Document:

Exhibit 4.2

 

EXECUTION COPY

 

REGISTRATION
RIGHTS AGREEMENT

 

This
REGISTRATION RIGHTS AGREEMENT dated December 19, 2005 (this “Agreement”)
is entered into by and among Kimball Hill, Inc., an Illinois corporation
(the “Company”), the guarantors listed in Schedule I hereto and J.P.
Morgan Securities Inc. (“JPMorgan”) and the several initial purchasers listed
in Schedule A hereto (the “Initial Purchasers”).

 

The Company,
the Guarantors and the Initial Purchasers are parties to the Purchase Agreement
dated December 14, 2005 (the “Purchase Agreement”), which provides for the
sale by the Company to the Initial Purchasers of $203,000,000 aggregate
principal amount of the Company’s 101⁄2% Senior Subordinated Notes due 2012 (the “Securities”)
which will be guaranteed on an unsecured senior subordinated basis by each of
the Guarantors. As an inducement to the Initial Purchasers to enter into the
Purchase Agreement, the Company and the Guarantors have agreed to provide to
the Initial Purchasers and their direct and indirect transferees the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the closing under the Purchase Agreement.

 

In
consideration of the foregoing, the parties hereto agree as follows:

 

1.                                       Definitions.
As used in this Agreement, the following terms shall have the following
meanings:

 

“Business Day” shall mean any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed.

 

“Closing Date”
shall mean the Closing Date as defined in the Purchase Agreement.

 

“Company”
shall have the meaning set forth in the preamble and shall also include the Company’s
successors.

 

“Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended from time to time.

 

“Exchange
Dates” shall have the meaning set forth in Section 2(a)(ii) hereof.

 

“Exchange
Offer” shall mean the exchange offer by the Company and the Guarantors of Exchange
Securities for Registrable Securities pursuant to Section 2(a) hereof.

 

“Exchange
Offer Registration” shall mean a registration under the Securities Act effected
pursuant to Section 2(a) hereof.

 

“Exchange
Offer Registration Statement” shall mean a registration statement on Form S-4
(or, if applicable, on another appropriate form) relating to an offering of
Exchange Securities pursuant to an Exchange Offer) and all amendments and
supplements to such registration statement, in each case including the
Prospectus contained therein, all exhibits thereto and any document
incorporated by reference therein.

 

“Exchange
Securities” shall mean senior subordinated notes issued by the Company and
guaranteed by the Guarantors under the Indenture containing terms identical in
all material respects to the Securities (except that the Exchange Securities
will not be subject to restrictions on transfer or contain terms

 

 

with respect
to the payment of liquidated damages) and to be offered to Holders of Securities
in exchange for Securities pursuant to the Exchange Offer.

 

“Guarantors”
shall have the meaning set forth in the preamble and shall also include any
Guarantor’s successors.

 

“Holders”
shall mean the Initial Purchasers, for so long as they own any Registrable
Securities, and each of their successors, assigns and direct and indirect
transferees who become owners of Registrable Securities under the Indenture; provided
that for purposes of Sections 4 and 5 of this Agreement, the term “Holders”
shall include Participating Broker-Dealers.

 

“Indemnified
Person” shall have the meaning set forth in Section 5(c) hereof.

 

“Indemnifying
Person” shall have the meaning set forth in Section 5(c) hereof.

 

“Indenture”
shall mean the Indenture relating to the Securities and the Exchange Securities
dated as of December 19, 2005 among the Company, the Guarantors and U.S.
Bank National Association, as trustee, and as the same may be amended from
time to time in accordance with the terms thereof.

 

“Initial
Purchasers” shall have the meaning set forth in the preamble.

 

“Inspector”
shall have the meaning set forth in Section 3(a)(xiii) hereof.

 

“JPMorgan”
shall have the meaning set forth in the preamble.

 

“Liquidated
Damages” shall have the meaning set forth in Section 2(d) hereof.

 

“Majority
Holders” shall mean the Holders of a majority of the aggregate principal amount
of the outstanding Registrable Securities; provided that whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, any Registrable Securities owned directly or
indirectly by the Company or any of its affiliates shall not be considered
outstanding and shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage or amount; and provided,
further, that if the Company shall issue any additional Securities under
the Indenture prior to consummation of the Exchange Offer or, if applicable,
the effectiveness of any Shelf Registration Statement, such additional
Securities and the Registrable Securities to which this Agreement relates shall
be treated together as one class for purposes of determining whether the
consent or approval of Holders of a specified percentage of Registrable
Securities has been obtained.

 

“Participating
Broker-Dealers” shall have the meaning set forth in Section 4(a) hereof.

 

“Person” shall
mean an individual, partnership, limited liability company, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.

 

“Prospectus”
shall mean the prospectus included in a Registration Statement, including any
preliminary prospectus, and any such prospectus as amended or supplemented by
any prospectus supplement or “free-writing prospectus” (as defined in Rule 405
under the Securities Act), including a prospectus supplement or free-writing
prospectus with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to such prospectus, and in each case including
any document incorporated by reference therein.

 

“Purchase
Agreement” shall have the meaning set forth in the preamble.

 

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“Registrable
Securities” shall mean the Securities; provided that the Securities
shall cease to be Registrable Securities (i) when a Registration Statement
with respect to such Securities has been declared effective under the
Securities Act and such Securities have been exchanged or disposed of pursuant
to such Registration Statement, (ii) when such Securities are eligible to
be sold pursuant to Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the Securities Act or (iii) when such Securities
cease to be outstanding.

 

“Registration
Default” shall have the meaning set forth in Section 2(d) hereof.

 

“Registration
Expenses” shall mean any and all expenses incident to performance of or compliance
by the Company and the Guarantors with this Agreement, including without
limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees
and expenses incurred in connection with compliance with state securities or
blue sky laws (including reasonable fees and disbursements of counsel for any
Underwriters or Holders in connection with blue sky qualification of any
Exchange Securities or Registrable Securities), (iii) all expenses of any
Persons in preparing or assisting in printing and distributing any Registration
Statement, any Prospectus and any amendments or supplements thereto, any
underwriting agreements, securities sales agreements or other similar
agreements and any other documents relating to the performance of and
compliance with this Agreement, (iv) all rating agency fees, (v) all
fees and disbursements relating to the qualification of the Indenture under
applicable securities laws, (vi) the fees and disbursements of the Trustee
and its counsel, (vii) the fees and disbursements of counsel for the
Company and the Guarantors and, in the case of a Shelf Registration Statement,
the reasonable fees and disbursements of one counsel for the Holders (which
counsel shall be selected by the Majority Holders and which counsel may also
be counsel for the Initial Purchasers) and (viii) the fees and disbursements
of the independent public accountants of the Company and the Guarantors,
including the expenses of any special audits or “comfort” letters required by
this Agreement, but excluding fees and expenses of counsel to the Underwriters
(other than fees and expenses set forth in clause (ii) above) or the
Holders and underwriting discounts and commissions, brokerage commissions and
transfer taxes, if any, relating to the sale or disposition of Registrable
Securities by a Holder.

 

“Registration
Statement” shall mean any registration statement of the Company and the
Guarantors that covers any of the Exchange Securities or Registrable Securities
pursuant to the provisions of this Agreement and all amendments and supplements
to any such registration statement, including post-effective amendments, in
each case including the Prospectus contained therein, all exhibits thereto and
any document incorporated by reference therein.

 

“SEC” shall
mean the United States Securities and Exchange Commission.

 

“Securities” shall
have the meaning set forth in the Preamble.

 

“Securities
Act” shall mean the Securities Act of 1933, as amended from time to time.

 

“Shelf
Effectiveness Period” shall have the meaning set forth in Section 2(b) hereof.

 

“Shelf
Registration” shall mean a registration effected pursuant to Section 2(b) hereof.

 

“Shelf
Registration Default” shall have the meaning set forth in Section 2(d) hereof.

 

“Shelf
Registration Statement” shall mean a “shelf” registration statement of the
Company and the Guarantors that covers all or a portion of the Registrable
Securities (but no other securities (other than debt securities similar to the
Securities) unless approved by the Holders of a majority of the aggregate

 

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principal
amount of Registrable Securities that are to be covered by such Shelf
Registration Statement) on an appropriate form under Rule 415 under
the Securities Act, or any similar rule that may be adopted by the
SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and any document incorporated by reference
therein.

 

“Staff” shall
mean the staff of the SEC.

 

“Target
Registration Date” shall have the meaning set forth in Section 2(d)(i) hereof.

 

“Trust
Indenture Act” shall mean the Trust Indenture Act of 1939, as amended from time
to time.

 

“Trustee”
shall mean the trustee with respect to the Securities under the Indenture.

 

“Underwriter”
shall have the meaning set forth in Section 3(e) hereof.

 

“Underwritten
Offering” shall mean an offering in which Registrable Securities are sold to an
Underwriter for reoffering to the public.

 

2.                                       Registration
Under the Securities Act.

 

(a)                                  To
the extent not prohibited by any applicable law or applicable interpretations
of the Staff, the Company and the Guarantors shall (i) cause to be filed
an Exchange Offer Registration Statement covering an offer to the Holders to
exchange all the Registrable Securities for like principal amount of Exchange
Securities and (ii) use their reasonable best efforts to have such
Registration Statement declared effective and upon written request from any
participating Broker-Dealer remain effective until the earlier of (A) such
time as the Registrable Securities have been disposed of by such Participating
Broker-Dealer or (B) 90 days after the closing of the Exchange Offer. The
Company and the Guarantors shall commence the Exchange Offer promptly after the
Exchange Offer Registration Statement is declared effective by the SEC and use
their commercially reasonable efforts to complete the Exchange Offer not later
than 60 days after such effective date.

 

The Company
and the Guarantors shall commence the Exchange Offer by mailing the related
Prospectus, appropriate letters of transmittal and other accompanying documents
to each Holder stating, in addition to such other disclosures as are required
by applicable law, substantially the following:

 

(i)                  that the Exchange Offer is being made
pursuant to this Agreement and that all Registrable Securities validly tendered and not properly withdrawn
will be accepted for exchange;

 

(ii)               the dates of acceptance for exchange
(which shall be a period of at least 20 Business Days from the date such notice
is mailed) (the “Exchange Dates”);

 

(iii)            that any Registrable Security not tendered
will remain outstanding and continue to accrue interest but will not retain any
rights under this Agreement;

 

(iv)           that any Holder electing to have a Registrable
Security exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the appropriate letters of
transmittal, to the institution and at the address (located in the Borough of
Manhattan, The City of New York) and in the manner specified in the notice,
prior to the close of business on the last Exchange Date; and

 

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(v)              that any Holder will be entitled to
withdraw its election, not later than the close of business on the last
Exchange Date, by sending to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Registrable Securities delivered for
exchange and a statement that such Holder is withdrawing its election to have
such Securities exchanged.

