall be reimbursed to the Trustee by
the Issuer.


 


SECTION 6.04.                                                                 Waiver of Past Defaults and Events of
Default.


 


Subject to Sections 6.02,
6.08 and 8.02, the Holders of a majority in aggregate principal amount of the
notes then outstanding have the right to waive any existing Default or compliance
with any provision of this Indenture or the Notes.  Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to 


 


71

















 


have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.


 


SECTION 6.05.                                                                 Control by Majority.


 


The Holders of a majority
in aggregate principal amount of the Notes then outstanding may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee by this Indenture.  The Trustee, however, may refuse to follow
any direction that conflicts with law or this Indenture or that the Trustee
determines may be unduly prejudicial to the rights of another Holder not taking
part in such direction, and the Trustee shall have the right to decline to follow
any such direction if the Trustee, being advised by counsel, determines that
the action so directed may not lawfully be taken or if the Trustee in good
faith shall, by a Responsible Officer, determine that the proceedings so
directed may involve it in personal liability; provided that the Trustee
may take any other action deemed proper by the Trustee which is not inconsistent
with such direction.


 


SECTION 6.06.                                                                 Limitation on Suits.


 


No Holder will have any
right to institute any proceeding with respect to this Indenture or for any
remedy thereunder, unless the Trustee:


 


(1)                                  has failed to act for a period of 60 days
after receiving written notice of a continuing Event of Default by such Holder
and a request to act by Holders of at least 25% in aggregate principal amount
of Notes outstanding;


 


(2)                                  has been offered indemnity satisfactory
to it in its reasonable judgment; and


 


(3)                                  has not received from the Holders of a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request.


 


However, such limitations
do not apply to a suit instituted by a Holder of any Note for enforcement of
payment of the principal of or interest on such Note on or after the due date
therefor (after giving effect to the grace period specified in clause (1) of
Section 6.01).


 


SECTION 6.07.                                                                 No Personal Liability of Directors,
Officers, Employees and Stockholders.


 


No director, officer,
employee, incorporator or stockholder of the Issuer will have any liability for
any obligations of the Issuer under the Notes or this Indenture or of any
Guarantor under its Note Guarantee or this Indenture or for any claim based on,
in respect of,


 


72

















 


or by reason of, such
obligations or their creation.  Each
Holder by accepting a Note waives and releases all such liability.  The waiver and release are part of the
consideration for issuance of the Notes and the Note Guarantees.


 


SECTION 6.08.                                                                 Rights of Holders To Receive Payment.


 


Notwithstanding any other
provision of this Indenture, the right of any Holder of a Note to receive
payment of principal of, or premium, if any, and interest of the Note (including
Additional Interest) on or after the respective due dates expressed in the
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates, is absolute and unconditional and shall not be impaired or
affected without the consent of the Holder.


 


SECTION 6.09.                                                                 Collection Suit by Trustee.


 


If an Event of Default in
payment of principal, premium or interest specified in Section 6.01(1) or
(2) occurs and is continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against the Issuer or any Guarantor (or any
other obligor on the Notes) for the whole amount of unpaid principal and
accrued interest remaining unpaid, together with interest on overdue principal
and, to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate set forth in the Notes, and
such further amounts as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.


 


SECTION 6.10.                                                                 Trustee May File Proofs of Claim.


 


The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative
to the Issuer or any Guarantor (or any other obligor upon the Notes), its
creditors or its property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same after deduction of its charges and expenses to the extent
that any such charges and expenses are not paid out of the estate in any such
proceedings and any custodian in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee, and in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07.


 


73

















 


Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept
or adopt on behalf of any Holder any plan or reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceedings.


 


SECTION 6.11.                                                                 Priorities.


 


If the Trustee collects
any money pursuant to this Article Six, it shall pay out the money in the
following order:


 


FIRST:  to the Trustee for amounts due under
Section 7.07;


 


SECOND:  to Holders for amounts due and unpaid on the
Notes for principal, premium, if any, and interest (including Additional
Interest, if any) as to each, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes; and


 


THIRD:  to the Issuer or, to the extent the Trustee
collects any amount from any Guarantor, to such Guarantor.


 


The Trustee may fix a
record date and payment date for any payment to Holders pursuant to this
Section 6.11.


 


SECTION 6.12.                                                                 Undertaking for Costs.


 


In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys’ fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant.  This Section 6.12 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.08 or a suit by Holders of more
than 10% in principal amount of the Notes then outstanding.


 


SECTION 6.13.                                                                 Restoration of Rights and Remedies.


 


If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every case, subject to any determination in such proceeding, the Issuer,
the Guarantors, the Trustee and the Holders shall be restored severally and
respectively to their former positions 


 


74

















 


hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.


 


ARTICLE SEVEN


 


TRUSTEE


 


SECTION 7.01.                                                                 Duties of Trustee.


 


(a)  If an
Event of Default actually known to a Responsible Officer of the Trustee has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the same
circumstances in the conduct of his or her own affairs.


 


(b)  Except
during the continuance of an Event of Default:


 


(1)                    The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.


 


(2)                    In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture but, in the case
of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not they conform on
their face to the requirements of this Indenture (but need not confirm or investigate
the accuracy of mathematical calculations or other facts stated therein).


 


(c)  The
Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:


 


(1)                    This paragraph does not limit the effect of paragraph
(b) of this Section 7.01.


 


(2)                    The Trustee shall not be liable for any error of judgment
made in good faith, unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts.


 


75

















 


(3)                    The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to the terms hereof.


 


(4)                    No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its rights, powers or duties if it shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity satisfactory to it against such risk or liability is not reasonably
assured to it.


 


(d)  Whether or
not therein expressly so provided, paragraphs (a), (b), (c) and (e) of this
Section 7.01 shall govern every provision of this Indenture that in any
way relates to the Trustee.


 


(e)  The
Trustee may refuse to perform any duty or exercise any right or power unless it
receives indemnity satisfactory to it in its sole discretion against any loss,
liability, expense or fee.


 


(f)  The
Trustee shall not be liable for interest on any money received by it except as
the Trustee may agree in writing with the Issuer or any Guarantor.  Money held in trust by the Trustee need not
be segregated from other funds except to the extent required by the law.


 


SECTION 7.02.                                                                 Rights of Trustee.


 


Subject to
Section 7.01:


 


(1)                                  The Trustee may rely on any document
reasonably believed by it to be genuine and to have been signed or presented by
the proper person.  The Trustee need not
investigate any fact or matter stated in the document.


 


(2)                                  Before the Trustee acts or refrains from
acting, it may require an Officers’ Certificate or an Opinion of Counsel, or both,
which shall conform to the provisions of Section 12.05.  The Trustee shall be protected and shall not
be liable for any action it takes or omits to take in good faith in reliance on
such certificate or opinion.


 


(3)                                  The Trustee may act through its attorneys
and agents and shall not be responsible for the misconduct or negligence of any
agent appointed by it with due care.


 


(4)                                  The Trustee shall not be liable for any
action it takes or omits to take in good faith which it reasonably believes to
be authorized or within its rights or powers;


 


76

















 


provided that the Trustee’s conduct does not
constitute gross negligence or wilful misconduct.


 


(5)                                  The Trustee may consult with counsel of
its selection, and the advice or opinion of such counsel as to matters of law
shall be full and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.


 


SECTION 7.03.                                                                 Individual Rights of Trustee.


 


The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may make loans to, accept deposits from, perform services for or otherwise deal
with the either of the Issuer or any Guarantor, or any Affiliates thereof, with
the same rights it would have if it were not Trustee.  Any Agent may do the same with like rights.  The Trustee, however, shall be subject to
Sections 7.10 and 7.11.


 


SECTION 7.04.                                                                 Trustee’s Disclaimer.


 


The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes or any Guarantee, it shall not be accountable for
the Issuer’s or any Guarantor’s use of the proceeds from the sale of Notes or
any money paid to the Issuer or any Guarantor pursuant to the terms of this
Indenture and it shall not be responsible for any statement in the Notes,
Guarantee or this Indenture other than its certificate of authentication.


 


SECTION 7.05.                                                                 Notice of Defaults.


 


The Trustee shall, within
30 days after the occurrence of any Default with respect to the Notes, give the
Holders notice of all uncured Defaults thereunder known to it; provided,
however, that, except in the case of an Event of Default in payment with
respect to the Notes or a Default in complying with Section 5.01, the
Trustee shall be protected in withholding such notice if and so long as a
committee of its Responsible Officers in good faith determines that the
withholding of such notice is in the interest of the Holders.


 


SECTION 7.06.                                                                 Reports by Trustee to Holders.


 


If required by TIA
§ 313(a), within 60 days after January 1 of any year, commencing
January 1, 2000 the Trustee shall mail to each Holder a brief report dated
as of such January 1 that complies with TIA § 313(a).  The Trustee also shall comply with TIA
§ 313(b)(2).  The Trustee shall
also transmit by mail all reports as required by TIA § 313(c) and TIA
§ 313(d).


 


77

















 


Reports pursuant to this
Section 7.06 shall be transmitted by mail:


 


(1)                                  to all Holders of Notes, as the names and
addresses of such Holders appear on the Registrar’s books; and


 


(2)                                  to such Holders of Notes as have, within
the two years preceding such transmission, filed their names and addresses with
the Trustee for that purpose.


