Document:

Exhibit 10.2

Loan
Nos.: 20069243010, 20069243011

GUARANTY OF NON-RECOURSE
OBLIGATIONS

THIS GUARANTY OF NON-RECOURSE OBLIGATIONS (this “Agreement”
or “Guaranty”), made as of July 11, 2006, is by AFFORDABLE
RESIDENTIAL COMMUNITIES LP, a Delaware limited partnership, (the “Guarantor”),
having an address at 7887 East Belleview Avenue, Suite 200, Englewood,
CO  80111 for the benefit of MERRILL
LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four
World Financial Center, 16th Floor, 250 Vesey
Street, New York, New York  10080 (“Lender”).

WITNESSETH:

WHEREAS, Lender has agreed to make a loan to ARCML06
LLC, ARC18FLD LLC, ARC18FLSH LLC, ARCFLMC LLC and ARCFLSV LLC, each a Delaware
limited liability company, and ARC18TX LP, a Delaware limited partnership (collectively
the “Borrower”), in the amount of TWO HUNDRED THIRTY MILLION and No/100
DOLLARS ($230,000,000) (the “Loan”); and

WHEREAS, to evidence the Loan, Borrower is this day
giving certain Promissory Notes, each dated the date hereof, in the aggregate principal
amount of $230,000,000 (collectively, the “Note”) to Lender pursuant to
a Loan Agreement dated the date hereof, among the Borrower and Lender (the “Loan
Agreement”); and

WHEREAS, the Note shall be secured by, among other
things, the Mortgage (as defined in the Loan Agreement), encumbering the
Mortgaged Property (as such term is defined in the Loan Agreement; and

WHEREAS, Guarantor directly or indirectly owns the
entire interest in Borrower and shall derive a substantial economic benefit
from the making of the Loan by Lender to Borrower; and

WHEREAS, as a condition precedent to the making of the
Loan, Borrower has agreed to procure and deliver to Lender this Agreement; and

WHEREAS, Lender has declined to make the Loan unless
this Agreement is duly executed by Guarantor and delivered to Lender.

NOW, THEREFORE, in consideration for, and as an
inducement to, Lender’s making the Loan, and for other good and valuable
consideration the legal sufficiency of which and receipt thereof are hereby
acknowledged, and notwithstanding any provision to the contrary contained in
the Loan Agreement, the Note, the Mortgage or any of the other Loan Documents
(as such term is defined in the Loan Agreement), including without limitation,
any “non-recourse” provision, Lender and Guarantor do hereby agree as follows:

1.             Guarantor, on behalf of itself and
its successors and assigns (collectively, “Successors”) does hereby
absolutely, unconditionally, irrevocably and personally:  (i) guaranty to Lender payment and
performance of all of the obligations, representations, covenants, warranties
and liabilities of Borrower under clauses (D) and (E) of the proviso
to Section 9.24 of 

 

the Loan Agreement and (ii) agrees to reimburse Lender for, and hold Lender
harmless from and against, any and all losses, damages, claims, expenses,
deficiencies, liabilities and costs (including, without limitation, reasonable
attorneys’ fees and disbursements) incurred, suffered or sustained by Lender
and/or its successors and assigns as a result of or arising out of, in
connection with or resulting from, the enforcement of this Agreement against
Guarantor (the obligations of Guarantor under clauses “i” and “ii” above being
referred to hereinafter, collectively, as “Guarantor’s Obligation”).

2.             It is agreed that the obligations
of Guarantor hereunder shall be primary and this Agreement shall be enforceable
against Guarantor and its Successors without the necessity for any suit or
proceeding of any kind or nature whatsoever brought by Lender against Borrower
or its respective successors or assigns or any other party or against any
security for the payment of the Guarantor’s Obligation and without the
necessity of any notice of non-payment or non-observance or of any notice of
acceptance of this Agreement or of any notice of demand to which Guarantor
might otherwise be entitled (including, without limitation, diligence,
presentment, notice of maturity, extension of time, protest, notice of dishonor
or default, change in nature or form of the Guarantor’s Obligation, acceptance
of further security, release of further security, imposition or agreement
arrived at as to the amount of or the terms of the Guarantor’s Obligation,
notice of adverse change in Borrower’s financial condition and any other fact
that might materially increase the risk to Guarantor), all of which Guarantor
hereby expressly waives. Guarantor hereby expressly agrees that the validity of
this Agreement and the obligations of Guarantor hereunder shall in no way be
terminated, affected, diminished, modified or impaired by reason of the
assertion of or the failure to assert by Lender against Borrower or its
successors or assigns, any of the rights or remedies reserved to Lender
pursuant to the provisions of the Loan Agreement, the Note, the Mortgage or any
other Loan Documents.