 

As a condition
to participating in the Exchange Offer, a Holder will be required to represent
to the Company and the Guarantors that (i) any Exchange Securities to be
received by it will be acquired in the ordinary course of its business, (ii) at
the time of the commencement of the Exchange Offer it has no arrangement or
understanding with any Person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Securities in violation of the
provisions of the Securities Act, (iii) it is not an “affiliate” (within
the meaning of Rule 405 under the Securities Act) of the Company or any
Guarantor and (iv) if such Holder is a broker-dealer that will receive
Exchange Securities for its own account in exchange for Registrable Securities
that were acquired as a result of market-making or other trading activities, then
such Holder will deliver a Prospectus in connection with any resale of such
Exchange Securities.

 

As soon as
practicable after the last Exchange Date, the Company and the Guarantors shall:

 

(i)                  accept for exchange Registrable
Securities or portions thereof validly tendered and not properly withdrawn
pursuant to the Exchange Offer; and

 

(ii)               deliver, or cause to be delivered, to
the Trustee for cancellation all Registrable Securities or portions thereof so
accepted for exchange by the Company and issue, and cause the Trustee to
promptly authenticate and deliver to each Holder, Exchange Securities equal in
aggregate principal amount to the aggregate principal amount of the Registrable
Securities surrendered by such Holder.

 

The Company
and the Guarantors shall use their commercially reasonable efforts to complete
the Exchange Offer as provided above and shall comply with the applicable
requirements of the Securities Act, the Exchange Act and other applicable laws
and regulations in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than that the Exchange Offer does not
violate any applicable law or applicable interpretation of the Staff.

 

If, during the
period the Exchange Offer Registration Statement is effective, an event occurs
which makes any statement made in such Exchange Offer Registration Statement or
the related Prospectus untrue in any material respect or which requires the
making of any changes in such Exchange Offer Registration Statement in order to
make the statements therein not misleading or in such Prospectus in order to
make the statements therein,  in the
light of the circumstances under which they were made, not misleading, the
Company and the Guarantors shall use their commercially reasonable efforts to
prepare and file with the SEC a supplement or post-effective amendment to the
Exchange Offer Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The Company
agrees to notify the Holders to suspend the exchange of the Registrable
Securities as promptly as practicable after the occurrence of such an event,
and the Holders hereby agree to suspend such exchange until the Company and the
Guarantors have amended or supplemented the Prospectus to correct such misstatement
or omission.

 

5

 

(b)                                 In
the event that (i) the Company and the Guarantors determine that the
Exchange Offer Registration provided for in Section 2(a) above is not
available or may not be completed as soon as practicable after the last
Exchange Date because it would violate any applicable law or applicable
interpretation of the Staff, (ii) the Exchange Offer is not for any other
reason completed on or prior to the 20th Business Day following the Target
Registration Date or (iii) the Exchange Offer has been completed and,
based upon the reasonable advice of counsel for the Initial Purchasers, a
Registration Statement must be filed and a Prospectus must be delivered by the
Initial Purchasers in connection with any offer or sale of Registrable
Securities originally purchased and still held by the Initial Purchasers, the
Company and the Guarantors shall cause to be filed as soon as practicable after
such determination, date or request, as the case may be, a Shelf Registration
Statement providing for the sale of all the Registrable Securities by the
Holders thereof and use their reasonable best efforts to have such Shelf
Registration Statement declared effective by the SEC. To the extent a Shelf
Registration Statement is required to be filed pursuant to clause (ii) and
the Exchange Offer is completed on a date which is later than 300 days after
the Closing Date, upon the completion of the Exchange Offer, the Company and
the Guarantors will no longer be required to make effective or continue the
effectiveness of the Shelf Registration Statement except as may be
required pursuant to clause (i) or (iii).

 

In the event
that the Company and the Guarantors are required to file a Shelf Registration
Statement pursuant to clause (iii) of the preceding sentence, the Company
and the Guarantors shall file and use their reasonable best efforts to have
declared effective by the SEC both an Exchange Offer Registration Statement
pursuant to Section 2(a) with respect to all Registrable Securities
and a Shelf Registration Statement (which may be a combined Registration
Statement with the Exchange Offer Registration Statement) with respect to
offers and sales of Registrable Securities held by the Initial Purchasers after
completion of the Exchange Offer.

 

The Company
and the Guarantors agree to use their reasonable best efforts to keep the Shelf
Registration Statement continuously effective until the expiration of the
period referred to in Rule 144(k) (or any similar rule then in force,
but not Rule 144A) under the Securities Act with respect to the
Registrable Securities or such shorter period that will terminate when all the
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement or are no longer outstanding
(the “Shelf Effectiveness Period”). The Company and the Guarantors further
agree to supplement or amend the Shelf Registration Statement and the related
Prospectus if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and regulations
thereunder for shelf registration or if reasonably and timely requested by a
Holder to correct information relating to such Holder (provided the
Majority Holders do not object to such amendment and resulting limitation of
use of the Shelf Registration Statement), and to use their reasonable best
efforts to cause any such amendment to become effective and such Shelf
Registration Statement and Prospectus to become usable as soon as thereafter
practicable; provided, that in the case of amendments (but not supplements) to
the Shelf Registration Statement and the related Prospectus, the Company and
the Guarantors shall not be required to amend the Shelf Registration Statement
and the related Prospectus to add additional Holders more than three times per calendar
quarter. The Company and the Guarantors agree to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly
after its being used or filed with the SEC.

 

(c)                                  The
Company and the Guarantors shall pay all Registration Expenses in connection
with any registration pursuant to Section 2(a) or Section 2(b) hereof.
Each Holder shall pay all underwriting discounts and commissions, brokerage
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder’s Registrable Securities pursuant to the Shelf Registration
Statement.

 

6

 

(d)                                 An
Exchange Offer Registration Statement pursuant to Section 2(a) hereof
or a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC.

 

The Company,
each Guarantor and the Initial Purchasers agree that the Holders will suffer
damages if the Company or the Guarantors fail to fulfill their respective
obligations under Section 2(a) or Section 2(b) hereof and
that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, the Company and each Guarantor agree that in the event
that:

 

(i)                  either the Exchange Offer
Registration Statement or the Shelf Registration Statement, if required hereby,
is not declared effective on or prior to the 270th day after the Closing Date
(the “Target Registration Date”) or the Exchange Offer is not completed (if no
Shelf Registration Statement has been declared effective) within 20 Business
Days of the Target Registration Date (each such event, a “Registration Default”);
or

 

(ii)               the Shelf Registration Statement, if
required hereby, has been declared effective and thereafter either ceases to be
effective or the Prospectus contained therein ceases to be usable at any time
during the Shelf Effectiveness Period, and such failure to remain effective or
usable continues for more than 60 days (whether or not consecutive) in any
12-month period (a “Shelf Registration Default”);

 

then the
Company and the Guarantors hereby agree to pay each Holder of Registrable
Securities affected thereby, liquidated damages (“Liquidated Damages”). Liquidated
Damages will accrue on the affected Registrable Securities and the affected
Exchange Securities, as applicable. The rate of Liquidated Damages will be
0.25% per annum of the principal amount of
Registrable Securities held by such Holder for the first 90-day period
immediately following the occurrence of a Registration Default or Shelf
Registration Default, as applicable, increasing by 0.25% per annum with respect to each subsequent 90-day period, up to a
maximum of 1.00% per annum, in each case
until (x) with respect to a Registration Default, the Exchange Offer is
completed or the Shelf Registration Statement, if required hereby, is declared
effective by the SEC or the Securities become freely tradeable under the
Securities Act (which shall include, without limitation, an effective Shelf Registration
Statement relating to the Securities) or (y) with respect to a Shelf
Registration Default, the Shelf Registration Statement has again been declared
effective or the Prospectus again becomes usable.

 

Notwithstanding
the foregoing, (1) the amount of Liquidated Damages payable shall not
increase because more than one Registration Default has occurred and is pending
and (2) a Holder of Registrable Securities or Exchange Securities who is
not entitled to the benefits of the Shelf Registration Statement (i.e.,
such Holder has not elected to furnish information to the Company in accordance
with Section 3(b) hereof) shall not be entitled to Liquidated Damages
with respect to a Shelf Registration Default.

 

Anything
herein to the contrary notwithstanding, no Holder who (x) was eligible to
exchange such Holder’s outstanding Securities at the time that the Exchange
Offer was pending and consummated and (y) failed to validly tender such
Securities for exchange pursuant to the Exchange Offer shall be entitled to
receive any Liquidated Damages that would otherwise accrue subsequent to the
date the Exchange Offer is consummated pursuant to this Section 2(d).

 

(e)                                  The
Company shall notify the Trustee within five Business Days after each date on
which an event occurs in respect of which Liquidated Damages are required to be
paid. Any amounts of Liquidated Damages due pursuant to this Section 2
will be payable in addition to any other interest payable from time to time
with respect to the Registrable Securities in cash semi-annually on the
interest payment dates specified in the Indenture (to the holders of record as
specified in the Indenture), commencing with

 

7

 

the first such interest payment
date occurring after any such Liquidated Damages commence to accrue. The amount
of Liquidated Damages will be determined in a manner consistent with the
calculation of interest under the Indenture.

 

(f)                                    Without
limiting the remedies available to the Initial Purchasers and the Holders, the
Company and the Guarantors acknowledge that any failure by the Company or the
Guarantors to comply with their obligations under Section 2(a) and Section 2(b) hereof
may result in material irreparable injury to the Initial Purchasers or the
Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such
relief as may be required to specifically enforce the Company’s and the
Guarantors’ obligations under Section 2(a) and Section 2(b) hereof.