 


A copy of each report at
the time of its mailing to Holders shall be filed with the SEC and each stock
exchange on which the Notes are listed. 
The Issuer shall promptly notify the Trustee when the Notes are listed
on any stock exchange.


 


SECTION 7.07.                                                                 Compensation and Indemnity.


 


The Issuer and the
Guarantors shall pay to the Trustee and Agents from time to time reasonable
compensation for its services hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of
an express trust).  The Issuer and the
Guarantors shall reimburse the Trustee and Agents upon request for all reasonable
disbursements, expenses and advances incurred or made by it in connection with
its duties under this Indenture, including the reasonable compensation,
disbursements and expenses of the Trustee’s agents and counsel.


 


The Issuer and the
Guarantors shall indemnify each of the Trustee and any predecessor Trustee for,
and hold each of them harmless against, any and all loss, damage, claim,
liability or expense, including without limitation taxes (other than taxes
based on the income of the Trustee or such Agent) and reasonable attorneys’
fees and expenses incurred by each of them in connection with the acceptance or
performance of its duties under this Indenture including the reasonable costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder
(including, without limitation, settlement costs).  The Trustee or Agent shall notify the Issuer and the Guarantors
in writing promptly of any claim asserted against the Trustee or Agent for
which it may seek indemnity.  However,
the failure by the Trustee or Agent to so notify the Issuer and the Guarantors
shall not relieve the Issuer and Guarantors of their obligations hereunder
except to the extent the Issuer and the Guarantors are prejudiced thereby.


 


Notwithstanding the foregoing,
the Issuer and the Guarantors need not reimburse the Trustee for any expense or
indemnify it against any loss or liability incurred by the Trustee through its
negligence or bad faith.  To secure the
payment obligations of the Issuer and the Guarantors in this Section 7.07,
the Trustee shall have a lien prior to the Notes on all money or property held
or collected by the Trustee except such money or property held in trust to pay
principal of and interest on particular Notes. 
The obligations of the Issuer and the Guarantors under this
Section 7.07 to compensate and indemnify the Trustee, Agents and each


 


78

















 


predecessor Trustee and
to pay or reimburse the Trustee, Agents and each predecessor Trustee for expenses,
disbursements and advances shall be joint and several liabilities of the Issuer
and each of the Guarantors and shall survive the resignation or removal of the
Trustee and the satisfaction, discharge or other termination of this Indenture,
including any termination or rejection hereof under any Bankruptcy Law.


 


When the Trustee incurs
expenses or renders services after an Event of Default specified in
Section 6.01(7) or (8) occurs, the expenses and the compensation for the
services are intended to constitute expenses of administration under any
Bankruptcy Law.


 


For purposes of this
Section 7.07, the term “Trustee” shall include any trustee appointed
pursuant to this Article Seven.


 


SECTION 7.08.                                                                 Replacement of Trustee.


 


The Trustee may resign by
so notifying the Issuer and the Guarantors in writing.  The Holders of a majority in principal
amount of the outstanding Notes may remove the Trustee by notifying the Issuer
and the removed Trustee in writing and may appoint a successor Trustee with the
Issuer’s written consent, which consent shall not be unreasonably withheld.  The Issuer may remove the Trustee at its
election if:


 


(1)                                  the Trustee fails to comply with
Section 7.10;


 


(2)                                  the Trustee is adjudged a bankrupt or an
insolvent;


 


(3)                                  a receiver or other public officer takes
charge of the Trustee or its property; or


 


(4)                                  the Trustee otherwise becomes incapable
of acting.


 


If the Trustee resigns or
is removed or if a vacancy exists in the office of Trustee for any reason, the
Issuer shall promptly appoint a successor Trustee.


 


If a successor Trustee
does not take office within 60 days after the retiring Trustee resigns or is
removed, the retiring Trustee, the Issuer or the Holders of a majority in
principal amount of the outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.


 


If the Trustee fails to
comply with Section 7.10, any Holder may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.


 


79

















 


A successor Trustee shall
deliver a written acceptance of its appointment to the retiring Trustee and to
the Issuer.  Immediately following such
delivery, the retiring Trustee shall, subject to its rights under
Section 7.07, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. 
A successor Trustee shall mail notice of its succession to each
Holder.  Notwithstanding replacement of
the Trustee pursuant to this Section 7.08, the Issuer obligations under
Section 7.07 shall continue for the benefit of the retiring Trustee.


 


SECTION 7.09.                                                                 Successor Trustee by Consolidation,
Merger, etc.


 


If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust assets to, another entity, subject to
Section 7.10, the successor entity without any further act shall be the
successor Trustee; provided such entity shall be otherwise qualified and
eligible under this Article Seven.


 


SECTION 7.10.                                                                 Eligibility; Disqualification.


 


This Indenture shall
always have a Trustee who satisfies the requirements of TIA § 310(a)(1)
and (2) in every respect.  The Trustee
(together with its corporate parent) shall have a combined capital and surplus
of at least $100,000,000 as set forth in the most recent applicable published
annual report of condition.  The Trustee
shall comply with TIA § 310(b), including the provision in
§ 310(b)(1).


 


SECTION 7.11.                                                                 Preferential Collection of Claims Against
Issuer.


 


The Trustee shall comply
with TIA § 311(a), excluding any creditor relationship listed in TIA
§ 311 (b).  A Trustee who has
resigned or been removed shall be subject to TIA § 311(a) to the extent
indicated therein.


 


SECTION 7.12.                                                                 Paying Agents.


 


The Issuer shall cause
each Paying Agent other than the Trustee to execute and deliver to it and the
Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section 7.12:


 


(A)                              that it will hold all sums held by it as
agent for the payment of principal of, or premium, if any, or interest on, the
Notes (whether such sums have been paid to it by the Issuer or by any obligor
on the Notes) in trust for the benefit of Holders or the Trustee;


 


80

















 


(B)                                that it will at any time during the
continuance of any Event of Default, upon written request from the Trustee,
deliver to the Trustee all sums so held in trust by it together with a full
accounting thereof; and


 


(C)                                that it will give the Trustee written
notice within three (3) Business Days of any failure of the Issuer (or by any
obligor on the Notes) in the payment of any installment of the principal of,
premium, if any, or interest on, the Notes when the same shall be due and payable.


 


ARTICLE EIGHT


 


AMENDMENTS, SUPPLEMENTS AND WAIVERS


 


SECTION 8.01.                                                                 Without Consent of Holders.


 


The Issuer and the
Trustee may amend, waive or supplement this Indenture, the Note Guarantees or
the Notes without consent of any Holder:


 


(1)                                  to provide for the assumption of the
Issuer’s obligations to the Holders pursuant to Section 5.01;


 


(2)                                  to provide for uncertificated Notes in
addition to or in place of certificated Notes;


 


(3)                                  to cure any ambiguity, defect or
inconsistency;


 


(4)                                  to release any Guarantor from any of its
obligations under its Notes Guarantee or this Indenture (to the extent
permitted by this Indenture);


 


(5)                                  to maintain the qualification of this
Indenture under the TIA; or


 


(6)                                  to make any other change that does not
materially adversely affect the rights of any Holder hereunder.


 


The Trustee is hereby
authorized to join with the Issuer and the Guarantors in the execution of any
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into any
such supplemental indenture which adversely affects its own rights, duties or
immunities under this Indenture.


 


81

















 


SECTION 8.02.                                                                 With Consent of Holders.


 


This Indenture or the
Notes may be amended with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for Notes) of the Holders of
at least a majority in aggregate principal amount of the Notes then outstanding,
and any existing Default under, or compliance with any provision of, this Indenture
may be waived (other than any continuing Default in the payment of the
principal or interest on the Notes) with the consent (which may include
consents obtained in connection with a tender offer or exchange offer for
Notes) of the Holders of a majority in aggregate principal amount of the Notes
then outstanding; provided that:


 


(a)                                  no such amendment may, without the
consent of the Holders of two-thirds in aggregate principal amount of Notes
then outstanding, amend the obligation of the Issuer under Section 4.20 or
the related definitions that could adversely affect the rights of any Holder;
and


 


(b)                                 without the consent of each Holder
affected, the Issuer and the Trustee may not:


 


(1)                                  change the maturity of any Note;


 


(2)                                  reduce the amount, extend the due date or
otherwise affect the terms of any scheduled payment of interest on or principal
of the Notes;


 


(3)                                  reduce any premium payable upon optional
redemption of the Notes, change the date on which any Notes are subject to
redemption or otherwise alter the provisions with respect to the redemption of
the Notes;


 


(4)                                  make any Note payable in money or
currency other than that stated in the Notes;


 


(5)                                  modify or change any provision of this
Indenture or the related definitions to affect the ranking of the Notes or any
Note Guarantee in a manner that adversely affects the Holders;


 


(6)                                  reduce the percentage of Holders
necessary to consent to an amendment or waiver to this Indenture or the Notes;


 


(7)                                  impair the rights of Holders to receive
payments of principal of or interest on the Notes;


 


(8)                                  release any Guarantor from any of its
obligations under its Note Guarantee or this Indenture, except as permitted by
this Indenture; or


 


82

















 


(9)                                  make any change in this
Section 8.02.


 


After an amendment,
supplement or waiver under this Section 8.02 becomes effective, the Issuer
shall mail to the Holders a notice briefly describing the amendment, supplement
or waiver.


