Document:

<PAGE>
                                                                    EXHIBIT 10.3

                            COMFORT SYSTEMS USA, INC.
                     1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN

                                    Amendment

     Pursuant to Section 9 of the Comfort Systems USA, Inc. 1997 Non-Employee
Directors' Stock Plan (the "Plan") and pursuant to a vote of the Board of
Directors of Comfort Systems USA, Inc. (the "Company") and, in the case of the
amendments described at paragraphs 1 and 2 below, subsequent stockholder
approval, the Plan has been amended as follows, effective as set forth in
paragraph 4 below:

     1.   The first sentence of Section 3 of the Plan is amended to read as
          follows:

             "Subject to adjustment as provided in Section 8, the total number
             of Shares reserved and available for issuance under the Plan is
             500,000."

     2.   The second and third sentences of Section 6 of the Plan are amended to
          read as follows:

             "In addition, an Option to purchase 10,000 Shares, subject to
             adjustment as provided in Section 8, will be automatically granted,
             at the close of business of each annual meeting of stockholders of
             the Company, to each member of the Board of Directors who is
             eligible under Section 5 at the close of business of such annual
             meeting. Notwithstanding the foregoing, any person who was
             automatically granted an Option to purchase 10,000 Shares at the
             effective date of the initial election to the Board of Directors
             shall not be automatically granted an Option to purchase 10,000
             Shares at the first annual meeting of stockholders following such
             initial election if such annual meeting takes place within three
             months of the effective date of such persons' initial election to
             the Board of Directors."

     3.   Section 7(f) of the Plan is deleted in its entirety.

     4.   The amendment made by paragraph 3 above shall take effect as of March
          22, 2002. The amendments made by paragraphs 1 and 2 above shall take
          effect as of May 23, 2002 and shall be deemed to have been in effect
          at the close of the annual meeting of stockholders held on that date.
<PAGE>
IN WITNESS WHEREOF, Comfort Systems USA, Inc. has caused this instrument to be
executed by its duly authorized officer this 23rd day of May, 2002.

                                    COMFORT SYSTEMS USA, INC.

                                    By: /s/ William F. Murdy
                                        ------------------------
                                        William F. Murdy
                                        Chairman of the Board, and
                                        Chief Executive Officer

                                      -2-<PAGE>
                                                                    EXHIBIT 10.2

================================================================================

                                CREDIT AGREEMENT

                         PREFERRED HOME MORTGAGE COMPANY

                                   as Borrower

                                  GUARANTY BANK

                                    as Lender

                                  July 5, 2001

================================================================================
<PAGE>

                                TABLE OF CONTENTS

<Table>
<Caption>

                                                                                                                Page
                                                                                                                ----

<S>                                                                                                             <C>
ARTICLE I         GENERAL TERMS...................................................................................1
                  Section 1.1       Certain Definitions...........................................................1
                  Section 1.2       Exhibits and Schedules.......................................................17
                  Section 1.3       Calculations and Determinations..............................................17

ARTICLE II        AMOUNT AND TERMS OF LOANS......................................................................17
                  Section 2.1       Commitment and Loans.........................................................17
                  Section 2.2       Promissory Note; Interest on the Note........................................17
                  Section 2.3       Notice and Manner of Obtaining Loans.........................................18
                  Section 2.4       Fees.........................................................................18
                  Section 2.5       Mandatory Repayments.........................................................18
                  Section 2.6       Continuations and Conversions of Existing Loans..............................18
                  Section 2.7       Payments to Lender...........................................................19
                  Section 2.8       Increased Cost and Reduced Return............................................20
                  Section 2.9       Limitation on Types of Loans.................................................22
                  Section 2.10      Illegality...................................................................22
                  Section 2.11      Treatment of Affected Loans..................................................22
                  Section 2.12      Compensation.................................................................23
                  Section 2.13      Taxes........................................................................23

ARTICLE III       CONDITIONS PRECEDENT...........................................................................24
                  Section 3.1       Initial Loan.................................................................24
                  Section 3.2       All Loans....................................................................25

ARTICLE IV        BORROWER REPRESENTATIONS AND WARRANTIES........................................................26
                  Section 4.1       Organization and Good Standing...............................................26
                  Section 4.2       Authorization and Power......................................................26
                  Section 4.3       No Conflicts or Consents.....................................................27
                  Section 4.4       Enforceable Obligations......................................................27
                  Section 4.5       Priority of Liens............................................................27
                  Section 4.6       No Liens.....................................................................27
                  Section 4.7       Financial Condition of Borrower..............................................27
                  Section 4.8       Full Disclosure..............................................................27
                  Section 4.9       No Default...................................................................28
                  Section 4.10      No Litigation................................................................28
                  Section 4.11      Taxes........................................................................28
                  Section 4.12      Principal Office, etc........................................................28
                  Section 4.13      Compliance with ERISA........................................................28
                  Section 4.14      Subsidiaries.................................................................28
                  Section 4.15      Indebtedness.................................................................28
                  Section 4.16      Permits, Patents, Trademarks, etc............................................28
</Table>

                                       i
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<Table>
<S>                                                                                                              <C>
                  Section 4.17      Status Under Certain Federal Statutes........................................29
                  Section 4.18      Securities Act...............................................................29
                  Section 4.19      No Approvals Required........................................................29
                  Section 4.20      Survival of Representations..................................................29
                  Section 4.21      Individual Mortgage Loans....................................................29
                  Section 4.22      Environmental Matters........................................................31

ARTICLE V         AFFIRMATIVE COVENANTS..........................................................................31
                  Section 5.1       Financial Statements and Reports.............................................31
                  Section 5.2       Taxes and Other Liens........................................................33
                  Section 5.3       Maintenance..................................................................33
                  Section 5.4       Further Assurances...........................................................33
                  Section 5.5       Reimbursement of Expenses....................................................33
                  Section 5.6       Insurance....................................................................34
                  Section 5.7       Accounts and Records; Servicing Records......................................34
                  Section 5.8       Right of Inspection..........................................................34
                  Section 5.9       Notice of Certain Events.....................................................35
                  Section 5.10      Performance of Certain Obligations and Information Regarding Investors.......35
                  Section 5.11      Use of Proceeds; Margin Stock................................................35
                  Section 5.12      Notice of Default............................................................35
                  Section 5.13      Compliance with Loan Documents...............................................36
                  Section 5.14      Operations and Properties....................................................36
                  Section 5.15      Environmental Matters........................................................36

ARTICLE VI        NEGATIVE COVENANTS.............................................................................36
                  Section 6.1       No Merger; Limitation on Issuance of Securities..............................36
                  Section 6.2       Limitation on Indebtedness...................................................37
                  Section 6.3       Fiscal Year, Method of Accounting............................................37
                  Section 6.4       Business.....................................................................37
                  Section 6.5       Liquidations, Consolidations and Dispositions of Substantial Assets..........37
                  Section 6.6       Loans, Advances, and Investments.............................................37
                  Section 6.7       Use of Proceeds..............................................................38
                  Section 6.8       Actions with Respect to Mortgage Collateral..................................38
                  Section 6.9       Transactions with Affiliates.................................................38
                  Section 6.10      Liens........................................................................39
                  Section 6.11      ERISA........................................................................39
                  Section 6.12      Change of Principal Office...................................................39
                  Section 6.13      Tangible Net Worth...........................................................39
                  Section 6.14      Total Debt to Tangible Net Worth Ratio.......................................39
                  Section 6.15      Profitability................................................................39

ARTICLE VII       EVENTS OF DEFAULT..............................................................................40
                  Section 7.1       Nature of Event..............................................................40
</Table>

                                       ii
<PAGE>

<Table>
<S>                                                                                                              <C>
                  Section 7.2       Default Remedies.............................................................42

ARTICLE VIII      INDEMNIFICATION................................................................................42
                  Section 8.1       Indemnification..............................................................42
                  Section 8.2       Limitation of Liability......................................................43

ARTICLE IX        [RESERVED].....................................................................................43

ARTICLE X         MISCELLANEOUS..................................................................................43
                  Section 10.1      Notices......................................................................43
                  Section 10.2      Amendments, Etc..............................................................44
                  Section 10.3      CHOICE OF LAW; VENUE.........................................................44
                  Section 10.4      Invalidity...................................................................44
                  Section 10.5      Survival of Agreements.......................................................45
                  Section 10.6      Renewal, Extension or Rearrangement..........................................45
                  Section 10.7      Waivers......................................................................45
                  Section 10.8      Cumulative Rights............................................................45
                  Section 10.9      Limitation on Interest.......................................................45
                  Section 10.10     Bank Accounts; Offset........................................................46
                  Section 10.11     Assignments, Participations..................................................46
                  Section 10.12     Exhibits.....................................................................47
                  Section 10.13     Titles of Articles, Sections and Subsections.................................47
                  Section 10.14     Counterparts.................................................................47
                  Section 10.15     ENTIRE AGREEMENT.............................................................47
                  Section 10.16     Termination; Limited Survival................................................47
                  Section 10.18     WAIVER OF JURY TRIAL.........................................................48
                  Section 10.19     CONSEQUENTIAL DAMAGES........................................................48
</Table>

EXHIBITS

         Exhibit A      --  Form of Note
         Exhibit B      --  Form of Borrowing Request
         Exhibit C      --  Investors
         Exhibit D      --  Subsidiaries
         Exhibit E      --  Certificate Accompanying Financial Statement
         Exhibit F      --  Form of Security Agreement
         Exhibit G      --  Form of Opinion of Borrower's Counsel
         Exhibit H      --  Borrowing Base Certificate
         Exhibit I      --  Continuation/Conversion Notice

                                      iii
<PAGE>

                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT is made and entered into as of July 5, 2001,
between PREFERRED HOME MORTGAGE COMPANY, a Florida corporation ("BORROWER"), and
GUARANTY BANK ("LENDER").

         The parties hereto hereby agree as follows:

                                    ARTICLE I

                                  GENERAL TERMS

         Section 1.1 Certain Definitions. As USED in this Agreement, the
following terms have the following meanings:

         "ADJUSTED EURODOLLAR RATE" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum equal to the sum of (a) the
Applicable Eurodollar Margin plus (b) the Eurodollar Rate, provided that the
Adjusted Eurodollar Rate shall never exceed the Maximum Rate. The Adjusted
Eurodollar Rate for any Eurodollar Loan shall change whenever the Reserve
Requirement changes.

         "AFFILIATE" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person.

         "AGREEMENT" means this Credit Agreement, as the same may from time to
time be amended, supplemented or restated.

         "AGREEMENT TO PLEDGE" means each agreement by Borrower set forth in a
Borrowing Request for Wet Mortgage Loans, to deliver Required Mortgage Documents
to Agent.

         "APPLICABLE BASE RATE MARGIN" means, on each day one and three-eighths
percent (1.375%) per annum.

         "APPLICABLE EURODOLLAR MARGIN" means, on each day one and one-fourth
percent (1.25%) per annum.

         "APPLICABLE LENDING OFFICE" means the address of Lender set forth
herein.

         "ALT A LOAN" means a Mortgage Loan which does not conform to FNMA,
FHLMC, FHA or VA guidelines in regards to credit quality, but does conform to
underwriting guidelines of Borrower for Alt A Loans, which guidelines have been
approved by Lender.

                                       1
<PAGE>

         "ALT A/SUBPRIME SUBLIMIT" means fifteen percent (15%) of the
Commitment.

         "BASE RATE" means, for any day, the rate per annum equal to the sum of
the Federal Funds Rate for such day plus the Applicable Base Rate Margin,
provided that the Base Rate shall never exceed the Maximum Rate.

         "BASE RATE LOAN" means a Loan which does not bear interest at the
Adjusted Eurodollar Rate.

         "BORROWER" shall have the meaning assigned to such term in the preamble
hereof.

         "BORROWING" means a borrowing of new Loans of a single Type pursuant to
Section 2.3 or a Continuation or Conversion of existing Loans into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 2.6.

         "BORROWING BASE" means at any date all Eligible Mortgage Loans which
have been delivered to and held by Lender or otherwise identified as Mortgage
Collateral.

         "BORROWING BASE CERTIFICATE" means a certificate describing the
Eligible Mortgage Loans to be included in the Borrowing Base in a form
acceptable to Lender.

         "BORROWING REQUEST" means a request, in the form of Exhibit B, for a
Loan pursuant to Article II.

         "BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas. Any
Business Day in any way relating to the Eurodollar Rate must also be a day on
which, in the judgment of Lender, significant transactions in dollars are
carried out in the interbank Eurocurrency market.

         "CASH EQUIVALENTS" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof which mature within ninety (90) days from the date of
acquisition, and (ii) time deposits and certificates of deposit, which mature
within ninety (90) days from the date of acquisition, of Lender or any other
domestic commercial bank having capital and surplus in excess of $200,000,000,
which has, or the holding company of which has, a commercial paper rating of at
least A-1 or the equivalent thereof by Standard & Poors Corporation or P-1 or
the equivalent thereof by Moody's Investors Service, Inc.

         "CHANGE OF CONTROL" means (a) Parent ceases to own one hundred percent
(100%) of the voting power of the voting stock of Borrower, or (b) Paul Leikert
ceases to serve as President of Borrower and is not replaced by a Person
reasonably acceptable to Lender within 180 days after such cessation.

         "CODE" means the Internal Revenue Code of 1986, as amended.

                                       2
<PAGE>

         "COLLATERAL" has the meaning given to it in the Security Agreement.

         "COLLATERAL VALUE OF THE BORROWING BASE" means on any day the sum of
the Unit Collateral Values of all Eligible Mortgage Loans included in the
Borrowing Base on such day as reasonably determined by Lender based on
information then available to Lender; provided that the Collateral Value of the
Borrowing Base shall never exceed the Commitment.

         "COMMITMENT" means at any date, the obligation of the Lender to make
Loans to Borrower pursuant to Section 2.1 hereof in an aggregate outstanding
amount not to exceed at any time $20,000,000.

         "CONSOLIDATED" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.

         "CONTINUATION" shall refer to the continuation pursuant to Section 2.6
hereof of a Eurodollar Loan as a Eurodollar Loan from one Interest Period to the
next Interest Period.

         "CONTINUATION/CONVERSION NOTICE" means a written or telephonic request,
or a written confirmation, made by Borrower which meets the requirements of
Section 2.6.

         "CONVERSION" shall refer to a conversion pursuant to Section 2.6 or
Article II of one Type of Loan into another Type of Loan.

         "DEBTOR LAWS" means all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization or
similar Laws from time to time in effect affecting the rights of creditors
generally and general principles of equity.