 

3.                                       Registration
Procedures.

 

(a)                                  In
connection with their obligations pursuant to Section 2(a) and Section 2(b) hereof,
the Company and the Guarantors shall:

 

(i)                  prepare and file with the SEC a
Registration Statement on the appropriate form under the Securities Act,
which form (x) shall be selected by the Company and the Guarantors, (y)
shall, in the case of a Shelf Registration, be available for the sale of the
Registrable Securities by the selling Holders thereof and (z) shall comply as
to form in all material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed therewith; and
use their commercially reasonable efforts to cause such Registration Statement
to become effective and remain effective for the applicable period in
accordance with Section 2 hereof;

 

(ii)               subject to section 3(a)(ix),
prepare and file with the SEC such amendments and post-effective amendments to
each Registration Statement as may be necessary to keep such Registration
Statement effective for the applicable period in accordance with Section 2
hereof and cause each Prospectus to be supplemented by any required prospectus
supplement and, as so supplemented, to be filed pursuant to Rule 424 under
the Securities Act; and keep each Prospectus current during the period
described in Section 4(3) of and Rule 174 under the Securities
Act that is applicable to transactions by brokers or dealers with respect to
the Registrable Securities or Exchange Securities;

 

(iii)            in the case of a Shelf Registration,
furnish to each Holder of Registrable Securities, to counsel for the Initial
Purchasers, to counsel for such Holders (if any had been identified by written
notice to the Company) and to each Underwriter of an Underwritten Offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or supplement
thereto, as such Holder or Underwriter may reasonably request, in order to
facilitate the sale or other disposition of the Registrable Securities
thereunder; and, subject to Section 3(a)(ix), the Company and the
Guarantors consent to the use of such Prospectus and any amendment or
supplement thereto in accordance with applicable law and this Agreement by each
of the selling Holders of Registrable Securities and any such Underwriters in
connection with the offering and sale of the Registrable Securities covered by
and in the manner described in such Prospectus or any amendment or supplement
thereto in accordance with applicable law and this Agreement;

 

(iv)           use their commercially reasonable efforts to
register or qualify the Registrable Securities under all applicable state
securities or blue sky laws of such jurisdictions as any Holder of Registrable
Securities covered by a Registration Statement shall reasonably request in
writing

 

8

 

by the time the applicable Registration Statement is declared effective
by the SEC; cooperate with such Holders in connection with any filings required
to be made with the National Association of Securities Dealers, Inc.; and
do any and all other acts and things that may be reasonably necessary or
advisable to enable each Holder to complete the disposition in each such
jurisdiction of the Registrable Securities owned by such Holder; provided
that neither the Company nor any Guarantor shall be required to (1) qualify
as a foreign corporation or other entity or as a dealer in securities in any
such jurisdiction where it would not otherwise be required to so qualify, (2) file
any general consent to service of process in any such jurisdiction or (3) subject
itself to taxation in any such jurisdiction if it is not so subject;

 

(v)              in the case of a Shelf Registration,
notify each Holder of Registrable Securities, counsel for such Holders and
counsel for the Initial Purchasers promptly and, if requested by any such
Holder or counsel, confirm such advice in writing (1) when a Registration
Statement has become effective and when any post-effective amendment thereto
has been filed and becomes effective, (2) of any request by the SEC or any
state securities authority for amendments and supplements to a Registration
Statement and Prospectus or for additional information after the Registration
Statement has become effective, (3) of the issuance by the SEC or any
state securities authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose, (4) if,
between the effective date of a Registration Statement and the closing of any
sale of Registrable Securities covered thereby, the representations and
warranties of the Company or any Guarantor contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to an offering of such Registrable Securities cease to be true and
correct in all material respects or if the Company or any Guarantor receives
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (5) of the happening of any event during the
period a Shelf Registration Statement is effective that makes any statement
made in such Registration Statement or the related Prospectus untrue in any
material respect or that requires the making of any changes in such
Registration Statement in order to make the statements therein not misleading
or in such Prospectus in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading and (6) of
any determination by the Company or any Guarantor that a post-effective
amendment to a Registration Statement would be appropriate;

 

(vi)           use their reasonable best efforts to obtain
the withdrawal of any order suspending the effectiveness of a Registration
Statement as soon as practicable and promptly provide notice to each Holder of
the withdrawal of any such order;

 

(vii)        in the case of a Shelf Registration, if a Shelf
Registration is required, furnish to each Holder of Registrable Securities,
without charge, at least one conformed copy of each Registration Statement and any
post-effective amendment thereto (without any documents incorporated therein by
reference or exhibits thereto, unless requested);

 

(viii)     in the case of a Shelf Registration, cooperate
with the selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold and not bearing any restrictive legends and enable such Registrable
Securities to be issued in such denominations and registered in such names
(consistent with the provisions of the Indenture) as such selling Holders may reasonably
request at least one Business Day prior to the closing of any sale of
Registrable Securities;

 

9

 

(ix)             in the case of a Shelf Registration, upon
the occurrence of any event contemplated by Section 3(a)(v)(5) hereof,
use their commercially reasonable efforts to prepare and file with the SEC a
supplement or post-effective amendment to such Shelf Registration Statement or
the related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to purchasers
of the Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and the Company and the Guarantors shall notify the
Holders of Registrable Securities to suspend use of the Prospectus as promptly
as practicable after the occurrence of such an event, and such Holders hereby
agree to suspend use of the Prospectus until the Company and the Guarantors
have amended or supplemented the Prospectus to correct such misstatement or
omission or until the Company notifies the Holders that the sale of the
Registrable Securities may be resumed. Notwithstanding the foregoing (and
anything else to the contrary in this Agreement), the Company and the
Guarantors may suspend the use of the Shelf Registration Statement if the
board of directors of the Company determines in good faith that it is in the
best interests of the Company not to disclose the existence of facts
surrounding any proposed or pending material corporate transaction involving
the Company or the Guarantors, and the Company notifies the Holders of
Registrable Securities promptly after the board of directors makes such
determination; provided, however, that the period referred to in Section 2
during which the Company and the Guarantors agree to use their commercially
reasonable efforts to keep such Shelf Registration Statement effective shall be
extended by the number of days during which the use of such Shelf Registration
Statement was suspended pursuant to the foregoing provision; provided, however,
that the Company and the Guarantors may give any such notice only twice
during any 365-day period and any such suspensions shall not exceed 45 days for
each suspension and 75 days in the aggregate and there shall not be more
than two suspensions in effect during any 365-day period;

 

(x)                a reasonable time prior to the filing
of any Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus or of any document that is
to be incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of such
document to the Initial Purchasers and their counsel (and, in the case of a
Shelf Registration Statement, to the Holders of Registrable Securities and
their counsel) and make such of the representatives of the Company and the
Guarantors as shall be reasonably requested by the Initial Purchasers or their
counsel (and, in the case of a Shelf Registration Statement, the Holders of
Registrable Securities or their counsel) available for discussion of such
document; and the Company and the Guarantors shall not, at any time after
initial filing of a Registration Statement, file any Prospectus, any amendment
of or supplement to a Registration Statement or a Prospectus, or any document
that is to be incorporated by reference into a Registration Statement or a
Prospectus, of which the Initial Purchasers and their counsel (and, in the case
of a Shelf Registration Statement, the Holders of Registrable Securities and
their counsel) shall not have previously been advised and furnished a copy or
to which the Initial Purchasers or their counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel) shall reasonably object
within five days of receipt;

 

(xi)             obtain a CUSIP number for all Exchange
Securities or Registrable Securities, as the case may be, not later than
the effective date of a Registration Statement;

 

(xii)          cause the Indenture to be qualified under the
Trust Indenture Act in connection with the registration of the Exchange
Securities or Registrable Securities, as the case may be; cooperate with
the Trustee and the Holders to effect such changes to the Indenture as may be
required

 

10

 

for the Indenture to be so qualified in accordance with the terms of
the Trust Indenture Act; and execute, and use their commercially reasonable
efforts to cause the Trustee to execute, all documents as may be required
to effect such changes and all other forms and documents required to be filed
with the SEC to enable the Indenture to be so qualified in a timely manner;

 

(xiii)                 in the case of a
Shelf Registration (including an Underwritten Offering thereunder), make
available for inspection by a representative of the Holders of a majority in
principal amount of the Registrable Securities (an “Inspector”), which
Inspector shall be reasonably acceptable to the Company and Guarantors, any
Underwriter participating in any disposition pursuant to such Shelf
Registration Statement, any attorneys and accountants designated by the Holders
of a majority in principal amount of Registrable Securities and any attorneys
and accountants designated by such Underwriter, at reasonable times and in a reasonable
manner, all pertinent financial and other records, documents and properties of
the Company and the Guarantors, and cause the respective officers, directors
and employees of the Company and the Guarantors to supply all information
reasonably requested by any such Inspector, Underwriter, attorney or accountant
in connection with a Shelf Registration Statement, in each case that would
customarily be reviewed or examined in connection with “due diligence” review
of the Company and the Guarantors; provided that the foregoing inspection and information
gathering (1) shall be coordinated on behalf of the selling Holders,
Underwriters and representatives thereof by one counsel, who shall be such
counsel as may be chosen by the Majority Holders or by the Underwriters,
as the case may be, and (2) if any such information is identified by
the Company or any Guarantor as being confidential or proprietary, shall not be
available for any such Holder or Underwriter who does not agree in writing
pursuant to a customary non-disclosure agreement to hold such information in
confidence;

 

(xiv)                [reserved];

 

(xv)                   if reasonably
requested by any Holder of Registrable Securities covered by a Shelf
Registration Statement, promptly include in a Prospectus supplement or post-effective
amendment such information with respect to such Holder as such Holder
reasonably requests to be included therein and make all required filings of
such Prospectus supplement or such post-effective amendment as soon as the
Company has received notification of the matters to be so included in such
filing; provided, that in the case of amendments (but not supplements) to the
Shelf Registration Statement and the related Prospectus, the Company and the
Guarantors shall not be required to amend the Shelf Registration Statement and
the related Prospectus to add additional Holders more than three times per
calendar quarter; and

 

(xvi)                in the case of a
Shelf Registration, enter into such customary agreements and take all such
other reasonable actions in connection therewith (including those requested by
the Holders of a majority in principal amount of the Registrable Securities
being sold) in order to expedite or facilitate the disposition of such
Registrable Securities including, but not limited to, if requested by the
Holders of a majority in principal amount of the Securities covered by a Shelf
Registration Statement, an Underwritten Offering and in such connection, (1) to
the extent possible, make such representations and warranties to the Holders
and any Underwriters of such Registrable Securities with respect to the
business of the Company and its subsidiaries and the Registration Statement,
Prospectus and documents incorporated by reference or deemed incorporated by
reference, if any, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings, (2) obtain
opinions of counsel to the Company and the Guarantors (which counsel and
opinions, in form, scope and substance, shall be reasonably satisfactory to the
Holders and such Underwriters and their respective counsel) addressed to each

 

11

 

selling Holder and Underwriter of Registrable
Securities, covering the matters customarily covered in opinions requested in
underwritten offerings of the type contemplated by this provision, (3) obtain
“comfort” letters from the independent certified public accountants of the
Company and the Guarantors (and, if necessary, any other certified public
accountant of any subsidiary of the Company or any Guarantor, or of any
business acquired by the Company or any Guarantor for which financial
statements and financial data are or are required to be included in the
Registration Statement) addressed to each selling Holder and Underwriter of
Registrable Securities (subject, in each case, to the policies and procedures
of the independent certified public accountants of the Company and the
Guarantors and such other independent certified public accountants regarding
the preparation and delivery of such letters), such letters to be in customary form and
covering matters of the type customarily covered in “comfort” letters in
connection with underwritten offerings of the type contemplated by this
provision and (4) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in principal amount of the
Registrable Securities being sold or the Underwriters, and which are
customarily delivered in underwritten offerings of the type contemplated by
this provision, to evidence the continued validity of the representations and
warranties of the Company and the Guarantors made pursuant to clause (1) above
and to evidence compliance with any customary conditions contained in an
underwriting agreement.