3.             Guarantor waives, and covenants and
agrees that it will not at any time insist upon, plead or in any manner
whatsoever claim or take the benefit or advantage of, any and all appraisal,
valuation, stay, extension, marshaling-of-assets or redemption laws, or right
of homestead or exemption, whether now or at any time hereafter in force, that
may delay, prevent or otherwise affect the performance by Guarantor of its
obligations under, or the enforcement by Lender of, this Agreement. Guarantor
further covenants and agrees not to set up or claim any defense, counterclaim,
cross-claim, offset, set-off, right of recoupment, or other objection of any
kind to any action, suit or proceeding in law, equity or otherwise, or to any
demand or claim that may be instituted or made by Lender hereunder other than
the defense of the actual timely performance of Guarantor’s Obligations
hereunder. Guarantor represents, warrants and agrees that, as of the date
hereof, its obligations under this Agreement are not subject to any
counterclaims, cross-claims, rights of recoupment, offsets or affirmative or
other defenses of any kind against Lender.

4.             Guarantor agrees that any notice or
directive given at any time by Guarantor to Lender that is inconsistent with
any waiver contained in this Agreement shall be void and may be ignored by
Lender, and, in addition, may not be pleaded or introduced as evidence in any
litigation relating to this Agreement for the reason that such pleading or introduction
would be at variance with the written terms of this Agreement, unless Lender
has specifically agreed otherwise in a writing, signed by a duly authorized
officer. Guarantor specifically acknowledges and agrees that the foregoing
waivers are of the essence of the Loan 

 

transaction and that, but
for this Agreement and such waivers, Lender would not make the Loan to
Borrower.

5.             The provisions of this Agreement
are for the benefit of Lender and its successors and assigns, and nothing
herein contained shall impair, as between Borrower and Lender, the obligations
of Borrower under the Loan Agreement, the Note, the Mortgage or any of the
other Loan Documents.

6.             This Agreement shall be a
continuing guaranty and the liability of Guarantor hereunder shall in no way be
terminated, affected, modified, impaired or diminished (to the extent permitted
by law) by reason of the happening, from time to time, of any of the following,
although without notice or the further consent of Guarantor:

(a)           any
assignment, amendment, modification or waiver of or change in any of the terms,
covenants, conditions or provisions of the Loan Agreement, the Note, the
Mortgage or any of the other Loan Documents or the invalidity or
unenforceability of any of the foregoing; or

(b)           any
extension of time that may be granted by Lender to Borrower, Guarantor or
Guarantor’s Successors; or

(c)           any
action that Lender or Borrower may take or fail to take under or in respect of
any of the Loan Documents or by reason of any waiver of, or failure to enforce
any of the rights, remedies, powers or privileges available to Lender under
this Agreement or available to Lender at law, equity or otherwise, or any
action on the part of Lender or Borrower granting indulgence or extension in
any form whatsoever; or

(d)           any
dealing, transaction, matter or thing occurring between Lender, Borrower,
Guarantor or Guarantor’s Successors; or

(e)           any
sale, exchange, release, or other disposition of any property pledged,
mortgaged or conveyed, or any property in which Lender has been granted a lien
or security interest to secure any indebtedness of Borrower to Lender; or

(f)            any
release of any person or entity who may be liable in any manner for the payment
and collection of any amounts owed by Borrower to Lender (including the other
Guarantor); or

(g)           the
application of any sums by whomsoever paid or however realized to any amounts
owing by Borrower to Lender in such manner as Lender shall determine in its
sole discretion; or

(h)           any
Event of Default (as such term is defined in the Loan Agreement), whether or
not Lender has exercised any of its rights and remedies as set forth in the
Loan Agreement or the Mortgage upon the happening of any such Event of Default;
or

(i)            Borrower’s
and/or Guarantor’s voluntary or involuntary liquidation, dissolution, sale of
all or substantially all of their respective assets and liabilities, 

 

appointment of a trustee, receiver, liquidator, sequestrator or
conservator for all or any part of Borrower’s or Guarantor’s assets,
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment, or the commencement
of other similar proceedings affecting Borrower or Guarantor or any of the
assets of either of them, including, without limitation, (A) the release
or discharge of Borrower from the payment and performance of its obligations
under any of the Loan Documents by operation of law, or (B) the
impairment, limitation or modification of the liability of Borrower, its
partners or Guarantor in bankruptcy, or of any remedy for the enforcement of
the Guarantor’s Obligation, under any of the Loan Documents, or Guarantor’s
liability under this Agreement, resulting from the operation of any present or
future provisions of the Federal Bankruptcy Code or other present or future
federal, state or applicable statute of law or from the decision in any court;
or

(j)            any
change in or termination of the ownership interest of Guarantor in Borrower
(whether direct or indirect); or

(k)           any
conveyance of the Mortgaged Property, whether or not pursuant to a foreclosure
sale, a deed in lieu of foreclosure, a transfer through bankruptcy, or
otherwise.