         "DEFAULT" means any of the events specified in Section 7.1 hereof,
whether or not any requirement for notice or lapse or time or any other
condition has been satisfied.

         "DEFAULT RATE" means, at the time in question, with respect to any
Eurodollar Loan, four percent (4%) per annum plus the Adjusted Eurodollar Rate
then in effect, and (ii) with respect to any Base Rate Loan and any other
Obligation, four percent (4%) per annum plus the Base Rate then in effect;
provided that in no event shall the Default Rate ever exceed the Maximum Rate.

         "DIVIDENDS," in respect of any corporation, means: (a) cash
distributions or any other distributions on, or in respect of, any class of
equity security of such corporation, except for distributions made solely in
shares of securities of the same class; and (b) any and all funds, cash or other
payments made in respect of the redemption, repurchase or acquisition of such
securities.

                                       3
<PAGE>

         "DRAWDOWN TERMINATION DATE" means the earlier of the date which is 364
days after the date hereof, or the day on which the Note first becomes due and
payable in full.

         "ELIGIBLE MORTGAGE LOAN" means a Mortgage Loan with respect to which
each of the following statements is accurate and complete (and the Borrower by
including such Mortgage Loan in any computation of the Collateral Value of the
Borrowing Base shall be deemed to so represent to Lender at and as of the date
of such computation):

                  (a) Such Mortgage Loan is a binding and valid obligation of
         the Obligor thereon, in full force and effect and enforceable in
         accordance with its terms, except as enforceability may be limited by
         Debtor Laws;

                  (b) The Mortgage Note evidencing such Mortgage Loan is genuine
         in all respects as appearing on its face and as represented in the
         books and records of Borrower, and all information set forth therein is
         true and correct;

                  (c) Such Mortgage Loan is free of any default (other than as
         permitted by subparagraph below) of any party thereto (including
         Borrower), counterclaims, offsets and defenses, including the defense
         of usury, and from any rescission, cancellation or avoidance, and all
         right thereof, whether by operation of law or otherwise;

                  (d) No payment under such Mortgage Loan is more than thirty
         (30) days past due the payment due date set forth in the underlying
         Mortgage Note and Mortgage;

                  (e) The Mortgage Note evidencing such Mortgage Loan contains
         the entire agreement of the parties thereto with respect to the subject
         matter thereof, has not been modified or amended in any respect not
         expressed in writing therein and is free of concessions or
         understandings with the Obligor thereon of any kind not expressed in
         writing therein;

                  (f) Such Mortgage Loan is in all respects in accordance with
         all Requirements of Law applicable thereto, including, without
         limitation, the federal Consumer Credit Protection Act and the
         regulations promulgated thereunder and all applicable usury Laws and
         restrictions, and all notices, disclosures and other statements or
         information required by Law or regulation to be given, and any other
         act required by Law or regulation to be performed, in connection with
         such Mortgage Loan have been given and performed as required;

                  (g) All advance payments and other deposits on such Mortgage
         Loan have been paid in cash, and no part of said sums has been loaned,
         directly or indirectly, by Borrower to the Obligor, and, other than as
         disclosed to Lender in writing, there have been no prepayments;

                  (h) At all times such Mortgage Loan will be free and clear of
         all Liens, except in favor of Lender;

                                       4
<PAGE>

                  (i) The Property covered by such Mortgage Loan is insured
         against loss or damage by fire and all other hazards normally included
         within standard extended coverage in accordance with the provisions of
         such Mortgage Loan with Borrower named as a loss payee thereon;

                  (j) Such Mortgage Loan is secured by a first Mortgage, or in
         the case of any Second Lien Loan, a second Mortgage, on Property
         consisting of a completed one-to-eight unit single family residence
         which is not used for commercial purposes and which is not a
         construction loan; provided that if such Mortgage Loan is a Second Lien
         Loan, the Unit Collateral Value of such Mortgage Loan when added to the
         Unit Collateral Value of other Second Lien Loans does not exceed the
         Second Lien Loan Sublimit;

                  (k) The date of origination of such Mortgage Loan is not more
         than thirty (30) days prior to the date such Mortgage Loan was first
         included in the Borrowing Base;

                  (l) Such Mortgage Loan has not been included in the Borrowing
         Base for more than ninety (90) days;

                  (m) If such Mortgage Loan is included in the Borrowing Base
         and has been withdrawn from the possession of the Lender on terms and
         subject to conditions set forth in the Security Agreement:

                           (i) If such Mortgage Loan was withdrawn by Borrower
                  for purposes of correcting clerical or other non-substantive
                  documentation problems, the promissory note and other
                  documents relating to such Mortgage Loan are returned to the
                  Lender within ten (10) Business Days from the date of
                  withdrawal; and the Unit Collateral Value of such Mortgage
                  Loan when added to the Unit Collateral Value of other Mortgage
                  Loans which have been similarly released to Borrower and have
                  not been returned does not exceed ten percent (10%) of the
                  Commitment;

                           (ii) If such Mortgage Loan was shipped by the Lender
                  directly to a permanent investor for purchase or to a
                  custodian for the formation of a pool, (x) such investor or
                  custodian is in full compliance with the terms of the bailee
                  letter under which such Mortgage Loan was shipped, and (y) the
                  full purchase price for such Mortgage Loan has been received
                  by the Lender (or such Mortgage Loan has been returned to the
                  Lender) within thirty (30) calendar days from the date of
                  shipment by the Lender;

                  (n) Such Mortgage Loan is subject to a Take-Out Commitment
         which is in full force and effect;

                  (o) Such Mortgage Loan conforms to FNMA, FHLMC, FHA or VA
         guidelines in regards to credit quality, or

                                       5
<PAGE>

                           (i) If such Mortgage Loan is a Jumbo Loan, the Unit
                  Collateral Value of such Mortgage Loan when added to the Unit
                  Collateral Value of all other Jumbo Loans does not exceed the
                  Jumbo Sublimit; and

                           (ii) If such Eligible Mortgage Loans is an Alt A Loan
                  or a Subprime Loan, the Unit Collateral Value of such Mortgage
                  Loan when added to the Unit Collateral Value of all other Alt
                  A Loans and Subprime Loans does not exceed the Alt A/Subprime
                  Sublimit; and

                  (p) The Required Mortgage Documents have been delivered to
         Lender prior to the inclusion of such Mortgage Loan in any computation
         of the Borrowing Base or, if such items have not been delivered to
         Lender on or prior to the date such Mortgage Loan is first included in
         any computation of the Borrowing Base, (a) Borrower has pledged and
         agreed to deliver all Required Mortgage Documents pursuant to a
         Borrowing Request delivered to Lender prior to such inclusion, and (b)
         the Collateral Value of such Mortgage Loan when added to the Collateral
         Value of all other Mortgage Loans for which Lender has not received the
         Required Mortgage Documents does not exceed the Wet Warehousing
         Sublimit, provided that, all Required Documents with respect to such
         Mortgage Loan shall be delivered to Agent within seven (7) Business
         Days after the date of the Agreement to Pledge with respect thereto;

         "ENVIRONMENTAL LAWS" means any and all Laws relating to (a) the
protection of the environment, (b) emissions, discharges or releases of
pollutants, contaminants, chemicals or hazardous or toxic substances or wastes
into the environment including ambient air, surface water, ground water or land,
or (c) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with the regulations from time to time
promulgated with respect thereto.

         "ERISA AFFILIATE" means all members of the group of corporations and
trades or businesses (whether or not incorporated) which, together with
Borrower, are treated as a single employer under Section 414 of the Code.

         "ERISA PLAN" means any pension benefit plan subject to Title IV of
ERISA or Section 412 of the Code maintained or contributed to by Borrower or any
ERISA Affiliate with respect to which Borrower has a fixed or contingent
liability.

         "EURODOLLAR LOAN" means a Loan that bears interest at the Adjusted
Eurodollar Rate.

         "EURODOLLAR RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on the Bloomberg
Eurorate (or, if not available,

                                       6
<PAGE>

any other nationally recognized trading screen reporting on-line trading with
Eurorates) at 10:00 a.m. (Dallas, Texas time) as the Eurorates for deposits in
dollars on that day for the period equal to or next greater than the Interest
Period. In the event such rate ceases to be published, Eurodollar Rate shall
mean a comparable rate of interest reasonably selected by Lender.

         "EVENT OF DEFAULT" means any of the events specified in Section 7.1
hereof, provided that any requirement in connection with such event for the
giving of notice or the lapse of time, or the happening of any further
condition, event or act has been satisfied.

         "FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (a) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to Lender on such day on such transactions as determined by Lender.

         "FHA" means the Federal Housing Administration or any successor
thereto.

         "FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor thereto.

         "FINANCING LEASE" means (i) any lease of Property if the then present
value of the minimum rental commitment thereunder should, in accordance with
GAAP, be capitalized on a balance sheet of the lessee, and (ii) any other lease
obligations which are capitalized on a balance sheet of the lessee.

         "FISCAL QUARTER" means each period of three calendar months ending
March 31, June 30, September 30 and December 31 of each year.

         "FISCAL YEAR" means each period of twelve calendar months ending
December 31 of each year.

         "FNMA" means the Federal National Mortgage Association, or any
successor thereto.

         "FUNDING ACCOUNT" means the non-interest bearing demand checking
account established by Borrower with Lender to be used for (a) the initial
deposit of proceeds of Loans; and (b) the funding or purchase of a Mortgage Note
by Borrower; provided that the Funding Account shall be pledged to Lender and
that Borrower shall not be entitled to withdraw funds from the Funding Account.

                                       7
<PAGE>

         "GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of Borrower
and its consolidated subsidiaries, are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the financing statements described in Section 4.7. If
any change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for such principle
or practice to continue as a generally accepted accounting principle or
practice, all reports and financial statements required hereunder with respect
to Borrower or Parent may be prepared in accordance with such change, but all
calculations and determinations to be made hereunder may be made in accordance
with such change only after notice of such change is given to Lender and Lender
agrees to such change insofar as it affects the accounting of Borrower.

         "GOVERNMENTAL AUTHORITY" means any nation or government, any agency,
department, state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

         "GOVERNMENTAL REQUIREMENT" means any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, permit,
certificate, license, authorization or other direction or requirement
(including, without limitation, any of the foregoing which relate to
environmental standards or controls, energy regulations and occupational, safety
and health standards or controls) of any arbitrator, court or other Governmental
Authority, which exercises jurisdiction over any Related Person or any of its
Property.

         "GUARANTOR" means Parent and any other person who incurs a Guaranty
Obligation with respect to the Obligations.

         "GUARANTY OBLIGATION" of any Person means any contract, agreement or
understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness, lease, dividends or other obligations (the
"PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, contingently or absolutely, in whole or
in part, including without limitation agreements:

                  (a) to purchase such Primary Obligation or any property
         constituting direct or indirect security therefor;

                  (b) to advance or supply funds (A) for the purchase or payment
         of any such Primary Obligation, or (B) to maintain working capital or
         other balance sheet conditions of the Primary Obligor or otherwise to
         maintain the net worth or solvency of the Primary Obligor;

                  (c) to purchase property, securities or services primarily for
         the purpose of assuring the owner of any such Primary Obligation of the
         ability of the Primary Obligor to make payment of such Primary
         Obligation; or

                                       8
<PAGE>

                  (d) otherwise to assure or hold harmless the owner of any such
         Primary Obligation against loss in respect thereof;

provided, that "GUARANTY OBLIGATION" shall not include endorsements that are
made in the ordinary course of business of negotiable instruments or documents
for deposit or collection. The amount of any Guaranty Obligation shall be deemed
to be the maximum amount for which the guarantor may be liable pursuant to the
agreement that governs such Guaranty Obligation, unless such maximum amount is
not stated or determinable, in which case the amount of such obligation shall be
the maximum reasonably anticipated liability thereon, as determined by such
guarantor in good faith.

         "INDEBTEDNESS" of any Person at a particular date means the sum
(without duplication) at such date of (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services or
which is evidenced by a note, bond, debenture, or similar instrument, (b) all
obligations of such Person under any Financing Lease, (c) all obligations of
such Person in respect of letters of credit, acceptances, or similar obligations
issued or created for the account of such Person, (d) all Guaranty Obligations
of such Person, (e) all liabilities secured by any Lien on any property owned by
such Person, whether or not such Person has assumed or otherwise become liable
for the payment thereof, and (f) any liability of such Person in respect of
unfunded vested benefits under an ERISA Plan and (g) all liabilities of such
Person in respect of indemnities or repurchase obligations made in connection
with the sale of Mortgage Loans.

         "INTERCREDITOR AGREEMENT" means that certain Release and Intercreditor
Agreement between Borrower, Lender and First Union National Bank.

         "INTEREST PERIOD" means, with respect to each particular Eurodollar
Loan, a period of 1, 2, or 3 months, as specified in the Borrowing Request
applicable thereto, beginning on and including the date specified in such
Borrowing Request (which must be a Business Day), and ending on but not
including the same day of the month as the day on which it began (e.g., a period
beginning on the third day of one month shall end on but not include the third
day of another month), provided that each Interest Period which would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day (unless such next succeeding Business Day is the first Business Day
of a calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day). No Interest Period may be elected which
would extend past the date on which the associated Note is due and payable in
full.

         "INVESTOR" means any Person listed on Exhibit C, as such exhibit may be
updated or supplemented from time to time; provided, however, that Lender shall
deliver a list of all Persons approved as Investors by Lender upon each
amendment of such exhibit by Lender, and a Investor shall be removed from such
list upon the written direction of Lender exercised in its reasonable
discretion.

         JUMBO LOAN" means a Mortgage Loan which has been underwritten in
accordance with the guidelines of an Investor and which would be an Eligible
Mortgage Loan except that the original unpaid principal amount of the underlying
Mortgage Note is greater than $275,000 but does not exceed $650,000.

                                       9
<PAGE>

         "JUMBO SUBLIMIT" means twenty percent (20%) of the Commitment.

         "LAW" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof. Any reference to a Law includes any amendment or
modification to such Law, and all regulations, rulings, and other Laws
promulgated under such Law.

         "LENDER" means Guaranty Bank and its successors and assigns.

         "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (whether statutory or otherwise), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any Financing Lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).

         "LOAN" has the meaning given it in Section 2.1(a).

         "LOAN BALANCE" means for any day, the principal balance of the Loans
outstanding on such day.

         "LOAN DOCUMENT" means any, and "LOAN DOCUMENTS" shall mean all, of this
Agreement, the Note, the Security Instruments, the MERS Agreement, the
Intercreditor Agreement and any and all other agreements or instruments now or
hereafter executed and delivered by Borrower or any other Person in connection
with, or as security for the payment or performance of any or all of the
Obligations, as any of such may be renewed, amended or supplemented from time to
time.