 

(b)                                 In
the case of a Shelf Registration Statement, the Company and the Guarantors may require
each Holder of Registrable Securities, as a condition to the inclusion of such
Holder’s Registrable Securities in a Shelf Registration Statement, to furnish
to the Company such information in writing within 10 Business Days after
receipt of a request therefor regarding such Holder and the proposed
disposition by such Holder of such Registrable Securities as the Company and
the Guarantors may from time to time reasonably request in writing. In
addition, each Selling Holder agrees to promptly furnish additional information
required to be disclosed in order to make the information previously furnished
to the Company not materially misleading. So long as any Holder fails to furnish
such information in a reasonably timely manner after receiving the request, the
Company and the Guarantors shall (i) have no obligation under this
Agreement to provide for the disposition of such Holder’s Registrable
Securities in the Shelf Registration Statement in respect to which such
information was requested, (ii) not be required to provide for the
disposition of such Holder’s Registrable Securities in any post-effective
amendment to such Shelf Registration Statement or any future Shelf Registration
Statement that is not otherwise required to be filed and (iii) not be
required to pay any liquidated damages to such Holder as provided in Section 2(d) hereof.
Each Holder including Registrable Securities in a Shelf Registration Statement
shall agree to furnish promptly to the Company all information regarding such
Holder and the proposed distribution by such Holder of such Registrable
Securities required to make the information previously furnished to the Company
by such Holder not materially misleading.

 

(c)                                  In
the case of a Shelf Registration Statement, each Holder of Registrable
Securities agrees that, upon receipt of any notice from the Company or any
Guarantor of the happening of any event of the kind described in Section 3(a)(v)(3) or
3(a)(v)(5) hereof or a notice pursuant to the last sentence of this
paragraph, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the Shelf Registration Statement until such Holder’s
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(a)(ix) hereof and, if so directed by the Company or any
Guarantor, such Holder will deliver to the Company and the Guarantors all
copies in its possession, other than permanent file copies then in such Holder’s
possession, of the Prospectus covering such Registrable Securities that is
current at the time of receipt of such notice. In addition, the Company may give
notice of suspension of offering and sale under the Shelf Registration
Statement in accordance with the last sentence of Section 3(a)(ix).

 

12

 

(d)                                 If
the Company or any Guarantor shall give any notice pursuant to Section 3(c) hereof
to suspend the disposition of Registrable Securities pursuant to a Shelf Registration
Statement, the Company and the Guarantors shall extend the period during which
such Shelf Registration Statement shall be maintained effective pursuant to
this Agreement by the number of days during the period from and including the
date of the giving of such notice to and including the date when the Holders of
such Registrable Securities shall have received copies of the supplemented or
amended Prospectus necessary to resume such dispositions.

 

(e)                                  The
Holders of Registrable Securities covered by a Shelf Registration Statement who
desire to do so may sell such Registrable Securities in an Underwritten
Offering referred to in Section 3(a)(xv) above. In any such Underwritten
Offering, the investment bank or investment banks and manager or managers (each
an “Underwriter”) that will administer the offering will be selected by the
Holders of a majority in principal amount of the Registrable Securities
included in such offering.

 

4.                                       Participation
of Broker-Dealers in Exchange Offer.

 

(a)                                  The
Staff has taken the position that any broker-dealer that receives Exchange
Securities for its own account in the Exchange Offer in exchange for Securities
that were acquired by such broker-dealer as a result of market-making or other
trading activities (a “Participating Broker-Dealer”) may be deemed to be
an “underwriter” within the meaning of the Securities Act and must deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such Exchange Securities.

 

The Company
and the Guarantors understand that it is the Staff’s position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means
by which Participating Broker-Dealers may resell the Exchange Securities,
without naming the Participating Broker-Dealers or specifying the amount of
Exchange Securities owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligation
under the Securities Act in connection with resales of Exchange Securities for
their own accounts, so long as the Prospectus otherwise meets the requirements
of the Securities Act.

 

(b)                                 In
light of the above, and notwithstanding the other provisions of this Agreement,
the Company and the Guarantors agree to amend or supplement the Prospectus
contained in the Exchange Offer Registration Statement until the earlier of (i) such
time as the Participating Broker-Dealer shall have disposed of the Registrable Securities
and (ii) 90 days after the closing of the Exchange Offer (as such period may be
extended pursuant to Section 3(d) of this Agreement), if requested by
one or more Participating Broker-Dealers, in order to expedite or facilitate
the disposition of any Exchange Securities by Participating Broker-Dealers
consistent with the positions of the Staff recited in Section 4(a) above.
The Company and the Guarantors further agree that Participating Broker-Dealers
shall be authorized to deliver such Prospectus during such period in connection
with the resales contemplated by this Section 4 in accordance with applicable
law and this Agreement.

 

(c)                                  The
Initial Purchasers shall have no liability to the Company, any Guarantor or any
Holder with respect to any request that they may make pursuant to Section 4(b) above.

 

5.                                       Indemnification
and Contribution.

 

(a)                                  The
Company and each Guarantor, jointly and severally, agree to indemnify and hold
harmless each Initial Purchaser and each Holder, their respective affiliates,
directors and officers and each Person, if any, who controls any Initial
Purchaser or any Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages

 

13

 

and liabilities (including,
without limitation, legal fees and other expenses incurred in connection with
any suit, action or proceeding or any claim asserted, as such fees and expenses
are incurred), joint or several, that arise out of, or are based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages or liabilities arise out of, or are based upon,
any untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with any information relating to any Initial
Purchaser, or information relating to any Holder furnished to the Company in
writing through JPMorgan or any selling Holder expressly for use therein;
provided, that with respect to any such untrue statement in or omission from
any preliminary prospectus, the indemnity agreement contained in this paragraph
(a) shall not inure to the benefit of any Initial Purchaser or Holder (or
any of their affiliates, directors and officers and each person, if any, who
controls such Initial Purchaser or Holder within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) in connection
with the sale of Securities or Exchange Securities by an Initial Purchaser or
Holder, to the extent that such untrue statement or omission was corrected in a
prospectus supplement or a free-writing prospectus delivered to the Person
asserting such loss, claim, damage or liability prior to the time of sale of
such Securities or Exchange Securities. In connection with any Underwritten
Offering permitted by Section 3, the Company and the Guarantors will also
agree to jointly and severally indemnify the Underwriters, if any, selling brokers,
dealers and similar securities industry professionals participating in such
Underwritten Offering, their respective affiliates and each Person who controls
such Persons (within the meaning of the Securities Act and the Exchange Act) to
the same extent as provided above with respect to the indemnification of the
Holders, if requested in connection with any Registration Statement for such
Underwritten Offering.

 

(b)                                 Each
Holder agrees, severally and not jointly, to indemnify and hold harmless the
Company, the Guarantors, the Initial Purchasers and the other selling Holders,
the directors, officers, employees, managers, members and general partners of
the Company and the Guarantors, each officer of the Company and the Guarantors
who signed the Registration Statement and each Person, if any, who controls the
Company, the Guarantors, any Initial Purchaser and any other selling Holder
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above,
but only with respect to any losses, claims, damages or liabilities that arise
out of, or are based upon, any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with any information
relating to such Holder furnished to the Company in writing by such Holder
expressly for use in any Registration Statement and any Prospectus.

 

(c)                                  If
any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any Person
in respect of which indemnification may be sought pursuant to either
paragraph (a) or (b) above, such Person (the “Indemnified Person”)
shall promptly notify the Person against whom such indemnification may be
sought (the “Indemnifying Person”) in writing; provided that the failure
to notify the Indemnifying Person shall not relieve it from any liability that
it may have under this Section 5 except to the extent that it has
been materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure; and provided, further, that the
failure to notify the Indemnifying Person shall not relieve it from any
liability that it may have to an Indemnified Person otherwise than under
this Section 5. If any such proceeding shall be brought or asserted
against an Indemnified Person and it shall have notified the Indemnifying
Person thereof, the Indemnifying Person shall retain counsel reasonably
satisfactory to the Indemnified Person (who shall not without the consent of
the Indemnified Person, be counsel to the Indemnifying Person) to represent the
Indemnified Person in such

 

14

 

proceeding and shall pay the
reasonable fees and expenses of such counsel related to such proceeding, as
incurred. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the reasonable fees and expenses of such counsel
shall be at the expense of such Indemnified Person unless (i) the Indemnifying
Person and the Indemnified Person shall have mutually agreed to the contrary;
or (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person. It is understood
and agreed that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm (in addition to any
local counsel) for all Indemnified Persons, and that all such fees and expenses
shall be reimbursed as they are incurred. Any such separate firm (x) for any
Initial Purchaser, its affiliates, directors and officers and any control
Persons of such Initial Purchaser shall be designated in writing by JPMorgan,
(y) for any Holder, its directors and officers and any control Persons of such
Holder shall be designated in writing by the Majority Holders and (z) in all
other cases shall be designated in writing by the Company. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the Indemnifying Person agrees to indemnify
each Indemnified Person from and against any loss or liability by reason of
such settlement or judgment. Notwithstanding the foregoing sentence, if at any
time an Indemnified Person shall have requested that an Indemnifying Person
reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by this paragraph, the Indemnifying Person shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by the Indemnifying
Person of such request and (ii) the Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement. No Indemnifying Person shall, without the written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnification could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any
statement as to or any admission of fault, culpability or a failure to act by
or on behalf of any Indemnified Person.

 

(d)                                 If
the indemnification provided for in paragraphs (a) and (b) above is
unavailable to an Indemnified Person or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraph, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company and the Guarantors from the offering of the Securities and the Exchange
Securities, on the one hand, and by the Holders from receiving Securities or
Exchange Securities registered under the Securities Act, on the other hand, or (ii) if
the allocation provided by clause (i) is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) but also the relative fault of the Company and
the Guarantors on the one hand and the Holders on the other in connection with
the statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The relative
fault of the Company and the Guarantors on the one hand and the Holders on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company and the Guarantors or by the Holders and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

 

(e)                                  The
Company, the Guarantors and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by pro
rata allocation (even if the Holders

 

15

 

were treated as one entity for
such purpose) or by any other method of allocation that does not take account
of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses incurred by such Indemnified Person in connection with any such
action or claim. Notwithstanding the provisions of this Section 5, in no
event shall a Holder be required to contribute any amount in excess of the
amount by which the total price at which the Securities or Exchange Securities
sold by such Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation.

 

(f)                                    The
remedies provided for in this Section 5 are not exclusive and shall not
limit any rights or remedies that may otherwise be available to any
Indemnified Person at law or in equity.

 

(g)                                 The
indemnity and contribution provisions contained in this Section 5 shall
remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf
of the Initial Purchasers or any Holder or any Person controlling any Initial
Purchaser or any Holder, or by or on behalf of the Company or the Guarantors or
the officers or directors of or any Person controlling the Company or the
Guarantors, (iii) acceptance of any of the Exchange Securities and (iv) any
sale of Registrable Securities pursuant to a Shelf Registration Statement.

 

6.                                       General.

 

(a)                                  No Inconsistent Agreements. The Company and the Guarantors
represent, warrant and agree that (i) the rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of any other outstanding securities issued or
guaranteed by the Company or any Guarantor under any other agreement and (ii) neither
the Company nor any Guarantor has entered into, or on or after the date of this
Agreement will enter into, any agreement that is inconsistent with the rights
granted to the Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof.