 


Upon the written request
of the Issuer, accompanied by a Board Resolution authorizing the execution of
any such supplemental indenture, and upon the receipt by the Trustee of
evidence reasonably satisfactory to the Trustee of the consent of the Holders
as aforesaid and upon receipt by the Trustee of the documents described in
Section 8.06, the Trustee shall join with the Issuer and the Guarantors in
the execution of such supplemental indenture unless such supplemental indenture
affects the Trustee’s own rights, duties or immunities under this Indenture, in
which case the Trustee may, but shall not be obligated to, enter into such
supplemental indenture.


 


It shall not be necessary
for the consent of the Holders under this Section to approve the particular
form of any proposed amendment, supplement or waiver, but it shall be
sufficient if such consent approves the substance thereof.


 


SECTION 8.03.                                                                 Compliance with Trust Indenture Act.


 


Every amendment or
supplement to this Indenture or the Notes shall comply with the TIA as then in
effect.


 


SECTION 8.04.                                                                 Revocation and Effect of Consents.


 


Until an amendment,
supplement, waiver or other action becomes effective, a consent to it by a
Holder of a Note is a continuing consent conclusive and binding upon such
Holder and every subsequent Holder of the same Note or portion thereof, and of
any Note issued upon the transfer thereof or in exchange therefor or in place
thereof, even if notation of the consent is not made on any such Note.  Any such Holder or subsequent Holder,
however, may revoke the consent as to his Note or portion of a Note, if the
Trustee receives the written notice of revocation before the date the
amendment, supplement, waiver or other action becomes effective.


 


The Issuer may, but shall
not be obligated to, fix a record date for the purpose of determining the
Holders entitled to consent to any amendment, supplement, or waiver.  If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such amendment, supplement, or waiver or to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date.  No


 


83

















 


such consent shall be
valid or effective for more than 90 days after such record date unless the
consent of the requisite number of Holders has been obtained.


 


After an amendment,
supplement, waiver or other action becomes effective, it shall bind every
Holder, unless it makes a change described in any of clauses (1) through (9) of
Section 8.02.  In that case the
amendment, supplement, waiver or other action shall bind each Holder of a Note
who has consented to it and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder’s Note.


 


SECTION 8.05.                                                                 Notation on or Exchange of Notes.


 


If an amendment,
supplement, or waiver changes the terms of a Note, the Trustee (in accordance
with the specific written direction of the Issuer) shall request the Holder of
the Note (in accordance with the specific written direction of the Issuer) to deliver
it to the Trustee.  In such case, the
Trustee shall place an appropriate notation on the Note about the changed terms
and return it to the Holder. 
Alternatively, if the Issuer or the Trustee so determines, the Issuer in
exchange for the Note shall issue, the Guarantors shall endorse, and the
Trustee shall authenticate a new Note that reflects the changed terms.  Failure to make the appropriate notation or
issue a new Note shall not affect the validity and effect of such amendment,
supplement or waiver.


 


SECTION 8.06.                                                                 Trustee To Sign Amendments, etc.


 


The Trustee shall sign
any amendment, supplement or waiver authorized pursuant to this
Article Eight if the amendment, supplement or waiver does not adversely
affect the rights, duties, liabilities or immunities of the Trustee.  If it does, the Trustee may, but need not,
sign it.  In signing or refusing to sign
such amendment, supplement or waiver the Trustee shall be entitled to receive
and, subject to Section 7.01, shall be fully protected in relying upon an
Officers’ Certificate and an Opinion of Counsel stating, in addition to the
matters required by Section 12.04, that such amendment, supplement or
waiver is authorized or permitted by this Indenture and is a legal, valid and
binding obligation of the Issuer and Guarantors, enforceable against the Issuer
and Guarantors in accordance with its terms (subject to customary exceptions).


 


84



















 


ARTICLE NINE



DISCHARGE OF INDENTURE; DEFEASANCE


 


SECTION 9.01.                      Discharge of Indenture.


 


The Issuer may terminate its obligations and the
obligations of the Guarantors under the Notes, the Guarantees and this
Indenture, except the obligations referred to in the last paragraph of this
Section 9.01, if


 


(1)           all the Notes that have been authenticated and
delivered (except lost, stolen or destroyed Notes which have been replaced or
paid and Notes for whose payment money has been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from this trust) have been delivered to the Trustee for
cancellation, or


 


(2)           (a)           all Notes not delivered to the Trustee
for cancellation otherwise have become due and payable or have been called for
redemption pursuant to paragraph 6 of the Notes, and the Issuer has
irrevocably deposited or caused to be deposited with the Trustee trust funds in
trust in an amount of money sufficient to pay and discharge the entire
Indebtedness (including all principal and accrued interest) on the Notes not
theretofore delivered to the Trustee for cancellation,


 


(b)           the Issuer has paid all sums payable by
it under this Indenture,


 


(c)           the Issuer has delivered irrevocable
instructions to the Trustee to apply the deposited money toward the payment of
the Notes at maturity or on the date of redemption, as the case may be, and


 


(d)           the Trustee, for the benefit of the
Holders, has a valid, perfected, exclusive security interest in this trust.


 


In addition, the Issuer must deliver an Officers’
Certificate and an Opinion of Counsel (as to legal matters) stating that all
conditions precedent to satisfaction and discharge have been complied with.


 


After such delivery, the Trustee shall acknowledge in
writing the discharge of the Issuer’s and the Guarantors’ obligations under the
Notes, the Guarantees and this Indenture except for those surviving obligations
specified below.


 


Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Issuer in Sections 7.07, 9.05 and 9.06 shall
survive.


 


85

















 


SECTION 9.02.                      Legal Defeasance.


 


The Issuer may at its option, by Board Resolution of
the Board of Directors of the Issuer, be discharged from its obligations with
respect to the Notes and the Guarantors discharged from their obligations under
the Guarantees on the date the conditions set forth in Section 9.04 are
satisfied (hereinafter, “Legal Defeasance”).  For this purpose, such Legal Defeasance means that the Issuer
shall be deemed to have paid and discharged the entire indebtedness represented
by the Notes and to have satisfied all its other obligations under such Notes
and this Indenture insofar as such Notes are concerned (and the Trustee, at the
expense of the Issuer, shall, subject to Section 9.06, execute instruments in
form and substance reasonably satisfactory to the Trustee and Issuer
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: 
(A) the rights of Holders of outstanding Notes to receive solely
from the trust funds described in Section 9.04 and as more fully set forth in
such Section, payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, (B) the Issuer’s
obligations with respect to such Notes under Sections 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.11 and 4.19, (C) the rights, powers, trusts, duties,
and immunities of the Trustee hereunder (including claims of, or payments to,
the Trustee under or pursuant to Section 7.07) and (D) this Article
Nine.  Subject to compliance with this
Article Nine, the Issuer may exercise its option under this Section 9.02
with respect to the Notes notwithstanding the prior exercise of its option under
Section 9.03 with respect to the Notes.


 


SECTION 9.03.                      Covenant Defeasance.


 


At the option of the Issuer, pursuant to a Board
Resolution of the Board of Directors of the Issuer, (x) the Issuer and the
Guarantors shall be released from their respective obligations under
Sections 4.02 (except for obligations mandated by the TIA), 4.05 through
4.17, inclusive, and 4.20 and clause (3) of the first paragraph of
Section 5.01 and (y) Section 6.01 (5) and (6) shall no longer apply
with respect to the outstanding Notes on and after the date the conditions set
forth in Section 9.04 are satisfied (hereinafter, “Covenant Defeasance”).  For this purpose, such Covenant Defeasance
means that the Issuer and the Guarantors may omit to comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such specified Section or portion thereof, whether directly or indirectly by
reason of any reference elsewhere herein to any such specified Section or
portion thereof or by reason of any reference in any such specified Section or
portion thereof to any other provision herein or in any other document, but the
remainder of this Indenture and the Notes shall be unaffected thereby.


 


SECTION 9.04.                      Conditions to Defeasance or Covenant
Defeasance.


 


The following shall be the conditions to application
of Section 9.02 or Section 9.03 to the outstanding Notes:


 


86

















 


(1)           the
Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders, U.S. legal tender, U.S. Government Obligations or a combination
thereof, in such amounts as will be sufficient (without reinvestment) in the
opinion of a nationally recognized firm of independent public accountants selected
by the Issuer, to pay the principal of and interest on the Notes on the stated
date for payment or on the redemption date of the principal or installment of
principal of or interest on the Notes, and the Trustee must have a valid,
perfected, exclusive security interest in such trust,


 


(2)           in
the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an
Opinion of Counsel in the United States reasonably acceptable to the Trustee
confirming that:


 


(a)           the Issuer has received from, or there has been
published by the Internal Revenue Service, a ruling, or


 


(b)           since the date hereof, there has been a change in the
applicable U.S. federal income tax law,


 


in either case to the
effect that, and based thereon this Opinion of Counsel shall confirm that, the
Holders will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of the Legal Defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred,


 


(3)           in the case of Covenant Defeasance, the
Issuer shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders will
not recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to U.S. federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if the Covenant Defeasance had not occurred,


 


(4)           no Default shall have occurred and be
continuing on the date of such deposit (other than a Default resulting from the
borrowing of funds to be applied to such deposit and the grant of any Lien
securing such borrowing),


 


(5)           the Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a
default under this Indenture or any other material agreement or instrument to
which the Issuer or any of its Subsidiaries is a party or by which the Issuer
or any of its Subsidiaries is bound,


 


87

















 


(6)           the Issuer shall have delivered to the
Trustee an Officers’ Certificate stating that the deposit was not made by it
with the intent of preferring the Holders over any other of its creditors or
with the intent of defeating, hindering, delaying or defrauding any other of
its creditors or others, and


 


(7)           the Issuer shall have delivered to the
Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that
the conditions provided for in, in the case of the Officers’ Certificate,
clauses (1) through (6) and, in the case of the Opinion of Counsel, clauses (1)
(with respect to the validity and perfection of the security interest), (2)
and/or (3) and (5) of this paragraph have been complied with.