         "MARKET VALUE" on any day shall be determined by Lender, in its
reasonable discretion, based upon (a) information then available to Lender
regarding quotes to dealers for the purchase of mortgage notes similar to the
Mortgage Note that have been delivered to Lender pursuant to this Agreement or
(b) sales prices actually received by Borrower for mortgage notes sold by
Borrower during the immediately preceding thirty (30) day period similar to the
Mortgage Note that have been delivered to Lender pursuant to this Agreement.

         "MATERIAL ADVERSE EFFECT" means any material adverse effect on (a) the
validity or enforceability of this Agreement, the Note or any other Loan
Document, (b) the business, operations, total Property or financial condition of
any Related Person, (c) the collateral under any Security Instrument, or (d) the
ability of any Related Person to fulfill its obligations under this Agreement,
the Note, or any other Loan Document to which it is a party.

                                       10
<PAGE>

         "MAXIMUM RATE" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable Law
to contract for, take, charge, or receive with respect to its Loans.

         "MERS" means Mortgage Electronic Registration, Inc., a Delaware
corporation, or any successor thereto.

         "MERS AGREEMENT" means those agreements by and among Borrower, Lender,
MERS and MERSCORP, Inc., as amended, modified, supplemented, extended, restated
or replaced from time to time.

         "MERS(R) SYSTEM" means the system of recording transfers of mortgages
electronically maintained by MERS.

         "MIN" means, with respect to each Mortgage Loan, the Mortgage
Identification Number for such Mortgage Loan registered with MERS on the MERS(R)
System.

         "MOM LOAN" means, with respect to any Mortgage Loan, MERS acting as the
mortgagee of such Mortgage Loan, solely as nominee for the originator or
Borrower, as the case may be, of such Mortgage Loan and its successors and
assignees.

         "MORTGAGE" means a mortgage or deed of trust, on standard forms in form
and substance satisfactory to Lender, securing a Mortgage Note and granting a
perfected, first or second priority lien on residential real property consisting
of land and a single-family dwelling thereon which is completed and ready for
occupancy.

         "MORTGAGE ASSIGNMENT" means an instrument duly executed and in
recordable form assigning a Mortgage, in blank and like all intervening
instruments that have been executed with respect to such Mortgage and which is
in form acceptable to Lender and satisfies all Requirements of Law.

         "MORTGAGE COLLATERAL" means all Mortgage Notes (a) which are made
payable to the order of Borrower or have been endorsed (without restriction or
limitation) payable to the order of Borrower, (b) in which Lender has been
granted and continues to hold a perfected first priority security interest, (c)
which are in form and substance acceptable to Lender in its reasonable
discretion, (d) which are secured by Mortgages, and (e) conform in all respects
with all the requirements for purchase of such Mortgage Note under the Take-Out
Commitments and are valid and enforceable in accordance with their respective
terms.

         "MORTGAGE LOAN" means a one-to-eight-family mortgage loan which is
evidenced by a Mortgage Note and secured by a Mortgage, together with the rights
and obligations of a holder thereof and payments thereon and proceeds therefrom.

         "MORTGAGE NOTE" means the note or other evidence of indebtedness
evidencing the indebtedness of an Obligor under a Mortgage Loan.

                                       11
<PAGE>

         "NET WORTH" of any Person means, as of any date, the remainder of all
Consolidated assets of such Person minus such Person's Consolidated liabilities,
each as determined by GAAP.

         "NOTE" means any promissory note delivered by Borrower to Lender
pursuant to Section 2.2 in the form attached hereto as Exhibit A and all
renewals, modifications and extensions thereof.

         "OBLIGATIONS" means all present and future Indebtedness, obligations,
and liabilities of Borrower to Lender, and all renewals and extensions thereof,
or any part thereof, arising pursuant to this Agreement or any other Loan
Document, and all interest accrued thereon, and reasonable attorneys' fees and
other costs incurred in the drafting, negotiation, enforcement or collection
thereof, regardless of whether such Indebtedness, obligations, and liabilities
are direct, indirect, fixed, contingent, joint, several or joint and several.

         "OBLIGOR" means the Person or Persons obligated to pay the Indebtedness
which is the subject of a Mortgage Loan.

         "OPERATING ACCOUNT" means the non-interest bearing demand checking
accounts (whether one or more) established by Borrower with Lender to be used
for Borrower's operations.

         "PARENT" means Engle Homes, Inc., a Florida corporation and owner of
all of the outstanding capital stock of Borrower.

         "PARENT DEBT AGREEMENTS" means (i) that certain Credit Agreement dated
as of November 22, 2000, among Parent, Bank of America, N.A., as agent and
lender and certain financial institutions named therein, as from time to time
supplemented, amended and restated, (ii) those certain Indentures between
Parent, the guarantors party thereto, and American Stock Transfer & Trust
Company, as trustee, pursuant to which Parent issued promissory notes in the
aggregate amount of $250,000,000, as from time to time supplemented, amended and
restated, and (iii) all agreements under which such debt described in clauses
(i) and (ii) above may hereafter be refinanced.

         "PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to any of its functions.

         "PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, trust,
unincorporated organization, Governmental Authority, or any other form of
entity.

         "PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

         "PURCHASE FACILITY" means the Mortgage Loan Purchase and Sale Agreement
of even date herewith between Borrower and Lender.

                                       12
<PAGE>

         "REGULATION D" means Regulation D issued by the Board of Governors of
the Federal Reserve System as in effect from time to time.

         "REGULATION U" means Regulation U issued by the Board of Governors of
the Federal Reserve System as in effect from time to time.

         "REGULATION X" means Regulation X issued by the Board of Governors of
the Federal Reserve System as in effect from time to time.

         "RELATED PERSONS" means Borrower and each of Borrower's Subsidiaries.

         "REPORTABLE EVENT" means (1) a reportable event described in Sections
4043(c)(5) or (6) of ERISA or the regulations promulgated thereunder, or (2) any
other reportable event described in Section 4043(c) of ERISA or the regulations
promulgated thereunder other than a reportable event not subject to the
provision for 30-day notice to the PBGC pursuant to a waiver by the PBGC under
Section 4043(a) of ERISA.

         "REQUIRED MORTGAGE DOCUMENTS" means as to any Mortgage Loan, the items
described on Schedule A to the Security Agreement.

         "REQUIREMENT OF LAW" as to any Person means the charter and by-laws or
other organizational or governing documents of such Person, and any law,
statute, code, ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other determination,
direction or requirement (including, without limitation, any of the foregoing
which relate to environmental standards or controls, energy regulations and
occupational, safety and health standards or controls) of any arbitrator, court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its Property or to which such Person or any of its Property is
subject.

         "RESERVE REQUIREMENT" means at any time, the maximum rate at which
reserves (including any marginal, special, supplemental, or emergency reserves)
are required to be maintained under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing, the
Reserve Requirement shall reflect any other reserves required to be maintained
by such member banks with respect to Section 1.2 any category of liabilities
which includes deposits by reference to which the Adjusted Eurodollar Rate is to
be determined, or Section 1.3 any category of extensions of credit or other
assets which include Eurodollar Loans.

         "RISK RATING" means the risk rating of a Mortgage Loan determined by
the applicable standards of an Investor to which such Mortgage Loan is to be
sold by Borrowers under a Take-Out Commitment, provided that such applicable
standards comply with industry standards in the reasonable judgment of Lender.

                                       13
<PAGE>

         "SECOND LIEN LOAN" means an otherwise Eligible Mortgage Loan, except
that such Mortgage Loan is secured by a second priority lien on Property
consisting of a completed one-to-eight unit single family residence, including a
condominium, planned unit development, townhouse or co-op.

         "SECOND LIEN LOAN SUBLIMIT" means twenty percent (20%) of the
Commitment.

         "SECURITY AGREEMENT" means the Security and Collateral Agency Agreement
between Borrower and Lender in the form attached hereto as Exhibit F, as the
same may from time to time be further supplemented, amended or restated.

         "SECURITY INSTRUMENT" means (a) the Security Agreement and (b) such
other executed documents as are or may be necessary to grant to Lender a
perfected first prior and continuing security interest in and to all Mortgage
Collateral, and any and all other agreements or instruments now or hereafter
executed and delivered by Borrower in connection with, or as security for the
payment or performance of, all or any of the Obligations, including Borrower's
obligations under the Note and this Agreement, as such agreements may be
amended, modified or supplemented from time to time.

         "SERVICING AGREEMENTS" means all agreements between the Related Persons
and Persons other than a Related Person pursuant to which Borrower undertakes to
service Mortgage Loans.

         "SERVICING RECORDS" means all contracts and other documents, books,
records and other information (including without limitation, computer programs,
tapes, discs, punch cards, data processing software and related property and
rights) maintained with respect to the Servicing Rights.

         "SERVICING RIGHTS" means all of right, title and interest of any
Related Person in and under the Servicing Agreements, including, without
limitation, the rights of Borrower to income and reimbursement thereunder.

         "SETTLEMENT ACCOUNT" means (i) the non-interest bearing demand deposit
account established by Borrower with Lender to be used for the deposit of
proceeds from the sale of Mortgage Collateral; and (ii) the payment of the
Obligations; provided that (a) the Settlement Account shall be pledged to Lender
for the benefit of Lender, (b) Borrower shall not be entitled to withdraw funds
from the Settlement Account, (c) as long as no Event of Default has occurred and
is continuing, to the extent that the deposit of proceeds from the sale of
Mortgage Loans exceeds the Unit Collateral Value of such Mortgage Loans and any
payments then due and owing under this Agreement or the Note, Lender shall
transfer such excess amount to the Operating Account, and (d) if at any time the
aggregate amount of funds in the Settlement Account is insufficient to pay any
and all payments due and owing under this Agreement or the Note (such amount
being referred to as the "Deficiency"), Lender shall transfer an amount equal to
the Deficiency from the Operating Account to the Settlement Account.

                                       14
<PAGE>

         "SUBMISSION LIST" means a list in the form of Schedule I to the form of
Borrowing Request.

         "SUBPRIME LOAN" means a Mortgage Loan which has a Risk Rating of less
than A.

         "SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent (50%) or more by such
Person.

         "TAKE-OUT COMMITMENT" means with respect to any Eligible Mortgage Loan,
a written master commitment of an Investor to purchase a pool of Mortgage Loans
under which such Eligible Mortgage Loans will be delivered to such Investor on
terms satisfactory to Lender, in its reasonable discretion.

         "TANGIBLE NET WORTH OF ANY PERSON" means, as of any date, the Net Worth
of such Person minus (a) all Consolidated assets of such Person which would be
classified as intangible assets under GAAP, including but not limited to
goodwill (whether representing the excess cost over book value of assets
acquired or otherwise), patents, trademarks, trade names, copyrights,
franchises, deferred charges, and capitalized servicing rights and (b) all
Indebtedness of such Person owing to its Affiliates.

         "TERMINATION EVENT" means (a) the occurrence with respect to any ERISA
Plan of a Reportable Event, (2) the withdrawal of the Borrower or any ERISA
Affiliate from an ERISA Plan during a plan year in which it was a "substantial
employer," as defined in Section 4001(a)(2) of ERISA, (c) the distribution to
affected parties of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, (d) the institution of proceedings to terminate any ERISA Plan by the
PBGC under Section 4042 of ERISA, or (5) any other event or condition which
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any ERISA Plan.

         "TOTAL DEBT" of any Person means, as of any date, all amounts which
would be included as liabilities on a balance sheet of such Person as of such
date prepared in accordance with GAAP.

         "TYPE" means with respect to any Loans, the characterization of such
Loans as either Base Rate Loans or Eurodollar Loans.

         "UCC" means the Texas Uniform Commercial Code, as the same may
hereafter be amended.

         "UNIT COLLATERAL VALUE" means on any day with respect to each Eligible
Mortgage Loan included in the Borrowing Base, ninety-eight percent (98%) of the
least of the following:

                                       15
<PAGE>

                  (i) the outstanding principal balance of the Mortgage Note
         constituting such Mortgage Loan;

                  (ii) the actual out-of-pocket cost to Borrower of such
         Mortgage Loan minus the amount of principal paid under such Mortgage
         Loan and delivered to Lender for application to the prepayment of the
         Loans;

                  (iii) the amount at which an Investor has committed to
         purchase the Mortgage Loan pursuant to a Take-Out Commitment not to
         exceed 100% of the original principal balance of the Mortgage Note; or

                  (iv) the Market Value of the Mortgage Note constituting such
         Mortgage Loan.

         "VA" means the Veterans Administration and any successor thereto.

         "WET LOANS" means Eligible Mortgage Loans which are included in the
Borrowing Base, but for which the Required Mortgage Documents have not been
delivered to Lender.

         "WET WAREHOUSING SUBLIMIT" means twenty-five percent (25%) of the
Commitment.

Other Definitional Provisions.

         (a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the above-defined meanings when used in the Note or any
other Loan Document, certificate, report or other document made or delivered
pursuant hereto.

         (b) Each term defined in the singular form in Section 1.1 shall mean
the plural thereof when the plural form of such term is used in this Agreement,
the Note or any other Loan Document, certificate, report or other document made
or delivered pursuant hereto, and each term defined in the plural form in
Section 1.1 shall mean the singular thereof when the singular form of such term
is used herein or therein.

         (c) The words "hereof," "herein," "hereunder" and similar terms when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and section, subsection, schedule and
exhibit references herein are references to sections, subsections, schedules and
exhibits to this Agreement unless otherwise specified. The word "or" is not
exclusive, and the word "including" (in its various forms) means "including
without limitation."

         (d) Unless the context otherwise requires or unless otherwise provided
herein the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments and restatements of such agreement,
instrument or document, provided that nothing contained in this section shall be
construed to authorize any such renewal, extension, modification, amendment or
restatement.

                                       16
<PAGE>

         (e) As used herein, in the Note or in any other Loan Document,
certificate, report or other document made or delivered pursuant hereto,
accounting terms relating to any Person and not specifically defined in this
Agreement or therein shall have the respective meanings given to them under
GAAP.

         Section 1.2 Exhibits and Schedules. All Exhibits and Schedules attached
to this Agreement are a part hereof for all purposes.