 

(b)                                 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof may not
be given unless the Company and the Guarantors have obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or consent; provided that no amendment, modification,
supplement, waiver or consent to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder. Any amendments, modifications,
supplements, waivers or consents pursuant to this Section 6(b) shall
be by a writing executed by each of the parties hereto.

 

(c)                                  Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such
Holder to the Company by means of a notice given in accordance with the
provisions of this Section 6(c), which address initially is, with respect
to the Initial Purchasers, the address set forth in the Purchase Agreement; (ii) if
to the Company or any Guarantor, initially at the Company’s address set forth
in the Purchase Agreement and thereafter at such other address, notice of which
is given in accordance with the provisions of

 

16

 

this Section 6(c); and to
such other persons at their respective addresses as provided in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c). All such notices and
communications shall be deemed to have been duly given: at the time delivered
by hand, if personally delivered; five Business Days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and on the next Business Day if timely
delivered to an air courier guaranteeing overnight delivery. Copies of all such
notices, demands or other communications shall be concurrently delivered by the
Person giving the same to the Trustee, at the address specified in the
Indenture.

 

(d)                                 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Indenture and the
Purchase Agreement. If any transferee of any Holder shall acquire Registrable
Securities in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all the terms of this
Agreement, and by taking and holding such Registrable Securities such Person
shall be conclusively deemed to have agreed to be bound by and to perform all
of the terms and provisions of this Agreement and such Person shall be entitled
to receive the benefits hereof. The Initial Purchasers (in their capacity as
Initial Purchasers) shall have no liability or obligation to the Company or the
Guarantors with respect to any failure by a Holder to comply with, or any
breach by any Holder of, any of the obligations of such Holder under this
Agreement.

 

(e)                                  Third Party Beneficiaries. Each Holder shall be a third
party beneficiary to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its rights or the rights of
other Holders hereunder.

 

(f)                                    Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

(g)                                 Headings. The headings in this Agreement are for convenience
of reference only, are not a part of this Agreement and shall not limit or
otherwise affect the meaning hereof.

 

(h)                                 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

 

(i)                                     Miscellaneous. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and supersedes all
oral statements and prior writings with respect thereto. If any term,
provision, covenant or restriction contained in this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable or against
public policy, the remainder of the terms, provisions, covenants and
restrictions contained herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. The Company, the Guarantors and
the Initial Purchasers shall endeavor in good faith negotiations to replace the
invalid, void or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, void or
unenforceable provisions.

 

17

 

IN WITNESS WHEREOF,
the parties have executed this Agreement as of the date first written above.

 

	
   

  	
  KIMBALL HILL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David K. Hill

  
	
   

  	
   

  	
  Title:

  	
  Chairman, Chief Executive Officer

  
	
   

  	
   

  	
  and Director

  
					

 

18

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  CACTUS HILLS, LLC

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN INVESTMENTS,
  L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN OPERATIONS,
  L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES DALLAS INVESTMENTS,
  L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES DALLAS OPERATIONS,
  L.L.C.

  
	
   

  	
  KIMBALL HILL
  HOMES HOUSTON INVESTMENTS,

  L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES HOUSTON OPERATIONS,
  L.L.C.

  
	
   

  	
  KIMBALL HILL TEXAS INVESTMENT COMPANY,
  L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
  Name:

  	
  David K. Hill

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EAST LAKE PARK, INC.

  
	
   

  	
  KIMBALL HILL FAR EAST DETROIT, LLC

  
	
   

  	
  KIMBALL HILL STATEWAY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President and Treasurer

  
							

 

 

	
   

  	
  KH FINANCIAL HOLDING COMPANY

  
	
   

  	
  KHH TEXAS TRADING COMPANY L.P.

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN, L.P.

  
	
   

  	
  KIMBALL HILL HOMES CALIFORNIA, INC.

  
	
   

  	
  KIMBALL HILL HOMES DALLAS, L.P.

  
	
   

  	
  KIMBALL HILL HOMES FLORIDA, INC.

  
	
   

  	
  KIMBALL HILL HOMES HOUSTON, L.P.

  
	
   

  	
  KIMBALL HILL HOMES ILLINOIS, LLC

  
	
   

  	
  KIMBALL HILL HOMES NEVADA, INC.

  
	
   

  	
  KIMBALL HILL HOMES OHIO, INC.

  
	
   

  	
  KIMBALL HILL HOMES OREGON, INC.

  
	
   

  	
  KIMBALL HILL HOMES REALTY FLORIDA, INC.

  
	
   

  	
  KIMBALL HILL HOMES SAN ANTONIO, L.P.

  
	
   

  	
  KIMBALL HILL HOMES TEXAS, INC.

  
	
   

  	
  KIMBALL HILL HOMES WASHINGTON, INC.

  
	
   

  	
  KIMBALL HILL HOMES WISCONSIN, INC.

  
	
   

  	
  NATIONAL CREDIT AND GUARANTY CORPORATION

  
	
   

  	
  RIVER OAKS REALTY, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  18TH AND PEORIA, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Suburban Centers, L.L.C., its
  manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill, Inc., its manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Senior Vice President, Finance

  
							

 

2

 

	
   

  	
  KIMBALL HILL SUBURBAN CENTERS, L.L.C.

  
	
   

  	
  KIMBALL HILL URBAN CENTERS, L.L.C.

  
	
   

  	
  THE GLENS AT WESTLAKE, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill, Inc., its manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Senior Vice President, Finance

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIMBALL HILL URBAN CENTERS CHICAGO ONE,
  L.L.C.

  
	
   

  	
  KIMBALL HILL URBAN CENTERS CHICAGO TWO,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Urban Centers, L.L.C., its manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill, Inc., its manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Senior Vice President, Finance

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BRIDLE RIDGE LIMITED PARTNERSHIP

  
	
   

  	
  PARKVIEW LIMITED PARTNERSHIP

  
	
   

  	
  RIVER POINTE LIMITED PARTNERSHIP

  
	
   

  	
  SONATA AT MORADA RANCH LIMITED PARTNERSHIP

  
	
   

  	
  WINDMILL PARK LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes California, Inc.,
  its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
										

 

3

 

	
   

  	
  KIMBALL HILL BELLEVUE RANCH, LLC

  
	
   

  	
  KIMBALL HILL REFLECTIONS, LLC

  
	
   

  	
  KIMBALL HILL SHELDON LAKES, LLC

  
	
   

  	
  KIMBALL HILL VILLAGES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes California, Inc.,
  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL CHADWICK FARMS LIMITED PARTNERSHIP

  
	
   

  	
  KIMBALL WEST FRISCO LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Dallas, L.P., its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL CALUSA PALMS LIMITED

  
	
   

  	
   

  	
  PARTNERSHIP

  
	
   

  	
  KIMBALL HILL MARBELLA ESTATES LIMITED

  
	
   

  	
   

  	
  PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Florida, Inc., its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
									

 

4

 

	
   

  	
  INDIAN TRAILS LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Houston, L.P., its
  general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIMBALL HILL TX PROPERTIES, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Houston, L.P., its
  manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASTOR PLACE LIMITED PARTNERSHIP

  
	
   

  	
  BOLINGBROOK LIMITED PARTNERSHIP

  
	
   

  	
  EDGEWATER LIMITED PARTNERSHIP

  
	
   

  	
  HUNTINGTON CHASE LIMITED PARTNERSHIP

  
	
   

  	
  LEGEND LAKES LIMITED PARTNERSHIP

  
	
   

  	
  THE GLEN TOWNHOMES LIMITED PARTNERSHIP

  
	
   

  	
  THE HAMILTON PLACE PARTNERSHIP

  
	
   

  	
  WATERFORD LIMITED PARTNERSHIP

  
	
   

  	
  WHISPERING MEADOW LIMITED PARTNERSHIP

  
	
   

  	
  WHITE OAK LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Illinois, LLC, its
  general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
							

 

5

 

	
   

  	
  KH INGHAM PARK SOUTH, LLC

  
	
   

  	
  KH SRAV II, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Illinois, LLC, its
  manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL CENTENNIAL HEIGHTS LIMITED

  
	
   

  	
   

  	
  PARTNERSHIP

  
	
   

  	
  KIMBALL HILL HEATHERS/CAPAROLA LIMITED

  
	
   

  	
   

  	
  PARTNERSHIP

  
	
   

  	
  KIMBALL MOUNTAIN FIRST LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Nevada, Inc., its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL COVE LIMITED PARTNERSHIP

  
	
   

  	
  KIMBALL HILL LYNDEN PARK II LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Texas, Inc., its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
							

 

6

 

	
   

  	
  RIVER OAKS HOMES, L.L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Texas, Inc., its
  manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GABLES AT HIDDENBROOK LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Washington, Inc.,
  its general

  
	
   

  	
   

  	
  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PARK SHORE, L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Wisconsin, Inc.,
  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
								

 

7

 

	
  Confirmed and accepted as of the

  
	
  date first above written:

  
	
   

  
	
  J.P. MORGAN SECURITIES INC.

  
	
   

  
	
  For itself and on behalf of the

  
	
  several Initial Purchasers

  
	
   

  
	
   

  
	
  By:

  	
  /s/ David Lynch

  	
   

  
	
   

  	
  Authorized Signatory

  

 

8

 

Schedule I

 

Guarantors

 

18th and Peoria, LLC

Astor Place Limited
Partnership

Bolingbrook Limited
Partnership

Bridle Ridge Limited
Partnership

Cactus Hills, LLC

East Lake Park, Inc.

Edgewater Limited
Partnership

Gables at Hiddenbrook
Limited Partnership

Huntington Chase Limited
Partnership

Indian Trails Limited
Partnership

KH Financial Holding Company

KH Ingham Park South, LLC

KH SRAV II, LLC

KHH Texas Trading Company
L.P.

Kimball Cove Limited
Partnership

Kimball Hill Bellevue Ranch,
LLC

Kimball Hill Calusa Palms
Limited Partnership

Kimball Hill Centennial
Heights Limited Partnership

Kimball Hill Chadwick Farms
Limited Partnership

Kimball Hill Far East
Detroit, LLC

Kimball Hill
Heathers/Caparola Limited Partnership

Kimball Hill Homes Austin
Investments, L.L.C.

Kimball Hill Homes Austin
Operations, L.L.C.

Kimball Hill Homes Austin,
L.P.

Kimball Hill Homes
California, Inc.

Kimball Hill Homes Dallas
Investments, L.L.C.

Kimball Hill Homes Dallas
Operations, L.L.C.

Kimball Hill Homes Dallas,
L.P.

Kimball Hill Homes Florida, Inc.

Kimball Hill Homes Houston
Investments, L.L.C.

Kimball Hill Homes Houston
Operations, L.L.C.

Kimball Hill Homes Houston,
L.P.

Kimball Hill Homes Illinois,
LLC

Kimball Hill Homes Nevada, Inc.