 


If the funds deposited with the Trustee to effect
Covenant Defeasance are insufficient to pay the principal of and interest on
the Notes when due, then the Issuer’s obligations and the obligations of
Guarantors under this Indenture will be revived and no such defeasance will be
deemed to have occurred.


 


SECTION 9.05.                      Deposited Money and U.S. Government
Obligations

To Be Held in Trust; Other Miscellaneous Provisions.


 


All money and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee pursuant to Section 9.04 in
respect of the outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent, to the Holders of
such Notes, of all sums due and to become due thereon in respect of principal,
premium, if any, and accrued interest, but such money need not be segregated
from other funds except to the extent required by law.


 


The Issuer and the Guarantors shall (on a joint and
several basis) pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 9.04 or the principal, premium, if any, and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the outstanding Notes.


 


Anything in this Article Nine to the contrary
notwithstanding, the Trustee shall deliver or pay to the Issuer from time to
time any money or U.S. Government Obligations held by it as provided in Section
9.04 which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee, are in excess of the amount thereof which would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.


 


88

















 


SECTION 9.06.                      Reinstatement.


 


If the Trustee or Paying Agent is unable to apply any
money or U.S. Government Obligations in accordance with Section 9.01, 9.02 or
9.03 by reason of any legal proceeding or by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Issuer’s and each Guarantor’s obligations
under this Indenture, the Notes and the Guarantees shall be revived and
reinstated as though no deposit had occurred pursuant to this Article Nine
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 9.01; provided
that if the Issuer or the Guarantors have made any payment of principal of,
premium, if any, or accrued interest on any Notes because of the reinstatement
of their obligations, the Issuer or the Guarantors, as the case may be, shall
be subrogated to the rights of the Holders of such Notes to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.


 


SECTION 9.07.                      Moneys Held by Paying Agent.


 


In connection with the satisfaction and discharge of
this Indenture, all moneys then held by any Paying Agent under the provisions
of this Indenture shall, upon written demand of the Issuer, be paid to the
Trustee, or if sufficient moneys have been deposited pursuant to Section 9.04,
to the Issuer (or, if such moneys had been deposited by the Guarantors, to such
Guarantors), and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.


 


SECTION 9.08.                      Moneys Held by Trustee.


 


Subject to applicable law, any moneys deposited with
the Trustee or any Paying Agent or then held by the Issuer or the Guarantors in
trust for the payment of the principal of, or premium, if any, or interest on
any Note that are not applied but remain unclaimed by the Holder of such Note
for two years after the date upon which the principal of, or premium, if any,
or interest on such Note shall have respectively become due and payable shall
be repaid to the Issuer (or, if appropriate, the Guarantors), or if such moneys
are then held by the Issuer or the Guarantors in trust, such moneys shall be
released from such trust; and the Holder of such Note entitled to receive such
payment shall thereafter, as an unsecured general creditor, look only to the
Issuer and the Guarantors for the payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money shall thereupon
cease; provided, that the Trustee or any such Paying Agent, before being
required to make any such repayment, may, at the expense of the Issuer and the
Guarantors, either mail to each Holder affected, at the address shown in the
register of the Notes maintained by the Registrar pursuant to
Section 2.03, or cause to be published once a week for two successive
weeks, in a newspaper published in the English language, customarily published
each Business Day and of general circulation in the City of New York, New York,
a notice that such money remains unclaimed


 


89

















 


and that, after a
date specified therein, which shall not be less than 30 days from the date of
such mailing or publication, any unclaimed balance of such moneys then
remaining will be repaid to the Issuer. 
After payment to the Issuer or the Guarantors or the release of any
money held in trust by the Issuer or any Guarantors, as the case may be, Holders
entitled to the money must look only to the Issuer and the Guarantors for
payment as general creditors unless applicable abandoned property law
designates another Person.


 


ARTICLE TEN



GUARANTEE OF NOTES


 


SECTION 10.01.                    Guarantee.


 


Subject to the provisions of this Article Ten,
each Guarantor, by execution of this Indenture, jointly and severally,
unconditionally guarantees to each Holder (i) the due and punctual payment
of the principal of and interest on each Note, when and as the same shall
become due and payable, whether at maturity, by acceleration or otherwise, the
due and punctual payment of interest on the overdue principal of and interest
on the Notes, to the extent lawful, and the due and punctual payment of all
other Obligations and due and punctual performance of all obligations of the
Issuer to the Holders or the Trustee all in accordance with the terms of such
Note, this Indenture and the Registration Rights Agreement, and (ii) in
the case of any extension of time of payment or renewal of any Notes or any of
such other Obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, at stated
maturity, by acceleration or otherwise. 
Each Guarantor, by execution of this Indenture, agrees that its
obligations hereunder shall be absolute and unconditional, irrespective of, and
shall be unaffected by, any invalidity, irregularity or unenforceability of any
such Note or this Indenture, any failure to enforce the provisions of any such
Note, this Indenture or the Registration Rights Agreement, any waiver,
modification or indulgence granted to the Issuer with respect thereto by the
Holder of such Note, or any other circumstances which may otherwise constitute
a legal or equitable discharge of a surety or such Guarantor.


 


Each Guarantor hereby waives diligence, presentment,
demand for payment, filing of claims with a court in the event of merger or
bankruptcy of the Issuer, any right to require a proceeding first against the
Issuer, protest or notice with respect to any such Note or the Indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Guarantee
will not be discharged as to any such Note except by payment in full of the
principal thereof and interest thereon. 
Each Guarantor hereby agrees that, as between such Guarantor, on the one
hand, and the Holders and the Trustee, on the other hand, (i) the maturity
of the Obligations guaranteed hereby may be accelerated as provided in
Article Six for the purposes


 


90

















 


of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (ii) in the
event of any declaration of acceleration of such Obligations as provided in
Article Six, such Obligations (whether or not due and payable) shall
forthwith become due and payable by each Guarantor for the purpose of this
Guarantee.


 


SECTION 10.02.                    Execution and Delivery of Guarantee.


 


To further evidence the Guarantee set forth in Section
10.01, each Guarantor hereby agrees that a notation of such Guarantee,
substantially in the form included in Exhibit G hereto, shall be
endorsed on each Note authenticated and delivered by the Trustee and such
Guarantee shall be executed by either manual or facsimile signature of an
Officer or an Officer of a general partner, as the case may be, of each
Guarantor.  The validity and enforceability
of any Guarantee shall not be affected by the fact that it is not affixed to
any particular Note.


 


Each of the Guarantors hereby agrees that its
Guarantee set forth in Section 10.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee.


 


If an officer of a Guarantor whose signature is on
this Indenture or a Guarantee no longer holds that office at the time the
Trustee authenticates the Note on which such Guarantee is endorsed or at any
time thereafter, such Guarantor’s Guarantee of such Note shall be valid
nevertheless.


 


The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any
Guarantee set forth in this Indenture on behalf of the Guarantor.


 


SECTION 10.03.                    Limitation of Guarantee.


 


The obligations of each Guarantor are limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under this Indenture, result in the obligations of
such Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law.  Each Guarantor that makes a payment or distribution under a
Guarantee shall be entitled to a contribution from each other Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Guarantor.


 


91

















 


SECTION 10.04.                    Release of Guarantor.


 


A Guarantor shall be released from all of its
obligations under its Guarantee if:


 


(i)            all of the assets of such Guarantor have
been sold or otherwise disposed of in a transaction in compliance with the terms
of this Indenture (including Sections 4.09, 4.20 and 5.01);


 


(ii)           all of the Equity Interests held by the
Issuer and the Restricted Subsidiaries of such Guarantor have been sold or
otherwise disposed of in a transaction in compliance with the terms of this
Indenture (including Sections 4.20 and 5.01);


 


(iii)          the
Guarantor is designated an Unrestricted Subsidiary in compliance with the terms
of this Indenture (including Section 4.15);


 


and in each such case, the Issuer has delivered to the
Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that
all conditions precedent herein provided for relating to such transactions have
been complied with and that such release is authorized and permitted hereunder.


 


The Trustee shall execute any documents reasonably
requested by the Issuer or a Guarantor in order to evidence the release of such
Guarantor from its obligations under its Guarantee endorsed on the Notes and
under this Article Ten.


 


SECTION 10.05.                    Waiver of Subrogation.


 


Each Guarantor hereby irrevocably waives any claim or
other rights which it may now or hereafter acquire against the Issuer that
arise from the existence, payment, performance or enforcement of such
Guarantor’s obligations under its Guarantee and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration, indemnification,
and any right to participate in any claim or remedy of any Holder of Notes
against the Issuer, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Issuer, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or Note on account of such claim or other rights.  If any amount shall be paid to any Guarantor
in violation of the preceding sentence and the Notes shall not have been paid
in full, such amount shall have been deemed to have been paid to such Guarantor
for the benefit of, and held in trust for the benefit of, the Holders, and
shall forthwith be paid to the Trustee for the benefit of such Holders to be
credited and applied upon the Notes, whether matured or unmatured, in
accordance with the terms of this Indenture. 
Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by


 


92

















 


this Indenture and
that the waiver set forth in this Section 10.05 is knowingly made in contemplation
of such benefits.