         Section 1.3 Calculations and Determinations. All calculations under the
Loan Documents of interest and of fees shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of three
hundred sixty (360) days. Each determination by Lender of amounts to be paid
under Sections 2.6 through 2.13 or any other matters which are to be determined
hereunder by Lender (such as any Eurodollar Rate, Adjusted Eurodollar Rate,
Business Day, Interest Period or Reserve Requirement) shall, in the absence of
manifest error, be conclusive and binding. Unless otherwise expressly provided
herein or unless Lender otherwise consents all financial statements and reports
furnished to Lender hereunder shall be prepared and all financial computations
and determinations pursuant hereto shall be made in accordance with GAAP. The
Lender shall deliver to Borrower an interest billing statement for each month on
or before the fifteenth day of the next succeeding month, which interest billing
statement shall set forth the interest accrued on the Loans for such month;
provided that any failure or delay in delivering such interest billing or any
inaccuracy therein shall not affect the Obligations.

                                   ARTICLE II

                            AMOUNT AND TERMS OF LOANS

         Section 2.1 Commitment and Loans. Subject to the terms and conditions
contained in this Agreement, Lender agrees to make loans ("LOANS") to Borrower
on a revolving credit basis from time to time on any Business Day from the date
of this Agreement through the Drawdown Termination Date. The aggregate amount of
all Loans requested in any Borrowing Notice (i) which are Base Rate Loans must
be greater than or equal to $25,000 or the unadvanced portion of the Borrowing
Base, and (ii) which are Eurodollar Loans must be greater than or equal to
$1,000,000 or the unadvanced portion of the Borrowing Base. Borrower may have no
more than four (4) Eurodollar Loans outstanding at any time. After giving effect
to the transactions contemplated by the Borrowing Request pursuant to which a
Loan is requested, and at all other times, the aggregate amount of all Loans
outstanding shall not exceed the Collateral Value of the Borrowing Base.

         Section 2.2 Promissory Note; Interest on the Note. The obligation of
Borrower to repay the Loans made by Lender, together with interest accruing in
connection therewith, shall be evidenced by a Note payable to the order of
Lender. Interest on the Note shall be due and payable as provided herein and
therein. The entire Loan Balance and all accrued and unpaid interest thereon
shall be finally due and payable on the Drawdown Termination Date.

                                       17
<PAGE>

         Section 2.3 Notice and Manner of Obtaining Loans. Borrower must give
written notice, or telephonic notice promptly confirmed in writing, of each
request for Loans. Each such written request or confirmation must be made in
writing in the form and substance of the "Borrowing Request" attached hereto as
Exhibit B, duly completed. Each such Borrowing Request must:

         (a) specify (i) the aggregate amount of any such Borrowing of new Base
Rate Loans and the date on which such Base Rate Loans are to be advanced, or
(ii) the aggregate amount of any such Borrowing of new Eurodollar Loans, the
date on which such Eurodollar Loans are to be advanced (which shall be the first
day of the Interest Period which is to apply thereto), and the length of the
applicable Interest Period; and

         (b) be received by Lender not later than 11:00 a.m., Dallas, Texas,
time, on (i) the day on which any such Base Rate Loans are to be made, or (ii)
the third Business Day preceding the day on which any such Eurodollar Loans are
to be made.

Each such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by Borrower as to the matters which are required to
be set out in such written confirmation. If all conditions precedent to such
Loan have been met Lender will on the date requested promptly remit to Borrower
the amount of such Loan in immediately available dollars, by crediting the
Funding Account with immediately available funds as the amount of such Loan.

         Section 2.4 Fees.

         (a) In consideration of Borrower's commitment to make the Loans,
Borrower will pay to Lender a non-refundable commitment fee determined on a
daily basis by applying a rate of ten basis points (0.10%) per annum to the
Commitment on each day during the term of the Loans. This commitment fee shall
be due and payable in advance for each Fiscal Quarter on the fifteenth day of
such Fiscal Quarter.

         (b) Borrower shall pay to Lender, a collateral handling fee in the
amount of $10 for each Mortgage Loan file.

         Section 2.5 Mandatory Repayments. If at any time the Loan Balance
exceeds the Collateral Value of the Borrowing Base, Borrower shall repay the
amount of such excess within two (2) Business Day after written notice thereof
is given by Lender to Borrower.

         Section 2.6 Continuations and Conversions of Existing Loans. Borrower
may make the following elections with respect to Loans already outstanding: to
convert Base Rate Loans to Eurodollar Loans, to convert Eurodollar Loans to Base
Rate Loans on the last day of the Interest Period applicable thereto, and to
continue Eurodollar Loans beyond the expiration of such Interest Period by
designating a new Interest Period to take effect at the time of such expiration.
In making such elections, Borrower may combine existing Loans made pursuant to
separate Borrowings into one new Borrowing or divide existing Loans made
pursuant to one Borrowing into separate new Borrowings, provided that Borrower
may have no more than four Borrowings

                                       18
<PAGE>

of Eurodollar Loans outstanding at any time. To make any such election, Borrower
must give to Lender written notice (or telephonic notice promptly confirmed in
writing) of any such Conversion or Continuation of existing Loans, with a
separate notice given for each new Borrowing. Each such notice constitutes a
"Continuation/Conversion Notice" hereunder and must:

                  (a) specify the existing Loans which are to be Continued or
         Converted;

                  (b) specify (i) the aggregate amount of any Borrowing of Base
         Rate Loans into which such existing Loans are to be continued or
         converted and the date on which such Continuation or Conversion is to
         occur, or (ii) the aggregate amount of any Borrowing of Eurodollar
         Loans into which such existing Loans are to be continued or converted,
         the date on which such Continuation or Conversion is to occur (which
         shall be the first day of the Interest Period which is to apply to such
         Eurodollar Loans), and the length of the applicable Interest Period;
         and

                  (c) be received by Lender not later than 11:00 a.m., Dallas,
         Texas time, on (a) the day on which any such Continuation or Conversion
         to Base Rate Loans is to occur, or (b) the third Business Day preceding
         the day on which any such Continuation or Conversion to Eurodollar
         Loans is to occur.

Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit I, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Each
Continuation/Conversion Notice shall be irrevocable and binding on Borrower.
During the continuance of any Default, Borrower may not make any election to
convert existing Loans into Eurodollar Loans or continue existing Loans as
Eurodollar Loans. If (due to the existence of a Default or for any other reason)
Borrower fails to timely and properly give any Continuation/Conversion Notice
with respect to a Borrowing of existing Eurodollar Loans at least three days
prior to the end of the Interest Period applicable thereto, such Eurodollar
Loans shall automatically be converted into Base Rate Loans at the end of such
Interest Period. No new funds shall be repaid by Borrower or advanced by Lender
in connection with any Continuation or Conversion of existing Loans pursuant to
this section, and no such Continuation or Conversion shall be deemed to be a new
advance of funds for any purpose; such Continuations and Conversions merely
constitute a change in the interest rate applicable to already outstanding
Loans.

         Section 2.7 Payments to Lender. All payments of interest on the Note,
all payments of principal, including any principal payment made with proceeds of
Mortgage Collateral, and fees hereunder shall be made directly to Lender in
federal or other immediately available funds before 1:00 pm (Dallas, Texas time)
on the respective dates when due via wire transfer to the Settlement Account.
Borrower shall send notice to Lender before 1:00 p.m. (Dallas, Texas time) on
the day any payment of principal or interest is received by Lender which sets
forth the Loans against which such payment is to be applied. Any payment (or any
payment received without a notice

                                       19
<PAGE>

regarding application of such payment) received by Lender after such time will
be deemed to have been made on the next following Business Day. Should any such
payment become due and payable on a day other than a Business Day, the maturity
of such payment shall be extended to the next succeeding Business Day, and, in
the case of a payment of principal or past due interest, interest shall accrue
and be payable thereon for the period of such extension as provided in the Loan
Document under which such payment is due. Each payment under a Loan Document
shall be payable at the place provided therein and, if no specific place of
payment is provided, shall be payable at the place of payment of the Note. When
Lender collects or receives money on account of the Obligations, Lender shall
apply all such money so distributed, as follows:

                  (a) first, for the payment of all Obligations which are then
         due, and if such money is insufficient to pay all such Obligations, (i)
         first to any reimbursements due Lender under Section 5.5, (ii) second,
         to the payment of the Loans then due, and (iii) then to the partial
         payment of all other Obligations then due in proportion to the amounts
         thereof, or as Lender shall otherwise agree;

                  (b) then for the prepayment of amounts owing under the Loan
         Documents if so specified by Borrower;

                  (c) then for the prepayment of principal on the Note, together
         with accrued and unpaid interest on the principal so prepaid; and

                  (d) last, for the payment or prepayment of any other
         Obligations.

All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest.

         Section 2.8 Increased Cost and Reduced Return.

         (a) If, after the date hereof, there shall occur any change in any
applicable Law, rule, or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
compliance by Lender (or its Applicable Lending Office) with any request or
directive issued after the date hereof (whether or not having the force of Law)
of any such governmental authority, central bank, or comparable agency:

                  (i) shall subject Lender (or its Applicable Lending Office) to
         any tax, duty, or other charge with respect to any Eurodollar Loans,
         any Note, or its obligation to make Eurodollar Loans, or change the
         basis of taxation of any amounts payable to Lender (or its Applicable
         Lending Office) under this Agreement or any Note in respect of any
         Eurodollar Loans (other than taxes imposed on the overall net income of
         Lender by the jurisdiction in which Lender has its principal office or
         such Applicable Lending Office);

                                       20
<PAGE>

                  (ii) shall impose, modify, or deem applicable any reserve,
         special deposit, assessment, or similar requirement (other than the
         Reserve Requirement utilized in the determination of the Adjusted
         Eurodollar Rate) relating to any extensions of credit or other assets
         of, or any deposits with or other liabilities or commitments of, Lender
         (or its Applicable Lending Office), including the commitment of Lender
         hereunder; or

                  (iii) shall impose on Lender (or its Applicable Lending
         Office) or the London interbank market any other condition affecting
         this Agreement or any Notes or any of such extensions of credit or
         liabilities or commitments;

and the result of any of the foregoing is to increase the cost to Lender (or its
Applicable Lending Office) of making, converting into, continuing, or
maintaining any Eurodollar Loans or to reduce any sum received or receivable by
Lender (or its Applicable Lending Office) under this Agreement or its Notes with
respect to any Eurodollar Loans, then Borrower shall pay to Lender within
fifteen (15) days after demand by Lender, such amount or amounts as will
compensate Lender for such increased cost or reduction. If Lender requests
compensation by Borrower under this Section 2.8(a), Borrower may, by notice to
Lender, suspend the obligation of Lender to make or continue Loans of the Type
with respect to which such compensation is requested, or to convert Loans of any
other Type into Loans of such Type, until the event or condition giving rise to
such request ceases to be in effect (in which case the provisions of Section
2.11 shall be applicable); provided that such suspension shall not affect the
right of Lender to receive the compensation so requested.

         (b) If, after the date hereof, Lender shall have determined that the
adoption of any applicable Law, rule, or regulation regarding capital adequacy
or any change therein or in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of Law) of any such
governmental authority, central bank, or comparable agency, has or would have
the effect of reducing the rate of return on the capital of Lender or any
corporation controlling Lender, due to the obligations of Lender hereunder, to a
level below that which Lender or such corporation could have achieved but for
such adoption, change, request, or directive (taking into consideration its
policies with respect to capital adequacy), then, within fifteen (15) days after
demand by Lender, Borrower shall pay to Lender such additional amount or amounts
as will compensate Lender for such reduction, but only to the extent that Lender
has not been compensated therefor by any increase in the Adjusted Eurodollar
Rate.

         (c) Lender shall promptly notify Borrower of any event of which it has
knowledge, occurring after the date hereof, which will entitle Lender to
compensation pursuant to this Section and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of Lender, be otherwise
disadvantageous to it. In the event that Lender claims compensation under this
Section, Lender shall furnish to Borrower a statement setting forth the
additional amount or amounts to be paid to it hereunder which shall be
conclusive in the absence of manifest error. In

                                       21
<PAGE>

determining such amount, Lender shall act in good faith and may use any
reasonable averaging and attribution methods.

         Section 2.9 Limitation on Types of Loans. If on or prior to the first
day of any Interest Period for any Eurodollar Loan:

         (a) Lender determines (which determination shall be conclusive) that by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate, as the case may be, for
such Interest Period; or

         (b) Lender determines (which determination shall be conclusive) that
the Adjusted Eurodollar Rate will not adequately and fairly reflect the cost to
Lender of funding Eurodollar Loans for such Interest Period;

then Lender shall give Borrower prompt notice thereof specifying the relevant
amounts or periods, and so long as such condition remains in effect, Lender
shall be under no obligation to make additional Loans, continue Eurodollar Loans
or convert Base Rate Loans into Eurodollar Loans, and Borrower shall, on the
last day(s) of the then current Interest Period(s) for the outstanding
Eurodollar Loans, either prepay such Loans or convert such Loans into Base Rate
Loans in accordance with the terms of this Agreement.

         Section 2.10 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for Lender or its Applicable
Lending Office to make, maintain, or fund Eurodollar Loans hereunder, then
Lender shall promptly notify Borrower thereof and Lender's obligation to make or
continue Eurodollar Loans and to convert Base Rate Loans into Eurodollar Loans
shall be suspended until such time as Lender may again make, maintain, and fund
Eurodollar Loans (in which case the provisions of Section 1.4 shall be
applicable).

         Section 2.11 Treatment of Affected Loans. If the obligation of Lender
to make a particular Type of Loan or to continue, or to convert Loans of any
other Type into, Loans of a particular Type shall be suspended pursuant to
Sections 2.8, 2.9 and 2.10 hereof (Loans of such Type being herein called
"Affected Loans" and such Type being herein called the "Affected Type"),
Lender's Affected Loans shall be automatically converted into Base Rate Loans on
the last day(s) of the then current Interest Period(s) for Affected Loans (or,
in the case of a Conversion required by Section 2.6 hereof, on such earlier date
as Lender may specify to Borrower) and, unless and until Lender gives notice as
provided below that the circumstances specified in Sections 2.8, 2.9 and 2.10
hereof that gave rise to such Conversion no longer exist:

                  (a) to the extent that Lender's Affected Loans have been so
         converted, all payments and prepayments of principal that would
         otherwise be applied to Lender's Affected Loans shall be applied
         instead to its Base Rate Loans; and

                  (b) all Loans that would otherwise be made or continued by
         Lender as Loans of the Affected Type shall be made or continued instead
         as Base Rate Loans, and all

                                       22
<PAGE>

         Loans of Lender that would otherwise be converted into Loans of the
         Affected Type shall be converted instead into (or shall remain as) Base
         Rate Loans.