Kimball Hill Homes Ohio, Inc.

Kimball Hill Homes Oregon, Inc.

Kimball Hill Homes Realty
Florida, Inc.

Kimball Hill Homes San
Antonio, L.P.

Kimball Hill Homes Texas, Inc.

Kimball Hill Homes
Washington, Inc.

Kimball Hill Homes Wisconsin, Inc.

Kimball Hill Lynden Park II
Limited Partnership

Kimball Hill Marbella
Estates Limited Partnership

Kimball Hill Reflections,
LLC

Kimball Hill Sheldon Lakes,
LLC

Kimball Hill Stateway, Inc.

Kimball Hill Suburban
Centers, L.L.C.

Kimball Hill Texas
Investment Company, L.L.C.

Kimball Hill TX Properties,
LLC

Kimball Hill Urban Centers
Chicago One, L.L.C.

Kimball Hill Urban Centers
Chicago Two, L.L.C.

Kimball Hill Urban Centers,
L.L.C.

Kimball Hill Villages, LLC

Kimball Mountain First
Limited Partnership

Kimball West Frisco Limited
Partnership

Legend Lakes Limited
Partnership

National Credit and Guaranty
Corporation

Park Shore, L.L.C.

Parkview Limited Partnership

River Oaks Homes, L.L.P.

River Oaks Realty, L.P.

River Pointe Limited
Partnership

Sonata at Morada Ranch
Limited Partnership

The Glen Townhomes Limited
Partnership

The Glens at Westlake, L.L.C.

The Hamilton Place
Partnership

Waterford Limited
Partnership

Whispering Meadow Limited
Partnership

White Oak Limited
Partnership

Windmill Park Limited
Partnership

 

 

Schedule A

 

J.P. Morgan Securities Inc.

Harris Nesbitt Corp.Exhibit 10.1

 

 

CREDIT AGREEMENT

 

DATED AS OF DECEMBER 21, 2005,

 

AMONG

 

KIMBALL HILL, INC.,

 

THE GUARANTORS FROM TIME TO TIME PARTIES
HERETO,

 

THE LENDERS FROM TIME TO TIME PARTIES HERETO,

 

HARRIS N.A.,

AS ADMINISTRATIVE AGENT

 

BANK OF AMERICA, N.A.,

AS SYNDICATION AGENT,

 

KEYBANK NATIONAL ASSOCIATION,

AS CO-DOCUMENTATION AGENT

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

AS CO-DOCUMENTATION AGENT

 

HARRIS NESBITT,

AS CO-LEAD ARRANGER AND JOINT BOOK RUNNER

AND

BANC OF AMERICA SECURITIES, LLC,

AS CO-LEAD ARRANGER AND JOINT BOOK RUNNER

 

 

$500,000,000 REVOLVING CREDIT FACILITY

 

 

	
  SECTION 1.

  	
  THE CREDIT FACILITIES

  	
  1

  
	
   

  	
   

  
	
  Section 1.1

  	
  Revolving Credit Commitments

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.2

  	
  Letters of Credit

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.3

  	
  Applicable Interest Rates

  	
  4

  
	
   

  	
   

  	
   

  
	
  Section 1.4

  	
  Minimum Borrowing Amounts; Maximum Eurodollar Loans

  	
  5

  
	
   

  	
   

  	
   

  
	
  Section 1.5

  	
  Manner of Borrowing Loans and Designating Applicable
  Interest Rates

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 1.6

  	
  Interest Periods

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 1.7

  	
  Maturity of Revolving Loans and Swing Loans

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 1.8

  	
  Prepayments

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 1.9

  	
  Default Rate

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 1.10

  	
  The Notes

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 1.11

  	
  Funding Indemnity

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 1.12

  	
  Revolving Credit Commitment Terminations

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 1.13

  	
  Increase in Aggregate Revolving Credit Commitment

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 1.14

  	
  Substitution of Lenders

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 1.15

  	
  Swing Loans

  	
  14

  
	
   

  	
   

  
	
  SECTION 2.

  	
  FEES

  	
  15

  
	
   

  	
   

  
	
  Section 2.1

  	
  Fees

  	
  15

  
	
   

  	
   

  
	
  SECTION 3.

  	
  PLACE AND APPLICATION OF
  PAYMENTS

  	
  16

  
	
   

  	
   

  
	
  Section 3.1

  	
  Place and Application of Payments

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 3.2

  	
  Account Debit

  	
  17

  
	
   

  	
   

  
	
  SECTION 4.

  	
  GUARANTIES

  	
  17

  
	
   

  	
   

  
	
  Section 4.1

  	
  Guaranties

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 4.2

  	
  Further Assurances

  	
  18

  
	
   

  	
   

  
	
  SECTION 5.

  	
  DEFINITIONS; INTERPRETATION

  	
  18

  
	
   

  	
   

  
	
  Section 5.1

  	
  Definitions

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 5.2

  	
  Interpretation

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 5.3

  	
  Change in Accounting Principles

  	
  32

  
	
   

  	
   

  
	
  SECTION 6.

  	
  REPRESENTATIONS AND WARRANTIES

  	
  33

  
	
   

  	
   

  
	
  Section 6.1

  	
  Organization and Qualification

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 6.2

  	
  Subsidiaries

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 6.3

  	
  Authority and Validity of Obligations

  	
  33

  
				

 

 

	
  Section 6.4

  	
  Use of Proceeds; Margin Stock

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 6.5

  	
  Financial Reports

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 6.6

  	
  No Material Adverse Change

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 6.7

  	
  Full Disclosure

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 6.8

  	
  Trademarks, Franchises, and Licenses

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 6.9

  	
  Governmental Authority and Licensing

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 6.10

  	
  Good Title

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 6.11

  	
  Litigation and Other Controversies

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 6.12

  	
  Taxes

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 6.13

  	
  Approvals

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 6.14

  	
  Affiliate Transactions

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 6.15

  	
  Investment Company; Public Utility Holding Company

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 6.16

  	
  ERISA

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 6.17

  	
  Compliance with Laws

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 6.18

  	
  Other Agreements

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 6.19

  	
  Solvency

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 6.20

  	
  No Broker Fees

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 6.21

  	
  No Default

  	
  38

  
	
   

  	
   

  
	
  SECTION 7.

  	
  CONDITIONS PRECEDENT

  	
  38

  
	
   

  	
   

  
	
  Section 7.1

  	
  All Credit Events

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 7.2

  	
  Initial Credit Event

  	
  39

  
	
   

  	
   

  
	
  SECTION 8.

  	
  COVENANTS

  	
  40

  
	
   

  	
   

  
	
  Section 8.1

  	
  Maintenance of Business

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 8.2

  	
  Maintenance of Properties

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 8.3

  	
  Taxes and Assessments

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 8.4

  	
  Insurance

  	
  41

  
	
   

  	
   

  	
   

  
	
  Section 8.5

  	
  Financial Reports

  	
  41

  
	
   

  	
   

  	
   

  
	
  Section 8.6

  	
  Inspection

  	
  43

  
	
   

  	
   

  	
   

  
	
  Section 8.7

  	
  Borrowings and Guaranties

  	
  44

  
	
   

  	
   

  	
   

  
	
  Section 8.8

  	
  Liens

  	
  45

  
	
   

  	
   

  	
   

  
	
  Section 8.9

  	
  Investments, Acquisitions, Loans and Advances

  	
  47

  
	
   

  	
   

  	
   

  
	
  Section 8.10

  	
  Mergers, Consolidations and Sales

  	
  48

  
	
   

  	
   

  	
   

  
	
  Section 8.11

  	
  Maintenance of Subsidiaries

  	
  49

  
				

 

ii

 

	
  Section 8.12

  	
  Dividends and Certain Other Restricted Payments

  	
  50

  
	
   

  	
   

  	
   

  
	
  Section 8.13

  	
  ERISA

  	
  50

  
	
   

  	
   

  	
   

  
	
  Section 8.14

  	
  Compliance with Laws

  	
  50

  
	
   

  	
   

  	
   

  
	
  Section 8.15

  	
  Burdensome Contracts With Affiliates

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 8.16

  	
  No Changes in Fiscal Year

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 8.17

  	
  Formation of Subsidiaries

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 8.18

  	
  Change in the Nature of Business

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 8.19

  	
  Use of Proceeds

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 8.20

  	
  No Restrictions

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 8.21

  	
  Subordinated Debt

  	
  53

  
	
   

  	
   

  	
   

  
	
  Section 8.22

  	
  Financial Covenants

  	
  53

  
	
   

  	
   

  	
   

  
	
  Section 8.23

  	
  Inventory Restrictions

  	
  53

  
	
   

  	
   

  
	
  SECTION 9.

  	
  EVENTS OF DEFAULT AND REMEDIES

  	
  53

  
	
   

  	
   

  
	
  Section 9.1

  	
  Events of Default

  	
  53

  
	
   

  	
   

  	
   

  
	
  Section 9.2

  	
  Non-Bankruptcy Defaults

  	
  56

  
	
   

  	
   

  	
   

  
	
  Section 9.3

  	
  Bankruptcy Defaults

  	
  56

  
	
   

  	
   

  	
   

  
	
  Section 9.4

  	
  Collateral for Undrawn Letters of Credit

  	
  56

  
	
   

  	
   

  	
   

  
	
  Section 9.5

  	
  Notice of Default

  	
  57

  
	
   

  	
   

  	
   

  
	
  Section 9.6

  	
  Expenses

  	
  57

  
	
   

  	
   

  
	
  SECTION 10.

  	
  CHANGE IN CIRCUMSTANCES

  	
  57

  
	
   

  	
   

  
	
  Section 10.1

  	
  Change of Law

  	
  57

  
	
   

  	
   

  	
   

  
	
  Section 10.2

  	
  Unavailability of Deposits or Inability to
  Ascertain, or Inadequacy of, LIBOR

  	
  58

  
	
   

  	
   

  	
   

  
	
  Section 10.3

  	
  Increased Cost and Reduced Return

  	
  58

  
	
   

  	
   

  	
   

  
	
  Section 10.4

  	
  Lending Offices

  	
  60

  
	
   

  	
   

  	
   

  
	
  Section 10.5

  	
  Discretion of Lender as to Manner of Funding

  	
  60

  
	
   

  	
   

  
	
  SECTION 11.