 


ARTICLE ELEVEN



[INTENTIONALLY OMITTED]


 


ARTICLE TWELVE



MISCELLANEOUS


 


SECTION 12.01.                    Trust Indenture Act Controls.


 


If any provision of this Indenture limits, qualifies
or conflicts with another provision which is required to be included in this Indenture
by the TIA, the required provision shall control.  If any provision of this Indenture modifies any TIA provision
that may be so modified, such TIA provision shall be deemed to apply to this
Indenture as so modified.  If any
provision of this Indenture excludes any TIA provision that may be so excluded,
such TIA provision shall be excluded from this Indenture.


 


The provisions of TIA §§ 310 through 317 that
impose duties on any Person (including the provisions automatically deemed
included unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.


 


SECTION 12.02.                    Notices.


 


Except for notice or communications to Holders, any
notice or communication shall be given in writing and delivered in person, sent
by facsimile, delivered by commercial courier service or mailed by first-class
mail, postage prepaid, addressed as follows:


 


93

















 


If to the Issuer or any Guarantor:


 


MERITAGE CORPORATION

8501 E. Princess Drive

Suite 290 

Scottsdale, AZ  85255



Attention:  Chief Financial Officer



Fax Number:  (480) 998-9178


 


with, in the case of any
notice furnished pursuant to Article Six, a copy to:


 


SNELL & WILMER L.L.P.

One Arizona Center

400 E. Van Buren St.

Phoenix, AZ  85004



Attention:  Steven D. Pidgeon, Esq.



Fax Number:  (602) 382-6070


 


If to the Trustee:


 


WELLS FARGO BANK,
NATIONAL ASSOCIATION

707 Wilshire Blvd.

17th Floor

Los Angeles, CA  90017



Attention:  Corporate Trust Department



Fax Number:  (213) 614-3355


 


Such notices or communications shall be effective when
received and shall be sufficiently given if so given within the time prescribed
in this Indenture.


 


The Issuer, the Guarantors or the Trustee by written
notice to the others may designate additional or different addresses for
subsequent notices or communications.


 


Any notice or communication mailed to a Holder shall
be mailed to him by first-class mail, postage prepaid, at his address shown on
the register kept by the Registrar.


 


94

















 


Failure to mail a notice or communication to a Holder
or any defect in it shall not affect its sufficiency with respect to other
Holders.  If a notice or communication
to a Holder is mailed in the manner provided above, it shall be deemed duly
given, whether or not the addressee receives it.


 


In case by reason of the suspension of regular mail
service, or by reason of any other cause, it shall be impossible to mail any
notice as required by this Indenture, then such method of notification as shall
be made with the approval of the Trustee shall constitute a sufficient mailing
of such notice.


 


SECTION 12.03.                    Communications by Holders with Other Holders.


 


Holders may communicate pursuant to TIA § 312(b)
with other Holders with respect to their rights under this Indenture or the
Notes.  The Issuer, the Guarantors, the
Trustee, the Registrar and anyone else shall have the protection of TIA
§ 312(c).


 


SECTION 12.04.                    Certificate and Opinion as to Conditions Precedent.


 


Upon any request or application by the Issuer or any
Guarantor to the Trustee to take any action under this Indenture, the Issuer or
such Guarantor shall furnish to the Trustee:


 


(1)           an Officers’ Certificate (which shall include the
statements set forth in Section 12.05) stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and


 


(2)           an Opinion of Counsel (which shall include the
statements set forth in Section 12.05) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.


 


SECTION 12.05.                    Statements Required in Certificate and Opinion.


 


Each certificate and opinion with respect to
compliance by or on behalf of the Issuer or any Guarantor with a condition or
covenant provided for in this Indenture shall include:


 


(1)           a statement that the Person making such certificate or
opinion has read such covenant or condition;


 


(2)           a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;


 


95

















 


(3)           a statement that, in the opinion of such Person, it or
he has made such examination or investigation as is necessary to enable it or
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and


 


(4)           a statement as to whether or not, in the opinion of
such Person, such covenant or condition has been complied with.


 


SECTION 12.06.                    Rules by Trustee and Agents.


 


The Trustee may make reasonable rules for action by or
meetings of Holders.  The Registrar and
Paying Agent may make reasonable rules for their functions.


 


SECTION 12.07.                    Business Days; Legal Holidays.


 


A “Business Day” is a day that is not a Legal
Holiday.  A “Legal Holiday” is a
Saturday, a Sunday or other day on which (i) commercial banks in the City
of New York are authorized or required by law to close or (ii) the New
York Stock Exchange is not open for trading. 
If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.


 


SECTION 12.08.                    Governing Law.


 


This
Indenture and the Notes shall be governed by and construed in accordance with
the laws of the State of New York, as applied to contracts made and performed
within the State of New York.


 


SECTION 12.09.                    No Adverse Interpretation of Other Agreements.


 


This Indenture may not be used to interpret another
indenture, loan, security or debt agreement of the Issuer or any Subsidiary
thereof.  No such indenture, loan, security
or debt agreement may be used to interpret this Indenture.


 


SECTION 12.10.                    No Recourse Against Others.


 


No recourse for the payment of the principal of or
premium, if any, or interest, including Additional Interest, on any of the
Notes, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Issuer or
any Guarantor in this Indenture or in any supplemental indenture, or in any of
the Notes, or because of the creation of any Indebtedness represented thereby,
shall be had against any stockholder, officer, director or employee, as such,
past, present or future, of the Issuer or of any successor corporation or
against the property or assets of any such stockholder, officer, employee or
director, either directly or through the Issuer or any Guarantor, or any
successor


 


96

















 


corporation
thereof, whether by virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the Notes are solely obligations of the
Issuer and the Guarantors, and that no such personal liability whatever shall
attach to, or is or shall be incurred by, any stockholder, officer, employee or
director of the Issuer or any Guarantor, or any successor corporation thereof,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or the Notes or implied therefrom, and that any and all such personal liability
of, and any and all claims against every stockholder, officer, employee and
director, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issuance of the
Notes.  It is understood that this
limitation on recourse is made expressly for the benefit of any such shareholder,
employee, officer or director and may be enforced by any of them.


 


SECTION 12.11.                    Successors.


 


All agreements of the Issuer and the Guarantors in
this Indenture and the Notes shall bind their respective successors.  All agreements of the Trustee, any
additional trustee and any Paying Agents in this Indenture shall bind its successor.


 


SECTION 12.12.                    Multiple Counterparts.


 


The parties may sign multiple counterparts of this
Indenture.  Each signed counterpart
shall be deemed an original, but all of them together represent one and the
same agreement.


 


SECTION 12.13.                    Table of Contents, Headings, etc.


 


The table of contents, cross-reference sheet and
headings of the Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof, and
shall in no way modify or restrict any of the terms or provisions hereof.


 


SECTION 12.14.                    Separability.


 


Each provision of this Indenture shall be considered
separable and if for any reason any provision which is not essential to the
effectuation of the basic purpose of this Indenture or the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.


 


97

















 


IN WITNESS WHEREOF, the parties have caused this
Indenture to be duly executed all as of the date and year first written above.


 


 


	
   

  	
  MERITAGE
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:  Larry W. Seay

  
	
   

  	
   

  	
  Title:  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  MONTEREY
  HOMES ARIZONA, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W.
  Seay

  
	
   

  	
   

  	
  Title:

  	
  Vice President-Secretary

  
	
   

  	
   

  
	
   

  	
  MERITAGE
  PASEO CROSSING, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage
  Homes of Arizona, Inc., its Sole

  Member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W.
  Seay

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President-Secretary

  
	
   

  	
   

  
	
   

  	
  MONTEREY
  HOMES CONSTRUCTION, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W.
  Seay

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President-Secretary

  
	
   

  	
   

  
	
   

  	
  MERITAGE
  PASEO CONSTRUCTION, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage
  Homes Construction, Inc.,

  its Sole Member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W.
  Seay

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President-Secretary

  



 


S-1

















 


	
   

  	
  MERITAGE
  HOMES OF ARIZONA, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W.
  Seay

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President-Secretary

  
	
   

  	
   

  
	
   

  	
  MERITAGE
  HOMES CONSTRUCTION, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W.
  Seay

  
	
   

  	
   

  	
  Title:

  	
  Vice President-Secretary

  
	
   

  	
   

  
	
   

  	
  MTH-TEXAS
  GP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W.
  Seay

  
	
   

  	
   

  	
  Title:

  	
  Vice President-Secretary

  
	
   

  	
   

  
	
   

  	
  MTH-TEXAS
  LP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name: Larry
  W. Seay

  
	
   

  	
   

  	
  Title: Vice
  President-Secretary

  
	
   

  	
   

  
	
   

  	
  LEGACY/MONTEREY
  HOMES L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  MTH-Texas
  GP, Inc., its General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name: Larry
  W. Seay

  
	
   

  	
   

  	
  Title: Vice
  President-Secretary

  



 


S-2

















 


	
   

  	
  MERITAGE
  HOMES OF CALIFORNIA, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W.
  Seay