7.             Guarantor acknowledges that this
Guaranty and Guarantor’s Obligations are and shall at all times continue to be
absolute, unconditional and irrevocable in all respects, and shall at all times
be valid and enforceable irrespective of any other agreement or circumstances
of any nature whatsoever that might otherwise constitute a defense to this
Guaranty or the obligations of any other person or party (including, without
limitation, Borrower or any other guarantor) relating to this Guaranty or the
obligations of Guarantor hereunder.

8.             Guarantor agrees that if at any
time all or any part of any payment at any time received by Lender from
Borrower or Guarantor under or with respect to this Agreement is or must be
rescinded or returned by Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of Borrower or
Guarantor), then Guarantor’s Obligations hereunder shall, to the extent of the
payment rescinded or returned, be deemed to have continued in existence
notwithstanding such previous receipt by Lender, and Guarantor’s Obligations
hereunder shall continue to be effective or reinstated, as the case may be, as
to such payment, as though such previous payment to Lender had never been made.

9.             Until repayment of the Indebtedness
(as such term is defined in the Loan Agreement) and satisfaction of all of the
obligations under the Loan Agreement, Guarantors and each of them (a) shall
have no right of subrogation against Borrower, general partner of any Borrower
that is a limited partnership or any other Guarantor by reason of any payments
or acts of performance by a Guarantor in compliance with the obligations of a
Guarantor hereunder; (b) shall have no right of indemnity, contribution,
or any other right or cause of action whatsoever under law or equity against
any other Guarantor by reason of any payments or acts of performance by a
Guarantor in compliance with the obligations of a Guarantor hereunder; (c) hereby
waive any right to enforce any remedy that any Guarantor now or hereafter shall
have against Borrower, general partner of any Borrower that is a limited
partnership or any other Guarantor by reason of any one or more payments or
acts of performance in compliance with the obligations of a Guarantor
hereunder; (d) shall subordinate any liability or indebtedness of 

 

Borrower, general partner
of any Borrower that is a limited partnership or any Guarantor now or hereafter
held by any Guarantor or any affiliate of a Guarantor to the obligations of
Borrower, general partner of any Borrower that is a limited partnership or
Guarantors to Lender under the Loan Documents; and (e) shall not file,
assert or receive payment on any claim, whether now existing or hereafter
arising, against Borrower, general partner of any Borrower that is a limited
partnership or any Guarantor in the event of the commencement of a case by or
against Borrower, general partner of any Borrower that is a limited partnership
or any Guarantor under federal or state insolvency laws.

10.           Guarantor represents and warrants to
Lender, with the knowledge that Lender is relying upon the same, as follows:

(a)           Guarantor
is solvent and has the legal right to enter into this Agreement and to perform
its obligations under the terms hereof;

(b)           to
the best of Guarantor’s knowledge, there is no action, suit, proceeding or
investigation pending or threatened against or affecting Guarantor at law, in
equity, in admiralty or before any arbitrator or any governmental department,
commission, board, bureau, agency or instrumentality (domestic or foreign) that
is likely to result in any material adverse change in the property, assets or
condition (financial or otherwise) of Guarantor or that is likely to impair
materially the ability of Guarantor to perform its obligations under this
Agreement; and

(c)           all
financial statements that have heretofore been furnished by Guarantor to Lender
in connection with this Agreement, and all such financial statements that
hereafter may be furnished to Lender by Guarantor, have been and shall be
prepared by an independent certified public accountant approved by Lender in
accordance with the Loan Agreement, shall be consistent in form with prior
statements and shall be certified by Guarantor (provided no Event of Default
(as defined in the Loan Agreement) shall have occurred and be continuing under
the Loan, in which event any such statements shall be certified by such
independent certified public accountant); are and shall be true, correct and
complete; and do and shall fairly present the financial condition of Guarantor,
all as of the respective dates thereof.

11.           As long as this Agreement shall be outstanding,
Guarantor shall furnish to Lender, within 45 days after the end of each
calendar year, Guarantor’s financial statement for such period, in scope and
detail reasonably satisfactory to Lender.