         Section 2.12 Compensation. Upon the request of Lender, Borrower shall
pay to Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of Lender) to compensate it for any loss, cost, or expense (including
loss of anticipated profits) incurred by it as a result of:

                  (a) any payment, prepayment, or Conversion of a Eurodollar
         Loan for any reason (including, without limitation, the acceleration of
         the Loans pursuant to Section 7.2) on a date other than the last day of
         the Interest Period for such Loan; or

                  (b) any failure by Borrower for any reason (including, without
         limitation, the failure of any condition precedent specified in Article
         IV hereof to be satisfied) to borrow, convert, continue, or prepay a
         Eurodollar Loan on the date for such borrowing, Conversion,
         Continuation, or prepayment specified in the relevant notice of
         borrowing, prepayment, Continuation, or Conversion under this
         Agreement.

         Section 2.13 Taxes.

         (a) Any and all payments by Borrower to or for the account of Lender
hereunder or under any other Loan Document shall be made free and clear of and
without deduction for any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, taxes imposed on Lender's income, and franchise taxes
imposed on it, by the jurisdiction under the Laws of which Lender (or its
Applicable Lending Office) is organized or any political subdivision thereof
(all such non-excluded taxes, duties, levies, imposts, deductions, charges,
withholdings, and liabilities being hereinafter referred to as "Taxes"). If
Borrower shall be required by Law to deduct any Taxes from or in respect of any
sum payable under this Agreement or any other Loan Document to Lender, (a) the
sum payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this section) Lender receives an amount equal to the sum it would have received
had no such deductions been made, (b) Borrower shall make such deductions, and
(c) Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable Law.

         (b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").

         (c) Borrower agrees to indemnify Lender for the full amount of Taxes
and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed
or asserted by any jurisdiction on amounts payable under this section) paid by
Lender and any liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto.

                                       23
<PAGE>

         (d) If Borrower is required to pay additional amounts to or for the
account of Lender pursuant to this Section, then Lender will agree to use
reasonable efforts to change the jurisdiction of its Applicable Lending Office
so as to eliminate or reduce any such additional payment which may thereafter
accrue if such change, in the judgment of Lender, is not otherwise
disadvantageous to Lender and in the event Lender is reimbursed for an amount
paid by Borrower pursuant to this Section 3.7, it shall promptly return such
amount to Borrower.

         (e) Within thirty (30) days after the date of any payment of Taxes,
Borrower shall furnish to Lender the original or a certified copy of a receipt
evidencing such payment.

         (f) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
section shall survive the termination of this Agreement and the payment in full
of the Notes.

                                   ARTICLE III

                              CONDITIONS PRECEDENT

         The obligation of Lender to make Loans hereunder is subject to
fulfillment of the conditions precedent stated in this Article III.

         Section 3.1 Initial Loan. The obligation of Lender to fund any Loan
hereunder shall be subject to, in addition to the conditions precedent specified
in Section 3.2, the following terms and conditions:

         (a) Borrower shall have delivered to Lender the following (each of the
following documents being duly executed and delivered and in form and substance
satisfactory to Lender, and, with the exception of the Note, each in a
sufficient number of originals that Lender and its counsel may have an executed
original of each document):

                  (i) an executed counterpart of this Agreement and of all
         instruments, certificates and opinions referred to in this Article III
         not theretofore delivered (except the Borrowing Request which is to be
         delivered at the time provided in Subsection 3.2(a) hereof);

                  (ii) the Note;

                  (iii) the Security Agreement dated of even date herewith;

                  (iv) a certificate of the Secretary or Assistant Secretary of
         Borrower setting forth (i) resolutions of its board of directors
         authorizing the execution, delivery, and performance of the Loan
         Documents to which it is a party and identifying the officers
         authorized to sign such instruments, (ii) specimen signatures of the
         officers so authorized,

                                       24
<PAGE>

         and (iii) articles of incorporation of Borrower certified by the
         appropriate Secretary of State as of a recent date, and (iv) bylaws of
         Borrower, certified as being accurate and complete;

                  (v) a certificate of the existence and good standing for
         Borrower in its state of incorporation dated no earlier than fifteen
         days prior to the date hereof; and

                  (vi) an opinion of counsel for Borrower in the form of Exhibit
         G;

                  (vii) a Borrowing Request and a Borrowing Base Certificate
         dated as of the date of the first Loan, certified by the chief
         financial officer or treasurer of Borrower;

                  (viii) the unlimited Guarantee of Parent;

                  (ix) documents similar to those described as items (iv) and
         (v) above with respect to Guarantor;

                  (x) a duly executed original of the MERS Agreement;

                  (xi) the Intercreditor Agreement;

                  (xii) such other documents as Lender may reasonably request at
         any time at or prior to the date of the initial Loan hereunder.

         (b) No Person, other than Lender and First Union National Bank, shall
be listed in the field designated "interim funder" on the MERS(R) System.

         (c) No Person, other than Lender and First Union National Bank, holds
any mortgage, pledge, lien, security interest or other charge or encumbrance in,
against or to any of the Mortgage Loans.

         (d) Borrower shall have paid all fees and reimbursements to be paid to
Lender pursuant to any Loan Document, or otherwise due Lender and including
reasonable fees and disbursements of Lender's attorneys.

         Section 3.2 All Loans. The obligation of Lender to fund any Loan
pursuant to this Agreement is subject to the following further conditions
precedent:

         (a) Borrowing Request accompanied by a Borrowing Base Certificate dated
as of the date of such Loan, certified by the chief financial officer of
Borrower, and the Required Mortgage Documents for all Eligible Mortgage Loans
other than Wet Loans;

         (b) all other Property in which Borrower has granted a Lien to Lender
shall have been physically delivered to the possession of Lender;

                                       25
<PAGE>

         (c) the representations and warranties of each Related Person contained
in this Agreement or any Security Instrument (other than those representations
and warranties which are by their terms limited to the date of the agreement in
which they are initially made) shall be true and correct in all material
respects on and as of the date of such Loan;

         (d) no Default or Event of Default shall have occurred and be
continuing and no change or event which constitutes a Material Adverse Effect
shall have occurred as of the date of such Loan;

         (e) the Funding Account, the Settlement Account and the Operating
Account shall be established and in existence;

         (f) the making of such Loan shall not be prohibited by any Governmental
Requirement; and

         (g) the delivery to Lender of such other documents and opinions of
counsel, including such documents as may be necessary or desirable to perfect or
maintain the priority of any Lien granted or intended to be granted hereunder or
otherwise and including favorable written opinions of counsel with respect
thereto, as Lender may reasonably request.

Delivery to Lender of a Borrowing Request shall be deemed to constitute a
representation and warranty by Borrower on the date thereof and on the date on
which the Loan is made, if any, set forth therein as to the facts specified in
Subsections (c) and (d) of this Section.

                                   ARTICLE IV

                     BORROWER REPRESENTATIONS AND WARRANTIES

         Borrower represents and warrants as follows:

         Section 4.1 Organization and Good Standing. Each Related Person (a) is
a corporation duly incorporated and existing in good standing under the Laws of
the jurisdiction of its incorporation, (b) is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which its failure to be
so qualified could have a Material Adverse Effect, (c) has the corporate power
and authority to own its properties and assets and to transact the business in
which it is engaged and is or will be qualified in those states wherein it
proposes to transact business in the future and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, have a Material Adverse Effect.

         Section 4.2 Authorization and Power. Each Related Person has the
corporate power and requisite authority to execute, deliver and perform the Loan
Documents to which it is a party; each Related Person is duly authorized to and
has taken all corporate action necessary to authorize it to, execute, deliver
and perform the Loan Documents to which it is a party and is and will continue
to be duly authorized to perform such Loan Documents.

                                       26
<PAGE>

         Section 4.3 No Conflicts or Consents. Neither the execution and
delivery by any Related Person of the Loan Documents to which it is a party, nor
the consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms and provisions hereof or with the terms and provisions
thereof, will (a) materially contravene or conflict with any Requirement of Law
to which any Related Person is subject, or any indenture, mortgage, deed of
trust, or other agreement or instrument to which any Related Person is a party
or by which any Related Person may be bound, or to which the Property of any
Related Person may be subject, or (b) result in the creation or imposition of
any Lien, other than the Lien of the Security Agreement, on the Property of any
Related Person. All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, from any
Governmental Authority that are necessary in connection with the transactions
contemplated by the Loan Documents have been obtained.

         Section 4.4 Enforceable Obligations. This Agreement, the Note, and the
other Loan Documents to which any Related Person is a party are the legal, valid
and binding obligations of such Related Person, enforceable in accordance with
their respective terms, except as limited by Debtor Laws.

         Section 4.5 Priority of Liens. Upon delivery to Lender of each
Borrowing Request, Lender shall have valid, enforceable, perfected, first
priority Liens and security interests in each Mortgage Note identified therein.

         Section 4.6 No Liens. Borrower has good and indefeasible title to the
Mortgage Collateral free and clear of all Liens and other adverse claims of any
nature, except for ad valorem taxes and assessments not yet due and payable and
Liens in the Mortgage Collateral in favor of Lender.

         Section 4.7 Financial Condition of Borrower. Borrower has delivered to
Lender copies of its annual audited balance sheet as of October 31, 2000, and
the related statements of income, stockholders' equity and cash flows for the
period ended such date; such financial statements fairly present the financial
condition of Borrower as of such date and the results of operations of Borrower
for the period ended on such date and have been prepared in accordance with
GAAP, subject to normal year-end adjustments; as of the date thereof, there were
no obligations, liabilities or Indebtedness (including material contingent and
indirect liabilities and obligations or unusual forward or long-term
commitments) of Borrower which are not reflected in such financial statements
and no change which constitutes a Material Adverse Effect has occurred in the
financial condition or business of Borrower since October 31, 2000. Borrower has
also delivered to Lender its unaudited quarterly balance sheet for the period
ending May 31, 2001 and management reports for May 31, 2001; such reports fairly
and accurately present Borrower's commitment position, pipeline position,
servicing and production as of the end of such months and for the fiscal year to
date for the periods ending on such dates.

         Section 4.8 Full Disclosure. There is no material fact that Borrower
has not disclosed to Lender which could adversely affect the properties,
business, prospects or condition (financial

                                       27
<PAGE>

or otherwise) of the Related Persons, or could adversely affect the Mortgage
Collateral or the Servicing Rights. To the knowledge of Borrower, none of (i)
the financial statements referred to in Section 4.7 hereof, (ii) any Borrowing
Request or officer's certificate, or (iii) any statement delivered by any
Related Person to Lender in connection with this Agreement, contains any untrue
statement of material fact.

         Section 4.9 No Default. No Related Person is in default under any loan
agreement, mortgage, security agreement or other material agreement or
obligation to which it is a party or by which any of its Property is bound.

         Section 4.10 No Litigation. There are no material actions, suits or
legal, equitable, arbitration or administrative proceedings pending, or to the
knowledge of Borrower threatened, against any Related Person the adverse
determination of which could constitute a Material Adverse Effect.

         Section 4.11 Taxes. All tax returns required to be filed by each
Related Person in any jurisdiction have been filed and all taxes, assessments,
fees and other governmental charges upon each Related Person or upon any of its
properties, income or franchises have been paid prior to the time that such
taxes could give rise to a Lien thereon, unless protested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been established on the books of such Related Person. No Related
Person has any knowledge of any proposed tax assessment against any Related
Person.

         Section 4.12 Principal Office, etc. The principal office, chief
executive office and principal place of business of each Related Person is at
the address set forth in Section 10.1.

         Section 4.13 Compliance with ERISA. No Related Person currently
maintains, contributes to, is required to contribute to or has any liability,
whether absolute or contingent, with respect to an ERISA Plan. With respect to
all other employee benefit plans maintained or contributed to by each Related
Person, each Related Person is in material compliance with ERISA.

         Section 4.14 Subsidiaries. No Related Person presently has any
Subsidiary or owns any stock in any other corporation or association except
those listed in Exhibit D. As of the date hereof, each Related Person owns,
directly or indirectly, the equity interest in each of its Subsidiaries which is
indicated in such exhibit.

         Section 4.15 Indebtedness. No Related Person has any indebtedness
outstanding other than the Indebtedness permitted by Section 6.2.

         Section 4.16 Permits, Patents, Trademarks, etc.

         (a) Each Related Person has all permits and licenses necessary for the
operation of its business.

                                       28
<PAGE>

         (b) Each Related Person owns or possesses (or is licensed or otherwise
has the necessary right to use) all patents, trademarks, service marks, trade
names and copyrights, technology, know-how and processes, and all rights with
respect to the foregoing, which are necessary for the operation of its business,
without any known material conflict with the rights of others. The consummation
of the transactions contemplated hereby will not alter or impair in any material
respect any of such rights of each Related Person.

         Section 4.17 Status Under Certain Federal Statutes. No Related Person
is (a) a "holding company" or a "subsidiary company" of a "holding company" or
an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, (b) a "public utility," as such term is defined in the Federal
Power Act, as amended, (c) an "investment company," or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act of
1949, as amended or (d) a "rail carrier," or a "person controlled by or
affiliated with a rail carrier," within the meaning of Title 49, U.S.C., and no
Related Person is a "carrier" to which 49 U.S.C. Section 11301(b)(1) is
applicable.

         Section 4.18 Securities Act. No Related Person has issued any
unregistered securities in violation of the registration requirements of the
Securities Act of 1933, as amended, or of any other Requirement of Law, and is
not violating any rule, regulation, or requirement under the Securities Act of
1933, as amended, or the Securities and Exchange Act of 1934, as amended. No
Related Person is required to qualify an indenture under the Trust Indenture Act
of 1939, as amended, in connection with its execution and delivery of the Note.

         Section 4.19 No Approvals Required. Other than consents and approvals
previously obtained and actions previously taken, neither the execution and
delivery of this Agreement, the Note and the other Loan Documents to which any
Related Person is a party, nor the consummation of any of the transactions
contemplated hereby or thereby requires the consent or approval of, the giving
of notice to, or the registration, recording or filing by any Related Person of
any document with, or the taking of any other action in respect of, any
Governmental Authority which has jurisdiction over each Related Person or any of
its Property, except for (a) the filing of the Uniform Commercial Code financing
statements and other similar filings to perfect the interest of Lender in the
Collateral, and (b) such other consents, approvals, notices, registrations,
filings or action as may be required in the ordinary course of business of the
Related Persons in connection with the performance of the obligations of the
Related Persons hereunder.

         Section 4.20 Survival of Representations. All representations and
warranties by Borrower herein shall survive delivery of the Note and the funding
of the Loans, and any investigation at any time made by or on behalf of Lender
shall not diminish the right of Lender to rely thereon.