  
	
   

  	
   

  	
  Title:

  	
  Vice President-Secretary

  
	
   

  	
   

  
	
   

  	
  HANCOCK-MTH
  BUILDERS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name: Larry
  W. Seay

  
	
   

  	
   

  	
  Title: Vice
  President-Secretary

  
	
   

  	
   

  
	
   

  	
  HANCOCK-MTH
  COMMUNITIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W.
  Seay

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President-Secretary

  
	
   

  	
   

  
	
   

  	
  LEGACY OPERATING
  COMPANY, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage
  Holdings, L.L.C., its General

  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Legacy/Monterey
  Homes L.P., its Sole

  Member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  MTH-Texas
  GP, Inc., its General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name: Larry
  W. Seay

  
	
   

  	
   

  	
  Title: Vice
  President-Secretary

  
	
   

  	
   

  
	
   

  	
  HULEN PARK
  VENTURE, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Legacy/Monterey
  Homes L.P., its Sole Member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  MTH-Texas
  GP, Inc., its General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W.
  Seay

  
	
   

  	
   

  	
  Title:

  	
  Vice President-Secretary

  



 


S-3

















 


	
   

  	
  MERITAGE
  HOLDINGS, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Legacy/Monterey
  Homes L.P., its Sole Mem-

  ber

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  MTH-Texas
  GP, Inc., its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:  Larry W. Seay

  
	
   

  	
   

  	
  Title:  Vice President-Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MTH-TEXAS GP
  II, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:  Larry W. Seay

  
	
   

  	
   

  	
  Title:  Vice President-Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MTH
  HOMES-TEXAS, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  MTH-Texas GP
  II, Inc., its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:  Larry W. Seay

  
	
   

  	
   

  	
  Title:  Vice President-Secretary

  



 


S-4

















 


	
   

  	
  MTH-TEXAS LP
  II, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:  Larry W. Seay

  
	
   

  	
   

  	
  Title:  Vice President-Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MTH-HOMES
  NEVADA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:  Larry W. Seay

  
	
   

  	
   

  	
  Title:  Vice President-Secretary

  



 


S-5

















 


	
   

  	
  MTH-CAVALIER,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Monterey
  Homes Construction, Inc., its Sole

  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:  Larry W. Seay

  
	
   

  	
   

  	
  Title:  Vice President-Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MTH GOLF,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Hancock-MTH
  Builders. Inc., its Sole Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:  Larry W. Seay

  
	
   

  	
   

  	
  Title:  Vice President-Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LEGACY-HAMMONDS
  MATERIALS, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage
  Holdings, L.L.C., its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Legacy/Monterey
  Homes L.P., its Sole Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  MTH-Texas
  GP, Inc., its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:  Larry W. Seay

  
	
   

  	
   

  	
  Title:  Vice President-Secretary

  



 


S-6

















 


	
   

  	
  WELLS FARGO BANK, NATIONAL

  ASSOCIATION, as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeanie Mar

  
	
   

  	
   

  	
  Name:

  	
  Jeanie Mar

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dania Samai

  
	
   

  	
   

  	
  Name:

  	
  Dania Samai

  
	
   

  	
   

  	
  Title:

  	
  Trust
  Officer

  



 


S-7

















 


EXHIBIT A


 


	
   

  	
  CUSIP

  



 


MERITAGE CORPORATION


 


	
  No.

  	
  $                             

  



 


7% SENIOR NOTE DUE 2014


 


MERITAGE CORPORATION, a Maryland corporation  (the “Company”), for value received,
promises to pay to CEDE & CO. or registered assigns the principal sum of
$            
dollars on May 1, 2014.


 


Interest Payment Dates:  May 1 and November 1.


 


Record Dates: 
April 15 and October 15.


 


Reference is made to the further provisions of this
Note contained herein, which will for all purposes have the same effect as if
set forth at this place.


 


A-1

















 


IN WITNESS WHEREOF, the Company has caused this Note
to be signed manually or by facsimile by its duly authorized officers.


 


	
   

  	
  MERITAGE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


Dated:


 


Certificate of Authentication


 


This is one of the 7% Senior Notes due 2014 referred
to in the within-mentioned Indenture.


 


 


	
   

  	
  WELLS FARGO BANK, NATIONAL ASSOCIA-

  TION, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  



 


A-2

















 


[FORM OF REVERSE OF NOTE]


 


MERITAGE CORPORATION


 


7% SENIOR NOTE DUE 2014


 


1.             Interest.  MERITAGE
CORPORATION, a Maryland corporation (the “Company”), promises to pay, until the
principal hereof is paid or made available for payment, interest on the
principal amount set forth on the face hereof at a rate of 7% per annum.  Interest hereon will accrue from and
including the most recent date to which interest has been paid or, if no
interest has been paid, from and including [insert applicable issue date] to but
excluding the date on which interest is paid. 
Interest shall be payable in arrears on each May 1 and November 1.  Interest will be computed on the basis of a
360-day year of twelve 30-day months. 
The Company shall pay interest on overdue principal and on overdue
interest (to the full extent permitted by law) at a rate of 7% per annum.


 


2.             Method of Payment. 
The Company will pay interest hereon (except defaulted interest) to the
Persons who are registered Holders at the close of business on April 15 or
October 15 next preceding the interest payment date (whether or not a Business
Day).  Holders must surrender Notes to a
Paying Agent to collect principal payments. 
The Company will pay principal and interest in money of the United
States of America that at the time of payment is legal tender for payment of
public and private debts.  Interest may
be paid by check mailed to the Holder entitled thereto at the address indicated
on the register maintained by the Registrar for the Notes.


 


3.             Paying Agent and Registrar. 
Initially, Wells Fargo Bank, National Association (the “Trustee”) will
act as a Paying Agent and Registrar. 
The Company may change any Paying Agent or Registrar without
notice.  Neither the Company nor any of
its Affiliates may act as Paying Agent or Registrar.


 


4.             Indenture.  The Company
issued the Notes under an Indenture dated as of April 21, 2004 (the
“Indenture”) among the Company, the Guarantors (as defined in the Indenture)
and the Trustee.  This is one of an
issue of Notes of the Company issued, or to be issued, under the
Indenture.  The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code §§ 77aaa-77bbbb), as
amended from time to time.  The Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of them. 
Capitalized and certain other terms used herein and not otherwise defined
have the meanings set forth in the Indenture.


 


5.             [Intentionally Omitted]


 


A-3

















 


6.             Optional Redemption. (a) 
The Company, at its option, may redeem the Notes, in whole or in part,
at any time on or after May 1, 2009 upon not less than 30 nor more than 60
days’ notice, at the redemption prices (expressed as percentages of principal
amount), set forth below, together, in each case, with accrued and unpaid
interest thereon, if any, to the Redemption Date, if redeemed during the twelve
month period beginning on May 1 of each year listed below:


 




	
  Year

  	
   

  	
  Redemption
  Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2009

  	
   

  	
  103.500

  	
  %

  
	
  2010

  	
   

  	
  102.333

  	
  %

  
	
  2011

  	
   

  	
  101.167

  	
  %

  
	
  2012 and thereafter

  	
   

  	
  100.000

  	
  %

  






 


(b)  Notwithstanding the foregoing, at any time
prior to May 1, 2007, the Issuer may redeem up to 35% of the aggregate
principal amount of the Notes with the net cash proceeds of one or more
Qualified Equity Offerings at a redemption price equal to 107% of the principal
amount of the Notes to be redeemed, plus accrued and unpaid interest thereon,
if any, to the Redemption Date; provided that (1) at least 65% of
the aggregate principal amount of Notes issued under the Indenture remains
outstanding immediately after the occurrence of such redemption and
(2) the redemption occurs within 90 days of the date of the closing of any
such Qualified Equity Offering.


 


(c)  In the event of a redemption of fewer than
all of the Notes, the Trustee shall select the Notes to be redeemed in
compliance with the requirements of the principal national securities exchange,
if any, while such Notes are listed, or if such Notes are not then listed on a national
securities exchange, on a pro  rata basis, by lot or in such other
manner as the Trustee shall deem fair and equitable.  The Notes will be redeemable in whole or in part upon not less
than 30 nor more than 60 days’ prior written notice, mailed by first class mail
to a Holder’s last address as it shall appear on the register maintained by the
Registrar of the Notes.  On and after
any redemption date, interest will cease to accrue on the Notes or portions
thereof called for redemption unless the Company shall fail to redeem any such
Note.


 


7.             Notice of Redemption. 
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Notes to be redeemed at
his registered address.  On and after
the Redemption Date, unless the Company defaults in making the redemption
payment, interest ceases to accrue on Notes or portions thereof called for redemption.


 


8.             Offers To Purchase. 
The Indenture provides that upon the occurrence of a Change of Control
or an Asset Sale and subject to further limitations contained therein, the
Company shall make an offer to purchase outstanding Notes in accordance with
the procedures set forth in the Indenture.


 


A-4

















 


9.             Registration Rights. 
Pursuant to a Registration Rights Agreement among the Company, the
Guarantors and the Initial Purchaser, the Company will be obligated to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for notes of a separate series issued
under the Indenture (or a trust indenture substantially identical to the
Indenture in accordance with the terms of the Registration Rights Agreement)
which have been registered under the Securities Act, in like principal amount
and having substantially identical terms as the Notes.  The Holders shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.