12.           Guarantor and Lender acknowledge and
agree that this Agreement is a guaranty of payment and performance and not of
collection and enforcement in respect of any of the Guarantor’s Obligation. No
exculpatory language contained in any of the other Loan Documents shall in any
event or under any circumstances modify, qualify or affect the personal
recourse obligations and liabilities of Guarantor hereunder.

13.           Lender may freely assign any or all
of its rights under this Agreement, but any such assignment shall be made only
to the subsequent holder of the Note and no such assignment shall increase
Guarantor’s Obligations or diminish its rights hereunder. In the event of any
such assignment, the consent of Guarantor shall not be required for any such
assignment 

 

and failure to give
notice of such assignment shall not affect the validity or enforceability of
any such assignment or subject Lender to any liability and Guarantor shall
continue to remain bound by and obligated to perform under and with respect to
this Agreement. Guarantor shall not assign any of its obligations under this
Agreement without the prior consent of the Lender.

14.           The representations, warranties and
obligations of Guarantor set forth in this Agreement shall survive until this
Agreement shall terminate in accordance with the terms hereof.

15.           This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements relating to such subject matter and may not
be modified, amended, supplemented or discharged except by a written agreement
signed by Guarantor and Lender. This Agreement also may be discharged by full
performance of the Guarantor’s Obligation in accordance with the terms hereof,
or as otherwise provided herein.

16.           If all or any portion of any
provision contained in this Agreement shall be determined to be invalid,
illegal or unenforceable in any respect for any reason, such provision or
portion thereof shall be deemed stricken and severed from this Agreement and
the remaining provision and portions thereof shall continue in full force and
effect.

17.           All notices, requests, demands and
other communications under or in connection with this Agreement shall be in
writing and shall be deemed to have been given or made for all purposes when
delivered in person to the addresses set forth below or three (3) business
days after same is sent by registered or certified mail, return receipt
requested, postage prepaid, to the following addresses:

	
  

  	
  If to Guarantor:

  	
  The address listed above

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
  c/o Affordable Residential Communities, Inc.

  
	
   

  	
   

  	
  7887 East
  Belleview Avenue, Suite 200

  
	
   

  	
   

  	
  Englewood, CO
  80111

  
	
   

  	
   

  	
  Attn.: Karen
  Kinslinger

  
	
   

  	
   

  	
   

  
	
   

  	
  With copy to:

  	
  c/o Affordable Residential Communities, Inc.

  
	
   

  	
   

  	
  7887 East
  Belleview Avenue, Suite 200

  
	
   

  	
   

  	
  Englewood,
  Colorado 80111

  
	
   

  	
   

  	
  Attn: Scott L.
  Gesell

  
	
   

  	
   

  	
   

  
	
   

  	
  With copy to:

  	
  Brownstein Hyatt &
  Farber, P.C.

  
	
   

  	
   

  	
  410 Seventeenth
  Street

  
	
   

  	
   

  	
  Twenty-Second
  Floor

  
	
   

  	
   

  	
  Denver, Co 80202

  
	
   

  	
   

  	
  Attn: Jeff
  Knetsch

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  If to Lender:

  	
  The address listed above

  

 

 

	
  

  	
  With a copy to:

  	
  Dechert LLP

  
	
   

  	
   

  	
  One Market

  
	
   

  	
  Steuart Tower,
  Suite 2500

  
	
   

  	
  San Francisco,
  CA 94105

  
	
   

  	
  Attn: David
  Linder, Esq.

  

 

The
above addresses may be changed on written notice given as hereinabove provided.
Notices may be sent by a party hereto or on its behalf by its attorney.

18.           This Agreement shall
be binding upon Guarantor and its Successors and shall inure to the benefit of
Lender and its successors and assigns.

19.           The failure of
Lender to enforce any right or remedy hereunder, or promptly to enforce any
such right or remedy, shall not constitute a waiver thereof, nor give rise to
any estoppel against Lender, nor excuse Guarantor from its obligations
hereunder. Any waiver of any such right or remedy to be enforceable against
Lender must be expressly set forth in writing signed by Lender.

20.           (a)           Any suit initiated by Lender against
Guarantor or in connection with or arising, directly or indirectly, out of or
relating to, this Agreement (an “Action”) may, at Lender’s option, be
brought in any state or federal court in the State of New York having
jurisdiction over the subject matter hereof. Guarantor hereby submits himself
to the jurisdiction of any such court and agrees that service of process
against Guarantor in any such action may be effected by any means permissible
under federal law or under the laws of the state in which such Action is
brought. Guarantor hereby agrees that insofar as is permitted under applicable
law, this consent to personal jurisdiction shall be self-operative and no
further instrument or action, other than service of process in one of the
manners specified in this Guaranty, or as otherwise permitted by law, shall be
necessary in order to confer jurisdiction upon Guarantor.