         Section 4.21 Individual Mortgage Loans. Borrower hereby represents with
respect to each Mortgage Note and Mortgage Loan that is part of the Collateral:

                                       29
<PAGE>

         (a) Borrower has good and marketable title to each Mortgage Note and
Mortgage, was the sole owner thereof and had full right to pledge the Mortgage
Loan to Lender free and clear of any other Lien;

         (b) To the knowledge of Borrower, there is no default, breach,
violation or event of acceleration existing under any Mortgage or the related
Mortgage Note and there is no event which, with the passage of time or with
notice and/or the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration and no such default, breach,
violation or event of acceleration has been waived;

         (c) To the knowledge of Borrower, the physical condition of the
Property subject to the Mortgage has not deteriorated since the date of
origination of the related secured Mortgage Loan (normal wear and tear excepted)
and there is no proceeding pending for the total or partial condemnation of any
Mortgaged Property;

         (d) Each Mortgage contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for the
realization against the related Property subject to the Mortgage of the benefits
of the security provided thereby, including, (i) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (ii) otherwise, by
judicial foreclosure;

         (e) Each Mortgage Loan is a first lien or second lien
one-to-eight-family loan, and has been underwritten by the originator thereof in
accordance with such originator's then current underwriting guidelines; provided
that the aggregate amount of Second Lien Loans does not exceed the Second Lien
Sublimit;

         (f) Each Mortgage Note is payable in monthly installments of principal
and interest, with interest payable in arrears, and requires a monthly payment
which is sufficient to amortize the original principal balance over the original
term and to pay interest at the related interest rate; and no Mortgage Note
provides for any extension of the original term;

         (g) No Mortgage Loan is a loan in respect of either the purchase of a
manufactured home or mobile home or the purchase of the land on which a
manufactured home or mobile home will be placed;

         (h) The origination practices used by the originator of the Mortgage
Loans and the collection practices used by the Borrower with respect to each
Mortgage Loan have been in all material respects legal, proper, prudent and
customary in the loan origination and servicing business;

         (i) Each Mortgage Loan was originated in compliance with all applicable
Laws and no fraud or misrepresentation was committed by any Person in connection
therewith;

         (j) Each Mortgage Loan matures within thirty (30) years after the date
of origination thereof.

                                       30
<PAGE>

         Section 4.22 Environmental Matters. In the ordinary course of each
Related Person's business, the officers and managers of each Related Person
consider the effect of Environmental Laws on the business of such Related
Person, in the course of which they identify and evaluate potential risks and
liabilities accruing to such Related Person due to Environmental Laws. On the
basis of this consideration, each Related Person has reasonably concluded that
neither violation of nor compliance with Environmental Laws can reasonably be
expected to have a Material Adverse Effect on the business or financial
condition of such Related Person or on the ability of Borrower to perform the
Obligations. No Related Person has received any notice to the effect that its
operations are not in material compliance with any of the requirements of
applicable Environmental Laws or are the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect on the business or financial condition of the Related
Persons, taken as a whole, or on the ability of Borrower to perform the
Obligations.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

         Each Related Person shall at all times comply with the covenants
contained in this Article V, from the date hereof and for so long as any part of
the Obligations or the Commitment is outstanding unless Lender has agreed
otherwise.

         Section 5.1 Financial Statements and Reports.

         (a) Borrower shall furnish to Lender the following, all in form and
detail reasonably satisfactory to Lender.

                  (i) Promptly after becoming available, and in any event within
         ninety (90) days after the close of each Fiscal Year, Borrower's
         Consolidated balance sheet as of the end of such Fiscal Year, and the
         related Consolidated statements of income, stockholders' equity and
         cash flows of Borrower for such Fiscal Year, setting forth in each case
         in comparative form the corresponding figures for the preceding Fiscal
         Year, such financial statements shall be unqualified and shall be
         accompanied by the related report of independent certified public
         accountants acceptable to Lender which report shall be to the effect
         that such statements have been prepared in accordance with GAAP applied
         on a basis consistent with prior periods except for such changes in
         such principles with which the independent public accountants shall
         have concurred;

                  (ii) Promptly after becoming available, and in any event
         within ninety (90) days after the close of each Fiscal Year, Parent's
         Consolidated and consolidating balance sheet as of the end of such
         Fiscal Year, and the related Consolidated and consolidating statements
         of income, stockholders' equity and cash flows of Parent for such
         Fiscal Year, setting forth in each case in comparative form the
         corresponding figures for the preceding

                                       31
<PAGE>

         Fiscal Year, such financial statements shall be unqualified and shall
         be accompanied by the related report of independent certified public
         accountants acceptable to Lender which report shall be to the effect
         that such statements have been prepared in accordance with GAAP applied
         on a basis consistent with prior periods except for such changes in
         such principles with which the independent public accountants shall
         have concurred;

                  (iii) Promptly after becoming available, and in any event
         within fifteen (15) days after the end of each calendar month,
         including the twelfth calendar month in each Fiscal Year, a
         Consolidated balance sheet of Borrower as of the end of such month and
         the related Consolidated statements of income and stockholders' equity
         of Borrower for such month and the period from the first day of the
         then current Fiscal Year through the end of such month, certified by
         the chief financial officer or other executive officer of Borrower to
         have been prepared in accordance with GAAP applied on a basis
         consistent with prior periods;

                  (iv) Promptly after becoming available, and in any event
         within forty-five (45) days after the end of each calendar month,
         including the twelfth calendar month in each Fiscal Year, a
         Consolidated and consolidating balance sheet of Parent as of the end of
         such month and the related Consolidated and consolidating statements of
         income, stockholders' equity and cash flows of Parent for such month
         and the period from the first day of the then current Fiscal Year
         through the end of such month, certified by the chief financial officer
         or other executive officer of Parent to have been prepared in
         accordance with GAAP applied on a basis consistent with prior periods;

                  (v) Promptly and in any event within forty-five (45) days
         after the end of each calendar month in each Fiscal Year of Borrower
         (except the last), and within fifteen (15) days after the completion of
         each year-end audit by Borrower's independent public accountants, a
         completed Officer's Certificate in the form of Exhibit E hereto,
         executed by the president or chief financial officer of Borrower;

                  (vi) Promptly and in any event within forty-five (45) days
         after the end of each calendar month, a management report in form
         acceptable to Lender including, without limitation detail on Borrower's
         pipeline position, commitment position, repurchase requests by
         investors and production statistics;

                  (vii) With each Borrowing Notice and in any event within
         thirty (30) days after the end of each calendar month, a Borrowing Base
         Certificate;

                  (viii) Promptly upon receipt thereof, a copy of each other
         report submitted to Borrower by independent accountants in connection
         with any annual, interim or special audit of the books of Borrower; and

                  (ix) such other information concerning the business,
         properties or financial condition of any Related Person as Lender may
         reasonably request.

                                       32
<PAGE>

         Section 5.2 Taxes and Other Liens. Each Related Person shall pay and
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or upon any of its Property as well as all
claims of any kind (including claims for labor, materials, supplies and rent)
which, if unpaid, might become a Lien upon any or all of its Property; provided,
however, each Related Person shall not be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
diligently conducted by or on behalf of such Related Person and if such Related
Person shall have set up reserves therefor adequate under GAAP.

         Section 5.3 Maintenance. Each Related Person shall (a) maintain its
corporate existence, rights and franchises; (b) observe and comply in all
material respects with all Governmental Requirements, and (c) maintain its
Properties (and any Properties leased by or consigned to it or held under title
retention or conditional sales contracts) in good and workable condition at all
times and make all repairs, replacements, additions, betterments and
improvements to its Properties as are needed and proper so that the business
carried on in connection therewith may be conducted properly and efficiently at
all times. Borrower shall maintain good standing as an approved seller and
servicer for FNMA and FHLMC and as an approved lender with FHA, VA and HUD.

         Section 5.4 Further Assurances. Borrower shall, within three (3)
Business Days after the request of Lender, cure any defects in the execution and
delivery of the Note, this Agreement or any other Loan Document and each Related
Person shall, at its expense, promptly execute and deliver to Lender upon
request all such other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements of each
Related Person in this Agreement and in the other Loan Documents or to further
evidence and more fully describe the collateral intended as security for the
Note, or to correct any omissions in this Agreement or the other Loan Documents,
or more fully to state the security for the obligations set out herein or in any
of the other Loan Documents, or to make any recordings, to file any notices, or
obtain any consents.

         Section 5.5 Reimbursement of Expenses. Borrower shall pay (a) all
reasonable legal fees (including, without limitation, allocated costs for
in-house legal service) incurred by Lender in connection with the preparation,
negotiation, syndication, execution and delivery of this Agreement, the Note and
the other Loan Documents and any amendments, consents or waivers executed in
connection therewith, (b) all fees, charges or taxes for the recording or filing
of the Security Instruments, (c) all reasonable out-of-pocket expenses of Lender
in connection with the administration of this Agreement, the Note and the other
Loan Documents, including courier expenses incurred in connection with the
Mortgage Collateral, (d) all amounts expended, advanced or incurred by Lender to
satisfy any obligation of Borrower under this Agreement or any of the other Loan
Documents or to collect the Note, or to protect, preserve, exercise or enforce
the rights of Lender under this Agreement or any of the other Loan Documents or
to collect the Note, or to protect, preserve, exercise or enforce the rights of
Lender or any Lender under this Agreement or any of the other Loan Documents,
(e) all reasonable out-of-pocket costs and expenses (including fees and
disbursements of attorneys and other experts employed or

                                       33
<PAGE>

retained by such Person) incurred in connection with, arising out of, or in any
way related to (i) consulting during a Default with respect to (A) the
protection, preservation, exercise or enforcement of any of its rights in, under
or related to the Collateral or the Loan Documents or (B) the performance of any
of its obligations under or related to the Loan Documents, or (ii) protecting,
preserving, exercising or enforcing during a Default any of its rights in, under
or related to the Collateral or the Loan Documents, each of (a) through (e)
shall include all underwriting expenses, collateral liquidation costs, court
costs, attorneys' fees (including, without limitation, for trial, appeal or
other proceedings), fees of auditors and accountants, and investigation expenses
reasonably incurred by Lender in connection with any such matters, together with
interest at the post-maturity rate specified in the Note on each item specified
in clause (a) through (e) from thirty (30) days after the date of written demand
or request for reimbursement until the date of reimbursement.

         Section 5.6 Insurance. Borrower shall maintain with financially sound
and reputable insurers, insurance with respect to its Properties and business
against such liabilities, casualties, risks and contingencies and in such types
and amounts as is customary in the case of Persons engaged in the same or
similar businesses and similarly situated, including, without limitation, a
fidelity bond or bonds with financially sound and reputable insurers with such
coverage and in such amounts as is customary in the case of Persons engaged in
the same or similar businesses and similarly situated. The improvements on the
land covered by each Mortgage shall be kept continuously insured at all times by
responsible insurance companies against fire and extended coverage hazards under
policies, binders, letters, or certificates of insurance, with a standard
mortgagee clause in favor of Borrower and its assigns. Each such policy must be
in an amount equal to the lesser of the maximum insurable value of the
improvements or the original principal amount of the Mortgage Note, without
reduction by reason of any co-insurance, reduced rate contribution, or similar
clause of the policies or binders. Upon request of Lender, Borrower shall
furnish or cause to be furnished to Lender from time to time a summary of the
insurance coverage of Borrower in form and substance satisfactory to Lender and
if requested shall furnish Lender copies of the applicable policies.

         Section 5.7 Accounts and Records; Servicing Records. Each Related
Person shall keep books of record and account in which full, true and correct
entries will be made of all dealings or transactions in relation to its business
and activities, in accordance with GAAP. Each Related Person shall maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate all records pertaining to the performance of
such Related Person's obligations under the Servicing Agreements in the event of
the destruction of the originals of such records) and keep and maintain all
documents, books, records, computer tapes and other information reasonably
necessary or advisable for the performance by each Related Person of its
obligations under the Servicing Agreements.

         Section 5.8 Right of Inspection. Each Related Person shall permit
authorized representatives of Lender to discuss the business, operations, assets
and financial condition of such Related Person with their officers and
employees, to examine their Servicing Records and books of records and account
and make copies or extracts thereof and to visit and inspect any of the
Properties of each Related Person, all at such reasonable times and as often as
Lender may

                                       34
<PAGE>

request. Each Related Person will provide its accountants with a copy of this
Agreement promptly after the execution hereof and will instruct its accountants
to answer candidly any and all questions that the officers of Lender or any
authorized representatives of Lender may address to them in reference to the
financial condition or affairs of any Related Person as those conditions or
affairs relate to this Agreement. Each Related Person may have its
representatives in attendance at any meetings between the officers or other
representatives of Lender and such Related Person's accountants held in
accordance with this authorization.

         Section 5.9 Notice of Certain Events. Borrower shall promptly notify
Lender upon (a) the receipt of any notice from, or the taking of any other
action by, the holder of any promissory note, debenture or other evidence of
Indebtedness of any Related Person with respect to a claimed default, together
with a detailed statement by a responsible officer of Borrower specifying the
notice given or other action taken by such holder and the nature of the claimed
default and what action Borrower is taking or proposes to take with respect
thereto; (b) the commencement of, or any determination in, any legal, judicial
or regulatory proceedings between any Related Person and any Governmental
Authority or any other Person which, if adversely determined, could have a
Material Adverse Effect; (c) any change in senior management of Borrower; (d)
any material adverse change in the business, operations, prospects or financial
condition of any Related Person, including, without limitation, the insolvency
of any Related Person, (e) any event or condition which, if adversely
determined, could have a Material Adverse Effect or (f) the occurrence of any
Termination Event.

         Section 5.10 Performance of Certain Obligations and Information
Regarding Investors. Borrower shall perform and observe in all material respects
each of the provisions of each Take-Out Commitment and each of the Servicing
Agreements on its part to be performed or observed and will cause all things to
be done which are necessary to have each item of Mortgage Collateral covered by
a Take-Out Commitment comply with the requirements of such Take-Out Commitment.
Upon request by Lender, Borrower will deliver to Lender financial information
concerning any Person Lender is reviewing to determine whether to approve such
Person as an Investor; all such financial information must be delivered to
Lender prior to any request by Borrower for Mortgage Collateral to be delivered
to such Person.

         Section 5.11 Use of Proceeds; Margin Stock. The proceeds of all Loans
shall be used by Borrower solely for the origination and purchase of Eligible
Mortgage Loans pending sale to an Investor. None of such proceeds shall be used
for the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U, or for the purpose of reducing or retiring any Indebtedness which
was originally incurred to purchase or carry margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation U. Neither Borrower nor any Person acting on behalf
of Borrower shall take any action in violation of Regulation U or Regulation X
or shall violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.