 


10.           Denominations, Transfer, Exchange. 
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. 
A Holder may transfer or exchange Notes in accordance with the
Indenture.  The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay to it any taxes and fees required by law or permitted by
the Indenture.  The Registrar need not
register the transfer of or exchange any Notes or portion of a Note selected
for redemption, or register the transfer of or exchange any Notes for a period
of 15 days before a mailing of notice of redemption.


 


11.           Persons Deemed Owners. 
The registered Holder of this Note may be treated as the owner of this
Note for all purposes.


 


12.           Unclaimed Money. 
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee will pay the money back to the Company at its written
request.  After that, Holders entitled
to the money must look to the Company for payment as general creditors unless
an “abandoned property” law designates another Person.


 


13.           Amendment, Supplement, Waiver, Etc. 
The Company, the Guarantors and the Trustee (if a party thereto) may,
without the consent of the Holders of any outstanding Notes, amend, waive or
supplement the Indenture or the Notes for certain specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies,
maintaining the qualification of the Indenture under the Trust Indenture Act of
1939, as amended, and making any change that does not materially and adversely
affect the rights of any Holder.  Other
amendments and modifications of the Indenture or the Notes may be made by the
Company, the Guarantors and the Trustee with the consent of the Holders of not
less than a majority of the aggregate principal amount of the outstanding
Notes, subject to certain exceptions requiring the consent of the Holders of the
particular Notes to be affected.


 


14.           Successor Corporation. 
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture and the transaction complies with
the terms of Article Five of the Indenture, the predecessor corporation will,
except as provided in Article Five, be released from those obligations.


 


A-5

















 


15.           Defaults and Remedies. 
Events of Default are set forth in the Indenture.  Subject to certain limitations in the
Indenture, if an Event of Default (other than an Event of Default specified in
Section 6.01(7) or (8) with respect to the Company) occurs and is continuing,
the Trustee or the Holders of not less than 25% in aggregate principal amount
of the outstanding Notes may, by written notice to the Trustee and the Company,
and the Trustee upon the request of the Holders of not less than 25% in
aggregate principal amount of the outstanding Notes shall, declare all
principal of and accrued interest on all Notes to be immediately due and
payable and such amounts shall become immediately due and payable.  If an Event of Default specified in Section
6.01(7) or (8) occurs with respect to the Company, the principal amount of and
interest on, all Notes shall ipso  facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder.  Holders may not enforce
the Indenture or the Notes except as provided in the Indenture.  The Trustee may require indemnity satisfactory
to it before it enforces the Indenture or the Notes.  Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power.  The
Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal, premium, if any, or interest on the Notes or a
default in the observance or performance of any of the obligations of the
Company under Article Five of the Indenture) if it determines that withholding
notice is in their best interests.


 


16.           Trustee Dealings with Company. 
The Trustee, in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Company or its Affiliates,
and may otherwise deal with the Company or its Affiliates, as if it were not
Trustee.


 


17.           Discharge.  The
Company’s obligations pursuant to the Indenture will be discharged, except for
obligations pursuant to certain sections thereof, subject to the terms of the
Indenture, upon the payment of all the Notes or upon the irrevocable deposit
with the Trustee of United States dollars or U.S. Government Obligations
sufficient to pay when due principal of and interest on the Notes to maturity
or redemption, as the case may be.


 


18.           Guarantees.  The Note
will be entitled to the benefits of certain Guarantees made for the benefit of
the Holders.  Reference is hereby made
to the Indenture for a statement of the respective rights, limitations of
rights, duties and obligations thereunder of the Guarantors, the Trustee and
the Holders.


 


19.           Authentication. 
This Note shall not be valid until the Trustee signs the certificate of
authentication on the other side of this Note.


 


20.           Governing Law. 
This Note shall be governed by and construed in accordance with the laws
of the State of New York, as applied to contracts made and performed within the
State of New York.  The Trustee, the
Company, the Guarantor and the Holders


 


A-6

















 


agree to submit to
the jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to the Indenture or the Notes.


 


21.           Abbreviations. 
Customary abbreviations may be used in the name of a Holder or an assignee,
such as:  TEN COM (=  tenants in common), TENANT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).


 


The Company will furnish to any Holder upon written
request and without charge a copy of the Indenture.  Requests may be made to:


 


MERITAGE CORPORATION

8501 E. Princess Drive

Suite 290

Scottsdale, AZ  85255



Attention:  Chief Financial Officer


 


A-7

















 


ASSIGNMENT


 


I or we assign and transfer
this Note to:


 


(Insert assignee’s social security or tax I.D. number)


 


	
   

  
	
   

  
	
   

  
	
  (Print or type name, address and zip code of assignee)

  
	
   

  
	
  and
  irrevocably appoint:

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  Agent to
  transfer this Note on the books of the Company.  The Agent may substitute another to act for him.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
   

  	
   

  	
  (Sign
  exactly as your name

  
	
   

  	
   

  	
   

  	
  appears on
  the other side of

  
	
   

  	
   

  	
   

  	
  this Note)

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature
  Guarantee:

  	
   

  	
   

  	
   

  
											



 


SIGNATURE GUARANTEE


 


Signatures must be guaranteed
by an “eligible guarantor institution” meeting the requirements of the
Registrar, which requirements include membership or participation in the Security
Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee
program” as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.


 


A-8

















 


OPTION OF HOLDER TO ELECT PURCHASE


 


If you want to elect to have all or any part of this
Note purchased by the Company pursuant to Section 4.09, Section 4.16 or Section
4.20 of the Indenture, check the appropriate box:


 


	
  o

  	
   

  	
  Section 4.09

  	
   

  	
  o

  	
   

  	
  Section 4.16

  	
   

  	
  o

  	
   

  	
  Section 4.20

  



 


If you want to have only part of the Note purchased by
the Company pursuant to Section 4.09, Section 4.16 or
Section 4.20 of the Indenture, state the amount you elect to have purchased:


 


	
  $

  	
   

  	
   

  
	
  (multiple of
  $1,000)

  
	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
  Your
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
  (Sign
  exactly as your name appears on the face of this Note)

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Signature
  Guaranteed

  
										



 


SIGNATURE GUARANTEE


 


Signatures must be guaranteed
by an “eligible guarantor institution” meeting the requirements of the
Registrar, which requirements include membership or participation in the Security
Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee
program” as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.


 


A-9

















 


EXHIBIT B


 


[FORM OF LEGEND FOR 144A NOTES AND OTHER NOTES THAT

ARE RESTRICTED NOTES]


 


The Note (or its predecessor)
evidenced hereby was originally issued in a transaction exempt from
registration under Section 5 of the United States Securities Act of 1933,
and the Note evidenced hereby may not be offered, sold or otherwise transferred
in the absence of such registration or an applicable exemption therefrom.  Each purchaser of the Note evidenced hereby
is hereby notified that the seller may be relying on the exemption from the
provisions of Section 5 of the Securities Act provided by Rule 144A
thereunder or another exemption under the Securities Act.  The holder of the Note evidenced hereby
agrees for the benefit of Meritage Corporation that (a) such Note may be
resold, pledged or otherwise transferred only (1)(a) to a person who the seller
reasonably believes is a qualified institutional buyer (as defined in
Rule 144A under the Securities Act), purchasing for its own account in a
transaction meeting the requirements of Rule 144A under the Securities
Act, (b) in a transaction meeting the requirements of Rule 144 of the
Securities Act, (c) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 of Regulation S
under the Securities Act, (d) to an “accredited investor” within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (an
“Institutional Accredited Investor”) that is purchasing at least $100,000 of
Notes for its own account or for the account of an institutional accredited
investor (and based upon an opinion of counsel if Meritage Corporation so
requests) or (e) in accordance with another exemption from the
registration requirements of the Securities Act provided that in the case of a
transfer under clause (e) such transfer is subject to the receipt by the
Trustee (and Meritage Corporation, if it so requests) of a certification of the
Transferor and an opinion of counsel to the effect that such transfer is in
compliance with the Securities Act, (2) to Meritage Corporation or any of
its subsidiaries or (3) under an effective registration statement under
the Securities Act and, in each case, in accordance with any applicable
securities laws of any state of the United States or any other applicable
jurisdiction and the indenture governing the Notes and (b) the holder
will, and each subsequent holder is required to, notify any purchaser from it
of the Note evidenced hereby of the resale restrictions set forth in (a)
above.  If any resale or other transfer
of any Note is proposed to be made under clause (a)(1)(d) above while
these transfer restrictions are in force then the transferor shall deliver a letter
from the transferee to Meritage and the Trustee which shall provide, among
other things, that the transferee is an institutional accredited investor and
that it is acquiring the Securities for investment purposes and not for
distribution in violation of the Securities Act.


 


B-1

















 


[FORM OF ASSIGNMENT FOR 144A NOTES AND OTHER NOTES THAT ARE 

RESTRICTED NOTES]


 


I or we assign and transfer
this Note to:


 


(Insert assignee’s social security or tax I.D. number)


 


	
   

  
	
   

  
	
   

  
	
  (Print or type name, address and zip code of assignee)

  
	
   

  
	
  and
  irrevocably appoint:

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  Agent to
  transfer this Note on the books of the Company.  The Agent may substitute another to act for him.

  



 


[Check One]


 


o  (a)                     this
Note is being transferred in compliance with the exemption from registration
under the Securities Act provided by Rule 144A thereunder.