(b)           Guarantor agrees that, provided that service of process is
effected upon Guarantor in one of the manners hereinafter specified or as
otherwise permitted by law, Guarantor irrevocably waives, to the fullest extent
permitted by law, and agrees not to assert, by way of motion, as a defense or
otherwise, (i) any objection that Guarantor may have or may hereafter have
to the laying of the venue of any Action brought in any court as provided for
by this Agreement, (ii) any claim that any Action brought in any such
court has been brought in an inconvenient forum, or (iii) any claim that
Guarantor is not personally subject to the jurisdiction of such court. Guarantor
agrees that, provided that service of process is effected upon Guarantor in one
of the manners specified in this Guaranty or as otherwise permitted by law, a
final judgment from which Guarantor has not appealed or may not appeal in any
Action brought in any such court shall be conclusive and binding upon Guarantor
and may, so far as permitted under applicable law, be enforced in the courts of
any state or any federal court or in any other courts to the jurisdiction of
which it is subject, by a suit upon such judgment and that Guarantor shall not
assert any defense, counterclaim or set-off in any such suit upon such
judgment.

(c)           Guarantor hereby irrevocably designates and appoints
Corporation Trust Company (the “Service Agent”) as Guarantor’s
authorized agent to accept and 

 

acknowledge on Guarantor’s behalf service of
any and all process that may be served in any Action.

(d)           Guarantor agrees to execute, deliver and file all such
further instruments or documents as may be necessary under the laws of the
State of New York or the laws of the United States in order to make effective (i) the
appointment of Service Agent as Lender for service of process as provided above
and (ii) Guarantor’s consent to jurisdiction as provided for in this
Guaranty.

(e)           Guarantor hereby consents to process being served in any
Action by the mailing of a copy thereof by registered or certified mail,
postage prepaid, return receipt requested, to the notice address for Guarantor
as set forth in this Guaranty or to Service Agent at the address provided for
herein. If Service Agent shall desire to resign as Lender for service of
process, Guarantor shall substitute a party having an office within the Borough
of Manhattan and reasonably acceptable to Lender to act as Service Agent (it
being agreed that any such resignation shall not be effective unless and until
the replacement Lender agrees in writing to act as Service Agent for service of
process). Guarantor hereby agrees that provided that service is made in
accordance with this paragraph or as otherwise permitted by law, Guarantor
irrevocably waives, to the fullest extent permitted by law, all claim of error
in connection with any such service and agrees that such service (i) shall
be deemed in every respect effective service of process upon it in any Action,
and (ii) shall, to the fullest extent permitted by law, be taken and held
to be valid personal service upon and personal delivery to Guarantor.

(f)            Nothing in this Agreement shall limit Lender’s right to
serve process in any manner permitted by law or limit Lender’s right or the
right of any of its successors or assigns to bring proceedings against
Guarantor in the courts of any jurisdiction(s).

(g)           To the extent that Guarantor has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment before judgment, attachment in aid of
execution, execution or otherwise) with respect to Guarantor or Guarantor’s
property, Guarantor hereby irrevocably waives such immunity in respect of its
obligations under this Agreement.

(h)           As a further inducement to Lender’s making of the Loan to
Borrower, and in consideration thereof, Lender and Guarantor each covenant and
agree that in any action or proceeding brought on, under or by virtue of this
Agreement, Lender and Guarantor each shall and do hereby unconditionally and
irrevocably waive trial by jury.

(i)            Guarantor hereby further covenants and agrees to and with
Lender that Guarantor may be joined in any action against Borrower in
connection with the Loan Agreement, the Note, the Mortgage, or any of the other
Loan Documents, solely with respect to the subject matter of this Agreement.

(j)            Guarantor covenants and agrees to indemnify and save
Lender harmless of and from, and defend it against, all losses, costs,
liabilities, expenses, damages or claims suffered by reason of Guarantor’s
failure to perform its obligations hereunder.

 

21.           All of Lender’s
rights and remedies under the Loan Agreement, the Note, the Mortgage or any of
the other Loan Documents or under this Agreement are intended to be distinct,
separate and cumulative and no such right or remedy therein or herein mentioned
is intended to be in exclusion of or a waiver of any other right or remedy
available to Lender.