         Section 5.12 Notice of Default. Borrower shall furnish to Lender
immediately upon becoming aware of the existence of any Default or Event of
Default, a written notice specifying

                                       35
<PAGE>

the nature and period of existence thereof and the action which Borrower is
taking or proposes to take with respect thereto.

         Section 5.13 Compliance with Loan Documents. Each Related Person shall
promptly comply with any and all covenants and provisions of this Agreement the
Note and the other Loan Documents to be complied with by such Related Person.

         Section 5.14 Operations and Properties. Each Related Person shall
comply with all rules, regulations and guidelines applicable to it. Borrower
shall act prudently and in accordance with customary industry standards in
managing and operating its Property.

         Section 5.15 Environmental Matters.

         (a) Each Related Person will comply in all material respects with all
Environmental Laws now or hereafter applicable to such Related Person and shall
obtain, at or prior to the time required by applicable Environmental Laws, all
environmental, health and safety permits, licenses and other authorizations
necessary for its operations and will maintain such authorizations in full force
and effect.

         (b) Borrower will promptly furnish to Lender all written notices of
violation, orders, claims, citations, complaints, penalty assessments, suits or
other proceedings received by Borrower, or of which it has notice, pending or
threatened against Borrower, by any governmental authority with respect to any
alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations in connection with its ownership or use of
its properties or the operation of its business.

                                   ARTICLE VI

                               NEGATIVE COVENANTS

         Each Related Person shall at all times comply with the covenants
contained in this Article VI, from the date hereof and for so long as any part
of the Obligations or the Commitment is outstanding unless Lender has agreed
otherwise:

         Section 6.1 No Merger; Limitation on Issuance of Securities. Neither
Parent nor any Related Person shall merge or consolidate with or into any Person
except that Parent may merge or consolidate with Newmark Homes Corp. No Related
Person shall acquire by purchase, or otherwise, all or substantially all of the
assets or capital stock of any Person. Borrower will not issue any securities
other than shares of its common stock and any options or warrants giving the
holders thereof only the right to acquire such shares. No Subsidiary of Borrower
will issue any additional shares of its capital stock or other securities or any
options, warrants or other rights to acquire such additional shares or other
securities except to Borrower and only to the extent not otherwise forbidden
under the terms hereof. No Subsidiary of Borrower which is a partnership will
allow any diminution of Borrower's interest (direct or indirect) therein.

                                       36
<PAGE>

         Section 6.2 Limitation on Indebtedness. No Related Person shall incur,
create, contract, assume, have outstanding, guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness or Guaranty
Obligations except:

         (a) the Obligations;

         (b) trade debt, equipment leases, equipment loans and liens for taxes
and assessments not yet due and payable owed in the ordinary course of business;
and

         (c) unsecured Guaranty Obligations of Borrower with respect to
Indebtedness arising under the Parent Debt Agreements.

         (d) Indebtedness of the Related Persons under agreements and in the
amount described on the Disclosure Schedule.

         Section 6.3 Fiscal Year, Method of Accounting. Neither Parent nor any
Related Person shall change its Fiscal Year or make any material change in its
method of accounting.

         Section 6.4 Business. No Related Person shall, directly or indirectly,
engage in any business which differs materially from that currently engaged in
by Borrower.

         Section 6.5 Liquidations, Consolidations and Dispositions of
Substantial Assets. No Related Person shall dissolve or liquidate or sell,
transfer, lease or otherwise dispose of any material portion of their property
or assets or business; provided, however, nothing in this Section 6.5 shall be
construed to prohibit any Related Person from selling rights to service mortgage
loans and pools of mortgage loans or Mortgage Note in the ordinary course of
their business.

         Section 6.6 Loans, Advances, and Investments. No Related Person shall
make any loan (other than Mortgage Loans), advance, or capital contribution to,
or investment in (including any investment in any Subsidiary, joint venture or
partnership), or purchase or otherwise acquire any of the capital stock,
securities, or evidences of indebtedness of, any Person (collectively,
"INVESTMENT"), or otherwise acquire any interest in, or control of, another
Person, except for the following:

         (a) Cash Equivalents;

         (b) Any acquisition of securities or evidences of indebtedness of
others when acquired by a Related Person in settlement of accounts receivable or
other debts arising in the ordinary course of its business, so long as the
aggregate amount of any such securities or evidences of indebtedness is not
material to the business or condition (financial or otherwise) of such Related
Person; and

                                       37
<PAGE>

         (c) Mortgage Notes acquired by Borrower in the ordinary course of
Borrower's business.

         (d) Investments in Subsidiaries which are Guarantors.

         (e) Loans to Parent.

         Section 6.7 Use of Proceeds. Borrower shall not permit the proceeds of
the Loans to be used for any purpose other than those permitted by Section 5.11
hereof. Borrower shall not, directly or indirectly, use any of the proceeds of
the Loans for the purpose, whether immediate, incidental or ultimate, of buying
any "margin stock" or of maintaining, reducing or retiring any Indebtedness
originally incurred to purchase a stock that is currently any "margin stock," or
for any other purpose which might constitute this transaction a "purpose
credit," in each case within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207, as amended), or
Regulation U, or otherwise take or permit to be taken any action which would
involve a violation of such Regulation G or Regulation U or of Regulation T (12
C.F.R. 220, as amended) or Regulation X (12 C.F.R. 224, as amended) or any other
regulation of such board.

         Section 6.8 Actions with Respect to Mortgage Collateral. Borrower shall
not:

         (a) Compromise, extend, release, or adjust payments on any Mortgage
Collateral, accept a conveyance of mortgaged property in full or partial
satisfaction of any Mortgage Collateral, or release any Mortgage securing or
underlying any Mortgage Collateral;

         (b) Agree to the amendment or termination of any Take-Out Commitment in
which Lender has a security interest or to substitution of a Take-Out Commitment
for a Take-Out Commitment in which Lender has a security interest hereunder, if
such amendment, termination or substitution may reasonably be expected (as
determined by Lender in its sole discretion) to have a Material Adverse Effect;

         (c) Transfer, sell, assign, or deliver any Mortgage Collateral pledged
to Lender to any Person other than Lender, except pursuant to a Take-Out
Commitment; or

         (d) Grant, create, incur, permit or suffer to exist any Lien upon any
Mortgage Collateral except for Liens granted to Lender to secure the Note and
Obligations and such non-consensual Liens as may be deemed to arise as a matter
of law pursuant to any Take-Out Commitment.

         Section 6.9 Transactions with Affiliates. Borrower shall not enter into
any transactions including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transactions are otherwise permitted under this Agreement, are in the
ordinary course of Borrower's business and are upon fair and reasonable terms no
less favorable to Borrower than it would obtain in a comparable arm's length
transaction with a Person not an Affiliate.

                                       38
<PAGE>

         Section 6.10 Liens. No Related Person shall grant, create, incur,
assume, permit or suffer to exist any Lien, upon any of its Property, including
without limitation any and all of Borrower's Mortgage Note, and Servicing Rights
and the proceeds from any thereof, other than (a) Liens which secure payment of
the Obligations, (b) first Liens on Property subject to Second Lien Mortgages,
so long as the aggregate amount of the Mortgage Notes secured thereby does not
exceed the Second Mortgage Sublimit, (c) to the extent not otherwise prohibited
hereunder, Liens which secure payment of the Indebtedness described in Section
6.2(b) or Section 6.2(d) on Property other than Collateral, (d) statutory liens
for taxes, assessments or other governmental charges or levies which are not yet
delinquent or which are being contested in good faith by appropriate action and
for which adequate reserves have been maintained in accordance with GAAP on
Property other than Collateral, and (e) landlords', operators', carriers',
warehousemen's, repairmen's, mechanics', materialmen's, or other like Liens
which do not secure Indebtedness, in each case only to the extent arising in the
ordinary course of business and only to the extent securing obligations which
are not delinquent or which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been maintained in accordance
with GAAP on Property other than Collateral.

         Section 6.11 ERISA Plans. No Related Person shall adopt or agree to
maintain or contribute to any ERISA Plan. Borrower shall promptly notify Lender
in writing in the event an ERISA Affiliate adopts an ERISA Plan.

         Section 6.12 Change of Principal Office. No Related Person shall move
its principal office, executive office or principal place of business from the
address set forth in Section 10.1 without giving written notice to Lender within
ten (10) Business Days after the date of such move.

         Section 6.13 Tangible Net Worth. As of the end of each calendar month,
the Consolidated Tangible Net Worth of Borrower shall not be less than
$5,000,000.

         Section 6.14 Total Debt to Tangible Net Worth Ratio. The ratio of the
Consolidated Total Debt of Borrower to the Consolidated Tangible Net Worth of
Borrower shall never be more than 10.0 to 1.0.

         Section 6.15 Profitability. As of the end of each Fiscal Quarter,
Borrower's Consolidated net income for such Fiscal Quarter shall be a positive
number equal to or greater than $1.

                                       39
<PAGE>

                                   ARTICLE VII

                                EVENTS OF DEFAULT

         Section 7.1 Nature of Event. An Event of Default shall exist if any one
or more of the following occurs:

         (a) Borrower or any Guarantor fails to make any payment of principal of
or interest on the Note, or payment of any fee, expense or other amount due
hereunder, under the Note, or under any other Loan Document, on or before the
date such payment is due;

         (b) Default is made in the due observance or performance by any Related
Person of any covenant set forth in Article V of this Agreement (other than
Section 5.9) and such Default continues for a period of thirty (30) days after
Lender gives Borrower notice thereof;

         (c) Default is made in the due observance or performance by any Related
Person of any of the covenants or agreements contained in this Agreement other
than those described in subsections (a) or (b) immediately above;

         (d) Any Related Person or any Guarantor defaults in the due observance
or performance or any of the covenants or agreements contained in any other Loan
Document to which it is a party, and (unless such default otherwise constitutes
a Default pursuant to other provisions of this Section 7.1) such default
continues unremedied beyond the expiration of any applicable grace period which
may be expressly allowed under such other Loan Document;

         (e) Any material statement, warranty or representation by or on behalf
of any Related Person or any Guarantor contained in this Agreement, the Note or
any other Loan Document to which it is a party, or in any Borrowing Request,
officer's certificate or other writing furnished in connection with this
Agreement, proves to have been incorrect or misleading in any material respect
as of the date made or deemed made;

         (f) Any Related Person or any Guarantor:

                  (i) suffers the entry against it of a judgment, decree or
         order for relief by a court of competent jurisdiction in an involuntary
         proceeding commenced under any applicable bankruptcy, insolvency or
         other similar law of any jurisdiction now or hereafter in effect,
         including the federal Bankruptcy Code, as from time to time amended, or
         has any such proceeding commenced against it which remains undismissed
         for a period of sixty (60) days; or

                  (ii) commences a voluntary case under any applicable
         bankruptcy, insolvency or similar law now or hereafter in effect,
         including the federal Bankruptcy Code, as from time to time amended; or
         applies for or consents to the entry of an order for relief in an
         involuntary case under any such law; or makes a general assignment for
         the benefit of creditors; or fails generally to pay (or admits in
         writing its inability to pay) its debts as

                                       40
<PAGE>

         such debts become due; or takes corporate or other action to authorize
         any of the foregoing; or

                  (iii) suffers the appointment of or taking possession by a
         receiver, liquidator, assignee, custodian, trustee, sequestrator or
         similar official of all or a substantial part of its assets or of any
         part of the Mortgage Collateral in a proceeding brought against or
         initiated by it, and such appointment or taking possession is neither
         made ineffective nor discharged within sixty (60) days after the making
         thereof, or such appointment or taking possession is at any time
         consented to, requested by, or acquiesced to by it; or

                  (iv) suffers the entry against it of a final judgment for the
         payment of money in excess of $500,000 (not covered by insurance
         satisfactory to Lender in its discretion), unless the same is
         discharged within thirty (30) days after the date of entry thereof or
         an appeal or appropriate proceeding for review thereof is taken within
         such period and a stay of execution pending such appeal is obtained; or

                  (v) suffers a writ or warrant of attachment or any similar
         process to be issued by any court against all or any substantial part
         of its assets or any part of the Mortgage Collateral;

         (g) Any Related Person fails to make when due or within any applicable
grace period any payment on any Indebtedness (other than the Obligations) with
an unpaid principal balance of over $1,000,000; or any event or condition occurs
under any provision contained in any agreement under which such obligation is
governed, evidenced or secured (or any other material breach or default under
such obligation or agreement occurs) if the effect thereof is to cause or permit
the holder or trustee of such obligation to cause such obligation to become due
prior to its stated maturity; or any such obligation becomes due (other than by
regularly scheduled payments) prior to its stated maturity; or any of the
foregoing occurs with respect to any one or more items of Indebtedness of any
Related Person with unpaid principal balances exceeding, in the aggregate,
$1,000,000;

         (h) Any event or condition occurs under any provision contained in the
Parent Debt Agreements (or any other material breach or default under any Parent
Debt Agreement occurs) if the effect thereof is to cause or permit the holder or
trustee of such obligation to cause such obligation to become due prior to its
stated maturity;

         (i) This Agreement, the Note or any other Loan Document shall for any
reason cease to be in full force and effect, or be declared null and void or
unenforceable in whole or in part as the result of any action initiated by any
Person other than Lender; or the validity or enforceability of any such document
shall be challenged or denied by any Person other than Lender other than by
reason of illegality;

         (j) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Code in excess of $75,000 exists with respect to any ERISA
Plan, whether or not waived by the Secretary of the Treasury or his delegate, or
(ii) any Termination Event occurs with respect to

                                       41
<PAGE>

any ERISA Plan and the then current value of such ERISA Plan's benefits
guaranteed under Title IV of ERISA exceeds the then current value of such ERISA
Plan's assets available for the payment of such benefits by more than $10,000
(or in the case of a Termination Event involving the withdrawal of a substantial
employer, the withdrawing employer's proportionate share of such excess exceeds
such amount) or (iii) any Related Person or any ERISA Affiliate withdraws from a
multiemployer plan resulting in liability under Title IV of ERISA of an amount
in excess of $10,000 in the case of any Related Person or $100,000 in the case
of any other ERISA Affiliate; or

         (k) A Change of Control occurs.

         Section 7.2 Default Remedies. Upon the occurrence of an Event of
Default, Lender may declare the Commitment to be terminated and/or declare the
entire principal and all interest accrued on the Note to be, and the Note,
together with all Obligations, shall thereupon become, forthwith due and
payable, without any presentment, demand, protest, notice of protest and
nonpayment, notice of acceleration or of intent to accelerate or other notice of
any kind, all of which hereby are expressly waived. Notwithstanding the
foregoing, if an Event of Default specified in Subsections 7.1 (f)(i), (ii) or
(iii) above occurs with respect to Borrower, the Commitment shall automatically
and immediately terminate and the Note and all other Obligations shall become
automatically and immediately due and payable, both as to principal and
interest, without any action by Lender and without presentment, demand, protest,
notice of protest and nonpayment, notice of acceleration or of intent to
accelerate, or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein, in the Note to the contrary notwithstanding.