  	
  THE ADMINISTRATIVE AGENT

  	
  61

  
	
   

  	
   

  
	
  Section 11.1

  	
  Appointment and Authorization of Administrative
  Agent

  	
  61

  
	
   

  	
   

  	
   

  
	
  Section 11.2

  	
  Administrative Agent and its Affiliates

  	
  61

  
	
   

  	
   

  	
   

  
	
  Section 11.3

  	
  Action by Administrative Agent

  	
  61

  
	
   

  	
   

  	
   

  
	
  Section 11.4

  	
  Consultation with Experts

  	
  62

  
	
   

  	
   

  	
   

  
	
  Section 11.5

  	
  Liability of Administrative Agent; Credit Decision

  	
  62

  
	
   

  	
   

  	
   

  
	
  Section 11.6

  	
  Indemnity

  	
  62

  
				

 

iii

 

	
  Section 11.7

  	
  Resignation of Administrative Agent and Successor
  Administrative Agent

  	
  63

  
	
   

  	
   

  	
   

  
	
  Section 11.8

  	
  L/C Issuer

  	
  63

  
	
   

  	
   

  	
   

  
	
  Section 11.9

  	
  Hedging Liability and Funds Transfer and Deposit
  Account Liability Arrangements

  	
  63

  
	
   

  	
   

  	
   

  
	
  Section 11.10

  	
  Designation of Additional Agents

  	
  64

  
	
   

  	
   

  
	
  SECTION 12.

  	
  THE GUARANTEES

  	
  64

  
	
   

  	
   

  
	
  Section 12.1

  	
  The Guarantees

  	
  65

  
	
   

  	
   

  	
   

  
	
  Section 12.2

  	
  Guarantee Unconditional

  	
  65

  
	
   

  	
   

  	
   

  
	
  Section 12.3

  	
  Discharge Only upon Payment in Full; Reinstatement
  in Certain Circumstances

  	
  66

  
	
   

  	
   

  	
   

  
	
  Section 12.4

  	
  Subrogation

  	
  66

  
	
   

  	
   

  	
   

  
	
  Section 12.5

  	
  Waivers

  	
  67

  
	
   

  	
   

  	
   

  
	
  Section 12.6

  	
  Limit on Recovery

  	
  67

  
	
   

  	
   

  	
   

  
	
  Section 12.7

  	
  Stay of Acceleration

  	
  67

  
	
   

  	
   

  	
   

  
	
  Section 12.8

  	
  Benefit to Guarantors

  	
  67

  
	
   

  	
   

  	
   

  
	
  Section 12.9

  	
  Guarantor Covenants

  	
  67

  
	
   

  	
   

  
	
  SECTION 13.

  	
  MISCELLANEOUS

  	
  67

  
	
   

  	
   

  
	
  Section 13.1

  	
  Withholding Taxes

  	
  67

  
	
   

  	
   

  	
   

  
	
  Section 13.2

  	
  No Waiver, Cumulative Remedies

  	
  70

  
	
   

  	
   

  	
   

  
	
  Section 13.3

  	
  Non-Business Days

  	
  70

  
	
   

  	
   

  	
   

  
	
  Section 13.4

  	
  Documentary Taxes

  	
  70

  
	
   

  	
   

  	
   

  
	
  Section 13.5

  	
  Survival of Representations

  	
  70

  
	
   

  	
   

  	
   

  
	
  Section 13.6

  	
  Survival of Indemnities

  	
  70

  
	
   

  	
   

  	
   

  
	
  Section 13.7

  	
  Sharing of Set-Off

  	
  70

  
	
   

  	
   

  	
   

  
	
  Section 13.8

  	
  Notices

  	
  71

  
	
   

  	
   

  	
   

  
	
  Section 13.9

  	
  Counterparts

  	
  71

  
	
   

  	
   

  	
   

  
	
  Section 13.10

  	
  Successors and Assigns

  	
  71

  
	
   

  	
   

  	
   

  
	
  Section 13.11

  	
  Participants

  	
  72

  
	
   

  	
   

  	
   

  
	
  Section 13.12

  	
  Assignments

  	
  72

  
	
   

  	
   

  	
   

  
	
  Section 13.13

  	
  Amendments

  	
  73

  
	
   

  	
   

  	
   

  
	
  Section 13.14

  	
  Headings

  	
  74

  
	
   

  	
   

  	
   

  
	
  Section 13.15

  	
  Costs and Expenses; Indemnification

  	
  74

  
				

 

iv

 

	
  Section 13.16

  	
  Set-off

  	
  75

  
	
   

  	
   

  	
   

  
	
  Section 13.17

  	
  Entire Agreement

  	
  75

  
	
   

  	
   

  	
   

  
	
  Section 13.18

  	
  Governing Law

  	
  75

  
	
   

  	
   

  	
   

  
	
  Section 13.19

  	
  Severability of Provisions

  	
  75

  
	
   

  	
   

  	
   

  
	
  Section 13.20

  	
  Excess Interest

  	
  75

  
	
   

  	
   

  	
   

  
	
  Section 13.21

  	
  Construction

  	
  76

  
	
   

  	
   

  	
   

  
	
  Section 13.22

  	
  Lender’s Obligations Several

  	
  76

  
	
   

  	
   

  	
   

  
	
  Section 13.23

  	
  Submission to Jurisdiction; Waiver of Jury Trial

  	
  76

  
	
   

  	
   

  	
   

  
	
  Section 13.24

  	
  USA Patriot Act

  	
  76

  
	
   

  	
   

  	
   

  
	
  Section 13.25

  	
  Confidentiality

  	
  77

  

 

v

 

CREDIT AGREEMENT

 

This Credit Agreement is entered into as of December        ,
2005, by and among (a) KIMBALL HILL, INC., an Illinois corporation (the “Borrower”), (b) the Guarantors (as defined in Section 4.1
hereof) from time to time party to this Agreement, (c) the several financial institutions
from time to time party to this Agreement, as Lenders, (d) HARRIS N.A., as
Administrative Agent, (e) BANK OF AMERICA, N.A., as Syndication Agent, (f)
KEYBANK NATIONAL ASSOCIATION, as Co-Documentation Agent, (g) WACHOVIA BANK,
NATIONAL ASSOCIATION, as Co-Documentation Agent, (h) HARRIS NESBITT, as Co-Lead
Arranger and Joint Book Runner, and (i) BANC OF AMERICA SECURITIES, LLC, as
Co-Lead Arranger and Joint Book Runner, all as provided herein. All capitalized
terms used herein without definition shall have the same meanings herein as
such terms are defined in Section 5.1 hereof.

 

PRELIMINARY STATEMENT

 

The Borrower has requested, and the Lenders have
agreed to extend, certain credit facilities on the terms and conditions of this
Agreement.

 

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

 

SECTION 1.           THE CREDIT FACILITIES.

 

Section
1.1            Revolving Credit
Commitments. Subject to the terms and conditions hereof, each
Lender, by its acceptance hereof, severally agrees to make a loan or loans
(individually a “Revolving Loan” and collectively
the “Revolving Loans”) in U.S. Dollars to the
Borrower from time to time on a revolving basis up to the amount of such Lender’s
Revolving Credit Commitment, subject to any increases or reductions thereof
pursuant to the terms hereof, before the Revolving Credit Termination Date. The
sum of the aggregate principal amount of Revolving Loans, Swing Loans, and L/C
Obligations at any time outstanding shall not exceed the lesser of (a) the
Revolving Credit Commitments in effect at such time and (b) the Borrowing Base
as determined based on the most recent Borrowing Base Certificate. Each
Borrowing of Revolving Loans shall be made ratably by the Lenders in proportion
to their respective Revolver Percentages. As provided in Section 1.5(a) hereof,
the Borrower may elect that each Borrowing of Revolving Loans be either Base
Rate Loans or Eurodollar Loans. Revolving Loans may be repaid and the principal
amount thereof reborrowed before the Revolving Credit Termination Date, subject
to the terms and conditions hereof.

 

Section
1.2            Letters of Credit.
(a)  General Terms. Subject
to the terms and conditions hereof, as part of the Revolving Credit, the L/C
Issuer shall issue standby and commercial letters of credit (each a “Letter of Credit”) for the account of the Borrower or one or
more of its Wholly-owned Subsidiaries in an aggregate undrawn face amount up to
the L/C Sublimit. Prior to the Closing Date, Harris N.A. issued for the account
of the Borrower and certain of its Wholly-owned Subsidiaries the letters of
credit listed on Schedule 1.2 attached hereto, which pre-existing letters of
credit shall be deemed to be “Letters of Credit”  hereunder and shall be

 

 

included in determining
future Letter of Credit availability under the L/C Sublimit. Each Letter of
Credit has been or shall be issued by the L/C Issuer, but each Lender shall be
obligated to reimburse the L/C Issuer for such Lender’s Revolver Percentage of
the amount of each drawing thereunder and, accordingly, each Letter of Credit
shall constitute usage of the Revolving Credit Commitment of each Lender pro
rata in an amount equal to its Revolver Percentage of the L/C Obligations then
outstanding.

 

(b)           Applications. At
any time before the Revolving Credit Termination Date, the L/C Issuer shall, at
the request of the Borrower, issue one or more Letters of Credit in U.S.
Dollars, in a form reasonably satisfactory to the L/C Issuer, with expiration
dates no later than 12 months from the date of issuance (subject to rights of
renewal for periods of up to 12 months each), provided no Letter of Credit by
renewal or otherwise may have an expiration date later than 30 days prior to
the Revolving Credit Termination Date, in an aggregate face amount as set forth
above, upon the receipt of an application duly executed by the Borrower and, if
such Letter of Credit is for the account of one of its Wholly-owned
Subsidiaries, such Wholly-owned Subsidiary for the relevant Letter of Credit in
the form then customarily prescribed by the L/C Issuer for the Letter of Credit
requested (each an “Application”). Notwithstanding
anything contained in any Application to the contrary:  (i) the Borrower shall pay fees in connection
with each Letter of Credit as set forth in Section 2.1 hereof, (ii) except as
otherwise provided in Section 1.8 hereof, before the occurrence of an Event of
Default, the L/C Issuer will not call for the funding by the Borrower of any
amount under a Letter of Credit before being presented with a drawing
thereunder, and (iii) if the L/C Issuer is not timely reimbursed for the amount
of any drawing under a Letter of Credit on the date such drawing is paid, the
Borrower’s obligation to reimburse the L/C Issuer for the amount of such
drawing shall, subject to the provisions of Section 1.2(c) hereof, be converted
to a Borrowing of a Base Rate Loan bearing interest from and after the date
such drawing is paid. If the L/C Issuer issues any Letter of Credit with an
expiration date that is automatically extended unless the L/C Issuer gives
notice that the expiration date will not so extend beyond its then scheduled
expiration date, unless the Required Lenders instruct the L/C Issuer otherwise,
the L/C Issuer will give such notice of non-renewal before the time necessary
to prevent such automatic extension if before such required notice date:  (i) the expiration date of such Letter of
Credit if so extended would be later than 30 days prior to the Revolving Credit
Termination Date, (ii) the Revolving Credit Commitments have been terminated,
or (iii) a Default or an Event of Default exists and the Administrative Agent,
in its discretion or at the request of the Required Lenders, has given the L/C
Issuer instructions not to so permit the extension of the expiration date of
such Letter of Credit. The L/C Issuer agrees to issue amendments to the
Letter(s) of Credit increasing the amount, or extending the expiration date,
thereof at the request of the Borrower subject to the conditions of Section 7
hereof and the other terms of this Section 1.2.