22.           Guarantor hereby
consents that from time to time, before or after any default by Borrower, with
or without further notice to or assent from Guarantor, any security at any time
held by or available to Lender for any obligation of Borrower, or any security
at any time held by or available to Lender for any obligation of any other
person or party secondarily or otherwise liable for all or any portion of the
Loan, may be exchanged, surrendered or released and any obligation of Borrower,
or of any such other person or party, may be changed, altered, renewed,
extended, continued, surrendered, compromised, waived or released in whole or
in part, or any default with respect thereto waived, and Lender may fail to set
off and may release, in whole or in part, any balance of any deposit account or
credit on its books in favor of Borrower, or of any such other person or party,
and may extend further credit in any manner whatsoever to Borrower, and
generally deal with Borrower or any such security or other person or party as
Lender may see fit; and Guarantor shall remain bound under this Agreement
notwithstanding any such exchange, surrender, release, change, alteration,
renewal, extension, continuance, compromise, waiver, action, inaction,
extension of further credit or other dealing. This Agreement is independent of,
and in addition to, all collateral granted, pledged or assigned under the Loan
Documents.

23.           The terms of this
Agreement have been negotiated, and this Agreement has been executed and
delivered in the State of New York, and it is the intention of the parties
hereto that this Agreement be construed and enforced in accordance with the
laws of such State.

24.           This Agreement may
not be changed orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.

25.           This Agreement may
be executed in counterparts, which together shall constitute the same
instrument.

26.           To the extent
applicable, all representations, warranties, covenants (both affirmative and
negative) and all other obligations under this Guaranty shall be the joint and
several obligation of each person or entity comprising Guarantor and any
default under this Guaranty by any such person or entity shall be deemed a
default by all such entities and Guarantor. To the extent applicable, the
representations, covenants and warranties contained in this Guaranty shall be
read to apply to each of the individual persons and entities comprising
Guarantor when the context so requires, but a breach of any such
representation, covenant or warranty shall be deemed a breach by all such
persons and entities and Guarantor, entitling Lender to exercise all of its
rights and remedies hereunder and under applicable law.

No further text on this
page.

 

IN WITNESS WHEREOF, Guarantor has executed and
delivered this Agreement as of the date and year first above written.

	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  AFFORDABLE
  RESIDENTIAL COMMUNITIES LP,

  
	
   

  	
  a Delaware
  limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Affordable Residential Communities, Inc.,

  
	
   

  	
   

  	
  its sole general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Scott L. Gesell

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Scott L. Gesell

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

(Signature
page to Non-Recourse Guaranty)Exhibit 10.1

SEVERANCE AGREEMENT

This Agreement dated as of July 10,
2006 is by and between Chase Corporation, a Massachusetts corporation (the “Company”),
and Peter Chase, (the “Executive”),

WHEREAS, the Executive is
the President and Chief Executive Officer of the Company; and

WHEREAS, the Company has
determined that it is desirable, to induce the Executive to remain in the
employ of the Company and also to place him in a position to act in the best
interests of the Company and its stockholders in the event of a proposal for
transfer of control of the Company, to provide certain severance benefits to
the Executive if his employment with the Company terminates under the
circumstances described below.

NOW, THEREFORE, the Company
and the Executive hereby agree as follows:

1.             Definitions. For purposes of this Agreement only,
the following definitions shall apply:

(a)           “Cause” for termination of the Executive’s employment by
the Company shall mean and be limited to:

(i)            deliberate
dishonesty by the Executive in connection with his employment;

(ii)           willful and
prolonged absence from work (other than as a result of illness or incapacity)
in circumstances that constitute a substantial abdication of the Executive’s
responsibilities to the Company after written notice thereof has been given by
the Board of Directors of the Company to the Executive;

(iii)          material violation
of any code of conduct or standard of ethics of the Company applicable to the
Executive; or

(iv)          the Executive’s conviction of, or pleading of
guilty or nolo contendere to, a felony.

For purposes of this definition, no act or failure to act on the
Executive’s part shall be deemed “willful” unless done or omitted to be done by
the Executive not in good faith and without reasonable belief that his action
or omission was in the best interests of the Company.

 

(b)           “Change in Control” means the occurrence of any of the
following events:

(i) any “person” (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company becomes the “beneficial
owner” (as defined  in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 45% or more of the combined voting power of the Company’s then
outstanding securities;

(ii) during any
period of twenty-four (24) consecutive months (not including any period prior
to the date of this Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a director designated by
a person who has entered into an agreement with the Company to effect a
transaction described in subparagraphs (i), (ii) or (iii)) whose election
by the Board or nomination for election by the Board or by the stockholders of
the Company was approved by a vote of at least a majority of the directors then
still in office who either were 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 thereof; or

(iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 50% of
the combined voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (ii) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no “person” (as hereinabove defined) acquires
45% or more of the combined voting power of the Company’s then outstanding
securities; or

(iv) the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially
all of the Company’s assets.