                                  ARTICLE VIII

                                 INDEMNIFICATION

         Section 8.1 Indemnification. Borrower agrees to indemnify Lender and
each director, officer, agent, attorney, employee, representative and Affiliate
of Lender (each an "Indemnified Party"), upon demand, from and against any and
all liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (including reasonable fees of
attorneys, accountants, experts and advisors) of any kind or nature whatsoever
(in this Section 8.1 collectively called "liabilities and costs") which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted against
any Indemnified Party growing out of, resulting from or in any other way
associated with any of the Mortgage Collateral, the Loan Documents, and the
transactions and events (including the enforcement or defense thereof) at any
time associated therewith or contemplated therein (including any violation or
noncompliance with any Environmental Laws by any Related Person).

         THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH
         LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR
         IN PART, UNDER ANY CLAIM OR THEORY OF

                                       42
<PAGE>

         STRICT LIABILITY, OR ARE CAUSED IN WHOLE OR PART, BY ANY NEGLIGENT ACT
         OR OMISSION OF ANY KIND BY SUCH INDEMNIFIED PARTY,

provided only that such indemnified party shall be not entitled under this
section to receive indemnification for that portion, if any, of any liabilities
and costs which is proximately caused by its own individual gross negligence or
willful misconduct. All amounts payable by Borrower shall be immediately due
upon Lender's request for the payment thereof.

         Section 8.2 Limitation of Liability. None of Lender, its directors,
officers, agents, attorneys, employees, representatives or affiliates shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement. THE FOREGOING EXCULPATION SHALL APPLY TO ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY SUCH PERSON, PROVIDED THAT SUCH
PERSON SHALL BE LIABLE FOR ITS OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.

                                   ARTICLE IX

                                   [RESERVED]

                                    ARTICLE X

                                  MISCELLANEOUS

         Section 10.1 Notices. Any notice or request required or permitted to be
given under or in connection with this Agreement, the Note or the other Loan
Documents (except as may otherwise be expressly required therein) shall be in
writing and shall be mailed by first class or express mail, postage prepaid, or
sent by telex, telegram, telecopy or other similar form of rapid transmission,
confirmed by mailing (by first class or express mail, postage prepaid) written
confirmation at substantially the same time as such rapid transmission, or
personally delivered to an officer of the receiving party. All such
communications shall be mailed, sent or delivered to the parties hereto at their
respective addresses as follows:

         Borrower:                  Preferred Home Mortgage Company
                                    123 NW 13th Street, Suite 300
                                    Boca Raton, FL 33432
                                    Attn:  Paul Leikert
                                    FAX:   (561) 391-9653
                                    TEL:   (561) 391-4012 Ex. 128

                                       43
<PAGE>

                                    with a copy to:

                                    Holly Hubenak
                                    Technical Olympic U.S.A., Inc.
                                    1200 Soldiers Field Drive
                                    Sugarland, Texas 77479
                                    FAX:  (281) 243-0100
                                    TEL:  (281) 243-0116

         Lender:                    Guaranty Bank
                                    8333 Douglas Avenue
                                    Dallas, Texas 75225
                                    Attention:  Carolyn Eskridge
                                    FAX:  (214) 360-1660
                                    TEL:  (214) 360-3357

or at such other addresses or to such individual's or department's attention as
any party may have furnished the other party in writing. Any communication so
addressed and mailed shall be deemed to be given when so mailed, except that
Borrowing Requests, and communications related thereto shall not be effective
until actually received by Lender or Borrower, as the case may be; and any
notice so sent by rapid transmission shall be deemed to be given when receipt of
such transmission is acknowledged, and any communication so delivered in person
shall be deemed to be given when receipted for by, or actually received by, an
authorized officer of Borrower or Lender, as the case may be.

         Section 10.2 Amendments, Etc. No amendment or waiver of any provision
of this Agreement, the Security Instruments, the Note, or any other Loan
Document, nor consent to any departure by any Related Person from the terms
thereof, shall in any event be effective unless the same shall be in writing and
signed by (i) if such party is Borrower, by Borrower and (ii) if such party is
Lender, by Lender.

         Section 10.3 CHOICE OF LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF TEXAS. ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT AND MAINTAINED IN THE
APPLICABLE STATE OR FEDERAL COURT IN DALLAS COUNTY, TEXAS. THIS AGREEMENT IS
PERFORMABLE IN DALLAS COUNTY, TEXAS AND THE PARTIES HERETO WAIVE ANY RIGHT THEY
MAY HAVE TO BE SUED ELSEWHERE. THE PARTIES HERETO CONSENT TO PERSONAL
JURISDICTION IN DALLAS COUNTY, TEXAS. SECTION 346 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

         Section 10.4 Invalidity. In the event that any one or more of the
provisions contained in the Note, this Agreement or any other Loan Document
shall, for any reason, be held invalid,

                                       44
<PAGE>

illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of such document.

         Section 10.5 Survival of Agreements. All covenants and agreements
herein and in any other Loan Document not fully performed before the date hereof
or the date thereof, and all representations and warranties herein or therein,
shall survive until payment in full of the Obligations and termination of the
Commitment.

         Section 10.6 Renewal, Extension or Rearrangement. All provisions of
this Agreement and of the other Loan Documents shall apply with equal force and
effect to each and all promissory Note hereafter executed which in whole or in
part represent a renewal, extension for any period, increase or rearrangement of
any part of the Obligations originally represented by the Note or of any part of
such other Obligations.

         Section 10.7 Waivers. No course of dealing on the part of Lender, or
any of its officers, employees, consultants or agents, nor any failure or delay
by Lender with respect to exercising any right, power or privilege of Lender
under the Note, this Agreement or any other Loan Document shall operate as a
waiver thereof, except as otherwise provided in Section 10.2 hereof.

         Section 10.8 Cumulative Rights. The rights and remedies of Lender under
the Note, this Agreement, and any other Loan Document shall be cumulative, and
the exercise or partial exercise of any such right or remedy shall not preclude
the exercise of any other right or remedy.

         Section 10.9 Limitation on Interest. Lender, each Related Person and
any other parties to the Loan Documents intend to contract in strict compliance
with applicable usury Law from time to time in effect. In furtherance thereof
such Persons stipulate and agree that none of the terms and provisions contained
in the Loan Documents shall ever be construed to create a contract to pay, for
the use, forbearance or detention of money, interest in excess of the maximum
amount of interest permitted to be charged by applicable Law from time to time
in effect. Neither each Related Person nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of any
Obligation shall ever be liable for unearned interest thereon or shall ever be
required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable Law from time to time in effect, and the
provisions of this section shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith. Lender
expressly disavows any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of any Obligation is
accelerated. If (a) the maturity of any Obligation is accelerated for any
reason, (b) any Obligation is prepaid and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or (c)
Lender or any other holder of any or all of the Obligations shall otherwise
collect moneys which are determined to constitute interest which would otherwise
increase the interest on any or all of the Obligations to an amount in excess of
that permitted to be charged by applicable Law then in effect, then all such
sums determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal of
the related Obligations or, at Lender's or such holder's option, promptly
returned to each Related Person or the other payor thereof upon such

                                       45
<PAGE>

determination. In determining whether or not the interest paid or payable, under
any specific circumstance, exceeds the maximum amount permitted under applicable
Law, Lender and each Related Persons (and any other payors thereof) shall to the
greatest extent permitted under applicable Law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable Law in order to
lawfully charge the maximum amount of interest permitted under applicable Law.
In the event applicable Law provides for an interest ceiling under Section 303
of the Texas Finance Code, that ceiling shall be the weekly ceiling.

         Section 10.10 Bank Accounts; Offset. To secure the repayment of the
Obligations each Related Person hereby grants to Lender and to each financial
institution which hereafter acquires a participation or other interest in the
Loans or Note (in this section called a "Participant") a security interest, a
lien, and a right of offset, each of which shall be in addition to all other
interests, liens, and rights of Lender or any Participant at common law, under
the Loan Documents, or otherwise, and each of which shall be upon and against
(a) any and all moneys, securities or other property (and the proceeds
therefrom) of any Related Person now or hereafter held or received by or in
transit to Lender, any Lender or Participant from or for the account any Related
Person, whether for safekeeping, custody pledge, transmission, collection or
otherwise, (b) any and all deposits (general or special, time or demand,
provisional or final) of any Related Person with Lender or any Participant, and
(c) any other credits and claims of any Related Person at any time existing
against Lender, any Lender or Participant, including claims under certificates
of deposit. Upon the occurrence of any Default, each of Lender and Participants
is hereby authorized to foreclose upon, offset, appropriate, and apply, at any
time and from time to time, without notice to Borrower, any and all items
hereinabove referred to against the Obligations then due and payable.

         Section 10.11 Assignments, Participations.

         (a) Assignments. Lender shall have the right to sell, assign or
transfer all or any part of Note, Loans and rights and the associated rights and
obligations under all Loan Documents to one or more financial institutions, with
minimum assets of $5,000,000,000, and the assignee, transferee or recipient
shall have, to the extent of such sale, assignment, or transfer, the same
rights, benefits and obligations of Lender. Within five (5) Business Days after
any such assignment, the assignee shall notify Borrower of the outstanding
principal balance of the Note payable to assignee and Borrower shall execute and
deliver to assignee a new Note evidencing such assignee's assigned Loans and, if
the assignor Lender has retained a portion of its Loans, replacement Note in the
principal amount of the Loans retained by the assignor Lender (such Note to be
in exchange for, but not in payment of, the Note held by such Lender).

         (b) Participations. Lender shall have the right to grant participations
in all or any part of the Note, Loans and the associated rights and obligations
under all Loan Documents to one or more financial institutions with minimum
assets of $5,000,000,000.

                                       46
<PAGE>

         (c) Distribution of Information. Subject to Section 10.17, it is
understood and agreed that Lender may provide to assignees and participants and
prospective assignees and participants financial information and reports and
data concerning Borrower's properties and operations which was provided to
Lender pursuant to this Agreement.

         Section 10.12 Exhibits. The exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein, except that in the event of any conflict between any of
the provisions of such exhibits and the provisions of this Agreement, the
provisions of this Agreement shall prevail.

         Section 10.13 Titles of Articles, Sections and Subsections. All titles
or headings to articles, sections, subsections or other divisions of this
Agreement or the exhibits hereto are only for the convenience of the parties and
shall not be construed to have any effect or meaning with respect to the other
content of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.

         Section 10.14 Counterparts. This Agreement may be executed in
counterparts, and it shall not be necessary that the signatures of both of the
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all counterparts together shall constitute one
and the same instrument.

         Section 10.15 ENTIRE AGREEMENT. THE NOTE, THIS AGREEMENT, AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND
THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.

         Section 10.16 Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
notice delivered to Lender to terminate this Agreement. Upon receipt by Lender
of such a notice, if no Obligations are then owing, this Agreement and all other
Loan Documents shall thereupon be terminated and the parties thereto released
from all prospective obligations thereunder. Notwithstanding the foregoing or
anything herein to the contrary, any waivers or admissions made by any Person in
any Loan Documents, any Obligations, and any obligations which any Person may
have to indemnify or compensate Lender shall survive any termination of this
Agreement or any other Loan Document. At the request and expense of Borrower,
Lender shall prepare and execute all necessary instruments to reflect and effect
such termination of the Loan Documents.

         Section 10.17 Confidential Information. Lender shall use any
confidential non-public information concerning the Borrower, the Parent, and
their Subsidiaries that is furnished to Lender by or on behalf of the Borrower,
the Parent and their Subsidiaries in connection with the Loan Documents
(collectively, "Confidential Information") solely for the purpose of evaluating
and providing products and services to them and administering and enforcing the
Loan

                                       47
<PAGE>

Documents, and shall hold the Confidential Information in confidence.
Notwithstanding the foregoing, Lender may disclose Confidential Information (a)
to its Affiliates or any of its or its Affiliates' directors, officers,
employees, advisors, or representatives (collectively, the "Representatives")
whom it determines need to know such information for the purposes set forth in
this Section; (b) to any bank or financial institution or other entity to which
such Lender has assigned or desires to assign an interest or participation in
the Loan Documents or the Obligations, provided that any such foregoing
recipient of such Confidential Information agrees to keep such Confidential
Information confidential as specified herein; (c) to any Governmental Authority
having or claiming to have authority to regulate or oversee any aspect of
Lender's business or that of its Representatives in connection with the exercise
of such authority or claimed authority; (d) to the extent necessary or
appropriate to effect or preserve Lender's or any of its Affiliates' security
(if any) for any Obligation or to enforce any right or remedy or in connection
with any claims asserted by or against Lender or any of its Representatives; and
(e) pursuant to any subpoena or any similar legal process. For purposes hereof,
the term "Confidential Information" shall not include information that (x) is in
Lender's possession prior to its being provided by or on behalf of the Borrower,
the Parent or their Subsidiaries, provided that such information is not known by
Lender to be subject to another confidentiality agreement with, or other legal
or contractual obligation of confidentiality to, the Borrower, Parent or their
Subsidiaries, (y) is or becomes publicly available (other than through a breach
hereof by Lender), or (z) becomes available to Lender on a nonconfidential
basis, provided that the source of such information was not known by Lender to
be bound by a confidentiality agreement or other legal or contractual obligation
of confidentiality with respect to such information.

         Section 10.18 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES,
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ITS RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF
ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE PARTIES
HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND ANY OTHER LOAN DOCUMENTS.

         Section 10.19 CONSEQUENTIAL DAMAGES. NEITHER BORROWER, NOR LENDER SHALL
HAVE ANY LIABILITY WITH RESPECT TO, AND EACH SUCH

                                       48
<PAGE>
PERSON HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE EACH OTHER SUCH PERSON FOR,
ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY SUCH OTHER PERSON IN
CONNECTION WITH ANY CLAIM RELATED TO THE LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREIN.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       49
<PAGE>

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

BORROWER:                                  PREFERRED HOME MORTGAGE COMPANY

                                           By:    /s/ Paul Leikert
                                                  ------------------------------
                                                  Paul Leikert
                                                  President

LENDER:                                    GUARANTY BANK

                                           By:    /s/ Carolyn Eskridge
                                                  ------------------------------
                                                  Carolyn Eskridge
                                                  Vice President

                                       50

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