 


or


 


o  (b)                     this
Note is being transferred other than in accordance with (a) above and documents
are being furnished which comply with the conditions of transfer set forth in
this Note and the Indenture.


 


If none of the foregoing boxes
is checked, the Trustee or Registrar shall not be obligated to register this
Note in the name of any person other than the Holder hereof unless and until
the conditions to any such transfer of registration set forth herein and in
Sections 2.16 and 2.17 of the Indenture shall have been satisfied.


 


	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
  (Sign
  exactly as your name

  
	
   

  	
  appears on
  the face of this Note)

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
						



 


B-2

















 


SIGNATURE GUARANTEE


 


Signatures must be guaranteed
by an “eligible guarantor institution” meeting the requirements of the
Registrar, which requirements include membership or participation in the Security
Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee
program” as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.


 


B-3

















 


TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED


 


The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
“qualified institutional buyer” within the meaning of Rule 144A under the
Securities Act and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned’s foregoing representations in order
to claim the exemption from registration provided by Rule 144A.


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  NOTICE: To be executed by

  an executive officer

  



 


B-4

















 


EXHIBIT C


 


[FORM OF LEGEND FOR REGULATION S NOTE]


 


This Note has not been
registered under the U.S. Securities Act of 1933, as amended (the “Act”), and,
unless so registered, may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. Persons unless registered under the
Act or except pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Act.


 


C-1

















 


[FORM OF ASSIGNMENT FOR REGULATION S NOTE]


 


I or we assign and transfer
this Note to:


 


	
  (Insert assignee’s social security or tax I.D. number)

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  (Print or type name, address and zip code of assignee)

  
	
   

  
	
  and
  irrevocably appoint:

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  Agent to
  transfer this Note on the books of the Company.  The Agent may substitute another to act for him.

  



 


[Check One]


 


o  (a)                     this
Note is being transferred in compliance with the exemption from registration
under the Securities Act provided by Rule 144A thereunder.


 


or


 


o  (b)                     this
Note is being transferred other than in accordance with (a) above and documents
are being furnished which comply with the conditions of transfer set forth in
this Note and the Indenture.


 


If none of the foregoing boxes
is checked, the Trustee or Registrar shall not be obligated to register this
Note in the name of any person other than the Holder hereof unless and until
the conditions to any such transfer of registration set forth herein and in
Sections 2.16 and 2.17 of the Indenture shall have been satisfied.


 


	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
  (Sign
  exactly as your name

  
	
   

  	
  appears on
  the face of this Note)

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
						



 


C-2

















 


SIGNATURE GUARANTEE


 


Signatures must be guaranteed
by an “eligible guarantor institution” meeting the requirements of the
Registrar, which requirements include membership or participation in the Security
Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee
program” as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.


 


C-3

















 


TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED


 


The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
“qualified institutional buyer” within the meaning of Rule 144A under the
Securities Act and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned’s foregoing representations in order
to claim the exemption from registration provided by Rule 144A.


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  NOTICE:  To be executed by

  an executive officer

  



 


C-4

















 


EXHIBIT D


 


[FORM OF LEGEND FOR GLOBAL NOTE]


 


Any Global Note authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required
in the case of a Restricted Note) in substantially the following form:


 


This Note is a Global Note within the meaning of the
indenture hereinafter referred to and is registered in the name of a depository
or a nominee of a depository.  This Note
is not exchangeable for Notes registered in the name of a person other than the
depository or its nominee except in the limited circumstances described in the
indenture, and no transfer of this Note (other than a transfer of this Note as
a whole by the depository to a nominee of the depository or by a nominee of the
depository to the depository or another nominee of the depository) may be
registered except in the limited circumstances described in the Indenture.


 


Unless this certificate is presented by an authorized
representative of the Depository Trust Company (a New York corporation) (“DTC”)
to the issuer or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of CEDE & CO. or in
such other name as it requested by an authorized representative of DTC (and any
payment is made to CEDE & CO. or such other entity as is requested by an
authorized representative of DTC), any transfer, pledge or other use hereof for
value or otherwise by or to any Person is wrongful inasmuch as the registered
owner hereof, CEDE & CO., has an interest herein.


 


D-1

















 


EXHIBIT E


 


Form of Certificate To Be


Delivered in Connection with


Transfers to Non-QIB Accredited Investors


 


Wells Fargo Bank, National Association

Meritage Corporation

c/o Wells Fargo Bank, National Association

707 Wilshire Boulevard, 17th Floor

Los Angeles, CA  90017


 


Attention:  Corporate Trust Department


 


Ladies and Gentlemen:


 


In connection with our proposed purchase of 7% Senior
Notes due 2014 (the “Notes”) of Meritage Corporation, a Maryland Corporation
(the “Company”), we confirm that:


 


1.             We understand that any subsequent transfer of the
Notes is subject to certain restrictions and conditions set forth in the
Indenture dated as of April 21, 2004 relating to the Notes and we agree to be
bound by, and not to resell, pledge or otherwise transfer the Notes except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the “Securities Act”).


 


2.             We understand that the Notes have not been registered
under the Securities Act or any other applicable securities laws, have not been
and will not be qualified for sale under the securities laws of any non-U.S.
jurisdiction and that the Notes may not be offered, sold, pledged or otherwise
transferred except as permitted in the following sentence.  We agree, on our own behalf and on behalf of
any accounts for which we are acting as hereinafter stated, that if we should
sell any Notes, we will do so only (i) to the Company or any subsidiary
thereof, (ii) in accordance with Rule 144A under the Securities Act to a
“qualified institutional buyer” (as defined in Rule 144A), (iii) to an
institutional “accredited investor” (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you a signed letter containing certain representations and agreements relating to
the restrictions on transfer of the Notes, (iv) outside the United States
to persons other than U.S. persons in offshore transactions meeting the
requirements of Rule 904 of Regulation S under the Securities Act, (v) pursuant
to the exemption form registration provided by Rule 144 under the Securities
Act (if applicable) or (vi) pursuant to an effective registration
statement, and we further agree to provide to any person purchasing any of the


 


E-1

















 


Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.


 


3.             We understand that, on any proposed resale of any
Notes, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions.  We further
understand that the Notes purchased by us will bear a legend to the foregoing effect.


 


4.             We are an institutional “accredited investor” (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and have
such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting each are able to bear the economic
risk of our or their investment, as the case may be.


 


5.             We are acquiring the Notes purchased by us for our
account or for one or more accounts (each of which is an institutional
“accredited investor”) as to each of which we exercise sole investment
discretion.


 


6.             We are not acquiring the Notes with a view toward the
distribution thereof in a transaction that would violate the Securities Act or
the securities laws of any state of the United States or any other applicable
jurisdiction.


 


You are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of Transferee]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
					



 


E-2

















 


EXHIBIT F


 


Form of Certificate To Be Delivered


in Connection with Transfers


Pursuant to Regulation S


 


Wells Fargo Bank, National Association

Meritage Corporation

c/o Wells Fargo Bank, National Association

707 Wilshire Boulevard, 17th Floor

Los Angeles, CA  90017


 


Attention:  Corporate Trust Department


 


Re:          Meritage
Corporation, a Maryland corporation (the “Company”)

7% Senior Notes due 2014 (the “Notes”)


 


Dear Sirs:


 


In connection with our proposed sale of
$                  
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, we
represent that:


 


(1)           the offer of the Notes was not made to a
U.S. person or to a person in the United States;


 


(2)           either (a) at the time the buy offer was
originated, the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor any
person acting on our behalf knows that the transaction has been pre-arranged
with a buyer in the United States;


 


(3)           no directed selling efforts have been
made in the United States in contravention of the requirements of Rule 904(a)
of Regulation S;


 


(4)           the transaction is not part of a plan or
scheme to evade the registration requirements of the Securities Act; and


 


(5)           we have advised the transferee of the
transfer restrictions applicable to the Notes.


 


F-1

















 


You are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. 
Terms used in this certificate have the meanings set forth in Regulation
S.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of Transferee]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  



 


F-2

















 


EXHIBIT G


 


NOTATION OF GUARANTEE


 


Each of the undersigned (the “Guarantors”) hereby
jointly and severally unconditionally guarantees, to the extent set forth in
the Indenture dated as of April 21, 2004 by and among Meritage Corporation, as
issuer, the Guarantors, as guarantors, and Wells Fargo Bank, National
Association, as Trustee (as amended, restated or supplemented from time to
time, the “Indenture”), and subject to the provisions of the Indenture,
(a) the due and punctual payment of the principal of, and premium, if any,
and interest on the Notes, when and as the same shall become due and payable,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on overdue principal of, and premium and, to the extent permitted
by law, interest, and the due and punctual performance of all other obligations
of the Company to the Holders or the Trustee, all in accordance with the terms
set forth in Article Ten of the Indenture, and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.


 


The obligations of the Guarantors to the Holders and
to the Trustee pursuant to this Guarantee and the Indenture are expressly set
forth in Article Ten of the Indenture, and reference is hereby made to the
Indenture for the precise terms and limitations of this Guarantee.  Each Holder of the Note to which this
Guarantee is endorsed, by accepting such Note, agrees to and shall be bound by
such provisions.


 


[Signatures on Following Pages]


 


G-1

















 


IN WITNESS WHEREOF, each of the Guarantors has caused
this Guarantee to be signed by a duly authorized officer.


 


	
   

  	
  [GUARANTORS]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


G-2