(c)           “Disability” means such physical or mental incapacity as to make the
Executive unable to perform the essential functions of his employment duties
for a period of at least six months with or without reasonable accommodation. If
any question shall arise as to whether during any period the Executive is so
disabled as to be unable to perform the essential functions of his employment
duties with or without reasonable accommodation, the Executive may, and at the
request of the Company shall, submit to the Company a certification in
reasonable detail by a physician selected by the Company to whom the Executive
or the Executive’s guardian has no reasonable objection as to whether the
Executive is so disabled or how long such disability is expected to continue,
and such certification shall for the purposes of this Agreement be conclusive
of the issue. The Executive shall cooperate with any reasonable request of the
physician in connection with such certification. If such question shall arise
and the Executive

 2
 

 

shall
fail to submit such certification, the Company’s determination of such issue
shall be binding on the Executive.

(d)           “Good Reason” means  shall mean, in connection with a Change in Control, of any that the
Executive has determined in good faith:

(i)            his existing annual
base salary, bonus and/or other short-term incentives have been reduced,
eliminated or restricted by the Company;

(ii)           the Company
has failed to continue in effect any health, welfare, retirement, vacation and
other fringe benefit plans of the Company in which the Executive participated
at the time of the Change in Control (or plans providing substantially
equivalent benefits) other than as a result of the normal expiration of any
such plan in accordance with its terms as in effect at the time of the Change
in Control, or the Company shall have taken or failed to take any action which
would adversely affect the Executive’s continued participation in or the
benefits receivable by the Executive under any such plan as in effect at the
time of the Change in Control;

(iii)          the Company
has failed to assign to him on a consistent basis executive duties performable
at the location at which he worked before the Change in Control which are
commensurate with the level of executive duties performed by him immediately
prior to such Change in Control;

(iv)          the Executive is prevented by the
Company from continuing to fulfill his responsibilities at a level commensurate
with that prior to the Change in Control; or

(iv)          the Company shall
have failed to obtain, at the Executive’s request, an assent to the Company’s
performance of its obligations under this Agreement from any person that
succeeds or has the practical ability to control (either immediately or with
the passage of time), directly or indirectly, the Company’s business.

2.             Termination of Employment  Without Cause.  If the Executive’s employment with the Company
is terminated at any time without Cause (and other than by reason of death,
Disability or retirement) the Executive shall receive the benefits set forth in
Section 4 hereof.

3.             Change
in Control. Notwithstanding Section 2 of this Agreement, this Section 3
shall apply if, within twenty-four (24) months immediately following a Change
in Control, the Executive’s employment is terminated by the Company without
Cause (and other than by reason of death, Disability or retirement) or the
Executive terminates his employment with the Company for Good Reason, the
Executive shall be entitled to the benefits set forth in Section 4 hereof.

4. (a)       Payment of his base salary, in accordance
with the Company’s regular payroll practices, for a two-year period commencing
on his termination date, such salary to be paid at a rate equal, on an
annualized basis, to the greater of his annual base salary in effect
immediately prior to the Change in Control or his annual base salary in effect
immediately prior to the termination of employment, provided, however, (i) no such payments shall be made until
the earlier of (A) six months and one day following the termination date
or (B) the earliest date as of which such payments may begin without penalty pursuant to Section 409A(a)(2) of
the U.S.

 3
 

 

Internal Revenue
Code of 1986 (the “Code”) and
(ii) all such payments that are deferred pursuant to clause (i) shall
be paid in the aggregate on the first day that such payments may be made
pursuant to clause (i). For purposes
of this subsection, the term “base salary” shall include shall
include bonuses which shall be computed by averaging the last two annual
bonuses (annualizing bonuses with respect to a partial year), if  any;

(b)           continued
participation in  benefits in effect for
Executive as of the date of termination, subject to the terms and conditions of
the respective plans and applicable law, for a period of  one year following the termination date;
provided that, to the extent that the Company’s plans, programs and
arrangements do not permit such continuation of the Executive’s participation
following his termination, the Company shall provide the Executive with an
amount which is sufficient for him to purchase equivalent benefits, such amount
to be paid quarterly in advance; provided, further, however, that if the
Executive becomes employed by another employer and is eligible to receive
medical or other welfare benefits under another employer-provided plan, the
Executive’s entitlement to participate in the Company’s medical or other
welfare benefit plans or to receive such alternate payments shall, to the
extent such medical or welfare benefits are offered by the other employer,
cease as of the date the Executive is eligible to participate in such plans,
and the Executive shall notify the Company of his eligibility under such other
plans.

(d)           reasonable costs of
an out-placement service used by the Executive for a period not to exceed  one year following termination of employment.

5.             Death, Disability
or Retirement. If the Executive’s employment is terminated by reason of
death, Disability or retirement, the Executive shall not be entitled to receive
any benefits under this Agreement pursuant to Sections 2 or 3 but may be
entitled to certain death, disability or retirement benefits offered by the
Company pursuant to its employee benefit plans and other agreements between the
Executive and the Company.

6.             Automobile. Upon
termination of the Executive’s employment for any reason, he shall have the
right to purchase any automobile supplied to him by the Company, immediately
prior to the Change in Control, or any automobile substituted therefore with
his approval, at its depreciated cost as shown on the books of the Company.

7.             Taxes.

(a)           All payments to be made to the Executive under this Agreement will be
subject to any required withholding of federal, state and local income and
employment taxes.

(b)           Notwithstanding anything in this Agreement to the
contrary, if any of the payments provided for in this Agreement, together with
any other payments which the Executive has the right to receive from the
Company, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended), the payments pursuant to this
Agreement shall be reduced (reducing first the payments under subparagraph 3(a) to
the largest amount as will result in no portion of such payments being subject
to the excise tax imposed by Section 4999 of the Code.

 4
 

 

8.             No
Duty to Mitigate. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and,
except as contemplated by Section 4(b) hereof, any benefits payable
to the Executive hereunder shall not be subject to reduction for any
compensation received from other employment.

9.             Successors and Assigns.

(a)           This Agreement is personal to the Executive and is not
assignable by the Executive, other than by will or the laws of descent and
distribution, without the prior written consent of the Company.

(b)           This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

(c)           The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, “Company” shall mean the Company as defined above and any successor
to its business and/or assets that assumes and agrees to perform this
Agreement.

10.           No Right to Continued Employment.
Nothing contained in this Agreement shall be considered a contract of
employment or construed as giving the Executive any right to be retained in the
employ of the Company. Nothing in this Agreement shall otherwise restrict in
any way the rights of the Company to terminate the Executive at any time and
for any reason, with or without cause.

11.           Miscellaneous.

(a)           Applicable
Law. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without giving effect to the
conflict of laws principles thereof.

(b)           Amendment;
Waiver. This Agreement may not be modified or amended in any manner except
by a written agreement executed by the parties hereto or their respective
successors and legal representatives. The waiver by either party of compliance
with any provision of this Agreement by the other party shall not operate or be
construed as waiver of any other provision of this Agreement, or of any
subsequent breach by such party or a provision of this Agreement.

(c)           Entire Understanding. This
Agreement constitutes the entire understanding and agreement between the
parties hereto with regard to the compensation and benefits payable to the
Executive in the circumstances described herein, superseding all prior
understandings and agreements, whether oral or written, including the Change in
Control Severance Agreement dated November 2, 1998 between the Company and
the Executive, which has been terminated and is no longer in effect.

 5
 

 

(d)           Fees and Expenses. The Company
agrees to pay as incurred and within 30 days after submission of supporting
documentation, to the full extent permitted by law, all legal fees and related
expenses the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement) following a Change in Control.

(e)           Notices.
All notices and other communications hereunder shall be in writing and shall be
delivered by hand delivery, by a reputable overnight courier service, or by
registered or certified mail, return receipt requested, postage prepaid, in
each case addressed as follows:

If to the Company:

Chase Corporation

26 Summer Street

Bridgewater, MA 02324

Attention: General Counsel

If to the Executive:

Peter R. Chase

305 Grange Park

Bridgewater, MA 02324

or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Any notice or communication shall be
deemed to be delivered upon the date of hand delivery, one day following
delivery to an overnight courier service, or three days following mailing by
registered or certified mail.

(f)            Headings. The
headings of paragraphs herein are included solely for convenience of reference
and shall not control the meaning of interpretations of any of the provisions
of this Agreement.

(g)           Severability. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

(h)           Counterparts. This Agreement
may be executed in one or more counterparts, all of which shall be considered
one and the same agreement and each of which shall be deemed an original.

 6
 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the date first written above.

 

	
  CHASE CORPORATION

  	
   

  	
  PETER R. CHASE

  
	
   

  	
   

  	
   

  
	
  By: /s/ George
  Hughes

  	
   

  	
  /s/ Peter R. Chase

  
	
  Secretary

  	
   

  	
   

  

 

 7

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