 

(c)           The Reimbursement
Obligations. Subject to Section 1.2(b) hereof, the obligation of the
Borrower to reimburse the L/C Issuer for all drawings under a Letter of Credit
(a “Reimbursement Obligation”) shall be
governed by the Application related to such Letter of Credit, except that
reimbursement shall be made by no later than 12:00 Noon (Chicago time) on the
date when each drawing is to be paid if the Borrower has been informed of such
drawing by the L/C Issuer on or before 11:30 a.m. (Chicago time) on the date
when such drawing is to be paid or, if notice of such drawing is given to the
Borrower after 11:30 a.m. (Chicago time) on the date when such drawing is to be
paid, by the end of such day, in immediately available funds at

 

2

 

the Administrative Agent’s
principal office in Chicago, Illinois or such other office as the
Administrative Agent may designate in writing to the Borrower (who shall
thereafter cause to be distributed to the L/C Issuer such amount(s) in like
funds). Notwithstanding the foregoing, unless the Borrower shall have notified
the Administrative Agent to the contrary, each drawing upon a Letter of Credit
shall automatically be deemed to be a request for a Borrowing of a Base Rate
Loan pursuant to the terms of Section 1.2(d) hereof, and the Borrower shall
thereafter be responsible for the repayment of such amount pursuant to the
provisions of Section 1.8 hereof.

 

(d)           The Participating
Interests. Each Lender (other than the Lender acting as L/C Issuer
in issuing the relevant Letter of Credit), by its acceptance hereof, severally
agrees to purchase from the L/C Issuer, and the L/C Issuer hereby agrees to
sell to each such Lender (a “Participating Lender”),
an undivided percentage participating interest (a “Participating
Interest”), to the extent of its Revolver Percentage, in each Letter
of Credit issued by, and each Reimbursement Obligation owed to, the L/C Issuer.
Unless the Borrower shall have paid the Reimbursement Obligation by 12:00 Noon
(Chicago time) on the date the related drawing is to be paid, as set forth in
Section 1.2(c) above, or if the L/C Issuer is required at any time to return to
the Borrower or to a trustee, receiver, liquidator, custodian or other Person
any portion of any payment of any Reimbursement Obligation, each Participating
Lender shall, not later than the Business Day it receives a certificate in the
form of Exhibit A hereto from the L/C Issuer (with a copy to the Administrative
Agent) to such effect, if such certificate is received before 1:00 p.m.
(Chicago time), or not later than 1:00 p.m. (Chicago time) the following
Business Day, if such certificate is received after such time, pay to the
Administrative Agent for the account of the L/C Issuer an amount equal to such
Participating Lender’s Revolver Percentage of such unpaid or recaptured
Reimbursement Obligation together with interest on such amount accrued from the
date the related payment was made by the L/C Issuer to the date of such payment
by such Participating Lender at a rate per annum equal to:  (i) from the date the related payment was
made by the L/C Issuer to the date 2 Business Days after payment by such
Participating Lender is due hereunder, the Federal Funds Rate for each such day
and (ii) from the date 2 Business Days after the date such payment is due from
such Participating Lender to the date such payment is made by such
Participating Lender, the Base Rate in effect for each such day. Thereafter,
all amounts advanced by the Participating Lenders, including the L/C Issuer’s
Revolver Percentage of the drawn amount under the Letter of Credit, shall be
deemed to be a Borrowing as a Base Rate Loan and shall bear interest and be
repaid in accordance with the terms of this Agreement. The several obligations
of the Participating Lenders to the L/C Issuer under this Section 1.2 shall be
absolute, irrevocable, and unconditional under any and all circumstances
whatsoever and shall not be subject to any set-off, counterclaim or defense to
payment which any Participating Lender may have or have had against the
Borrower, the L/C Issuer, the Administrative Agent, any Lender or any other
Person whatsoever. Without limiting the generality of the foregoing, such
obligations shall not be affected by any Default or Event of Default or by any
reduction or termination of any Revolving Credit Commitment of any Lender, and
each payment by a Participating Lender under this Section 1.2 shall be made
without any offset, abatement, withholding or reduction whatsoever.

 

(e)           Indemnification.
The Participating Lenders shall, to the extent of their respective Revolver Percentages,
indemnify the L/C Issuer (to the extent not reimbursed by the Borrower) against
any cost, expense (including reasonable counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from the L/C Issuer’s
gross negligence or willful 

 

3

 

misconduct) that the L/C
Issuer may suffer or incur in connection with any Letter of Credit issued by it.
The obligations of the Participating Lenders under this Section 1.2(e) and all
other parts of this Section 1.2 shall survive termination of this Agreement and
of all Applications, Letters of Credit, and all drafts and other documents
presented in connection with drawings thereunder.

 

(f)            Manner of Requesting a
Letter of Credit. The Borrower shall provide at least 3 Business
Days’ advance written notice to the Administrative Agent of each request for
the issuance of a Letter of Credit, such notice in each case to be accompanied
by an Application for such Letter of Credit properly completed and executed by
the Borrower and, in the case of an extension or an increase in the amount of a
Letter of Credit, a written request therefor, in a form acceptable to the
Administrative Agent and the L/C Issuer, in each case, together with the fees called
for by this Agreement. The Administrative Agent shall promptly notify the L/C
Issuer of the Administrative Agent’s receipt of each such notice and the L/C
Issuer shall promptly notify the Administrative Agent and the Lenders of the
issuance of the Letter of Credit so requested.

 

Section
1.3            Applicable Interest Rates.
(a)  Base Rate Loans.
Each Base Rate Loan made or maintained by a Lender shall bear interest during
each Interest Period it is outstanding (computed on the basis of a year of 360
days and the actual days elapsed) on the unpaid principal amount thereof from
the date such Loan is advanced or continued, or created by conversion from a
Eurodollar Loan, until maturity (whether by acceleration or otherwise) at a
rate per annum equal to the sum of the Applicable Margin plus the Base Rate
from time to time in effect, payable on the tenth day of each calendar month in
arrears for the prior Interest Period, and at maturity (whether by acceleration
or otherwise).

 

“Base Rate”
means for any day the greater of:  (i)
the rate of interest announced or otherwise established by the Administrative
Agent from time to time as its prime commercial rate as in effect on such day,
with any change in the Base Rate resulting from a change in said prime
commercial rate to be effective as of the date of the relevant change in said
prime commercial rate (it being acknowledged and agreed that such rate may not
be the Administrative Agent’s best or lowest rate) and (ii) the sum of (x) the
rate determined by the Administrative Agent to be the average (rounded upward,
if necessary, to the next higher 1/100 of 1%) of the rates per annum quoted to
the Administrative Agent at approximately 10:00 a.m. (Chicago time) (or as soon
thereafter as is practicable) on such day (or, if such day is not a Business
Day, on the immediately preceding Business Day) by two or more Federal funds
brokers selected by the Administrative Agent for sale to the Administrative
Agent at face value of Federal funds in the secondary market in an amount equal
or comparable to the principal amount owed to the Administrative Agent for
which such rate is being determined, plus (y) 1/2 of
1%.

 

(b)           Eurodollar Loans.
Each Eurodollar Loan made or maintained by a Lender shall bear interest during
each Interest Period it is outstanding (computed on the basis of a year of 360
days and actual days elapsed) on the unpaid principal amount thereof from the
date such Loan is advanced or continued, or created by conversion from a Base
Rate Loan, until maturity (whether by acceleration or otherwise) at a rate per
annum equal to the sum of the Applicable Margin plus the Adjusted LIBOR
applicable for such Interest Period, payable on the last day of the Interest
Period and at maturity (whether by acceleration or otherwise), and, if the
applicable Interest

 

4

 

Period is longer than
three months, on each day occurring every three months after the commencement
of such Interest Period.

 

“Adjusted LIBOR”
means, for any Borrowing of Eurodollar Loans, a rate per annum determined in
accordance with the following formula:

 

	
  Adjusted LIBOR

  	
   

  	
  =

  	
   

  	
  LIBOR

  
	
   

  	
   

  	
   

  	
   

  	
  1 - Eurodollar Reserve Percentage

  

 

“Eurodollar Reserve
Percentage” means, for any Borrowing of Eurodollar Loans, the daily
average for the applicable Interest Period of the maximum rate, expressed as a
decimal, at which reserves (including, without limitation, any supplemental,
marginal, and emergency reserves) are imposed during such Interest Period by
the Board of Governors of the Federal Reserve System (or any successor) on “eurocurrency liabilities”, as defined in such Board’s
Regulation D (or in respect of any other category of liabilities that includes
deposits by reference to which the interest rate on Eurodollar Loans is
determined or any category of extensions of credit or other assets that include
loans by non-United States offices of any Lender to United States residents),
subject to any amendments of such reserve requirement by such Board or its
successor, taking into account any transitional adjustments thereto. For
purposes of this definition, the Eurodollar Loans shall be deemed to be “eurocurrency liabilities” as defined in Regulation D without
benefit or credit for any prorations, exemptions or offsets under Regulation D.

 

“LIBOR” means,
for an Interest Period for a Borrowing of Eurodollar Loans, (a) the LIBOR Index
Rate for such Interest Period, if such rate is available, and (b) if the LIBOR
Index Rate cannot be determined, the arithmetic average of the rates of
interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
at which deposits in U.S. Dollars in immediately available funds are offered to
the Administrative Agent at 11:00 a.m. (London, England time) 2 Business Days
before the beginning of such Interest Period by 3 or more major banks in the
interbank eurodollar market selected by the Administrative Agent for delivery
on the first day of and for a period equal to such Interest Period and in an
amount equal or comparable to the principal amount of the Eurodollar Loan
scheduled to be made by the Administrative Agent as part of such Borrowing.

 

“LIBOR Index Rate”
means, for any Interest Period, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) for deposits in U.S. Dollars for a period
equal to such Interest Period, which appears on the Telerate Page 3750 as of
11:00 a.m. (London, England time) on the day 2 Business Days before the
commencement of such Interest Period.

 

“Telerate Page 3750”
means the display designated as “Page 3750” on
the Telerate Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Bankers’
Association as the information vendor for the purpose of displaying British
Bankers’ Association Interest Settlement Rates for U.S. Dollar deposits).

 

(c)           Rate Determinations.
The Administrative Agent shall determine each interest rate applicable to the
Loans and the Reimbursement Obligations hereunder, and its determination
thereof shall be conclusive and binding except in the case of manifest error.

 

5

 

Section
1.4            Minimum Borrowing Amounts;
Maximum Eurodollar Loans. Each Borrowing of Base Rate Loans
advanced under a Credit shall be in an amount not less than $250,000. Each
Borrowing of Eurodollar Loans advanced, continued or converted under a Credit
shall be in an amount equal to $1,000,000 or such greater amount which is an
integral multiple of $500,000. Without the Administrative Agent’s consent,
there shall not be more than 6 Borrowings of Eurodollar Loans outstanding
hereunder.

 

Section
1.5            Manner of Borrowing Loans
and Designating Applicable Interest Rates. (a)  Notice to the
Administrative Agent. The Borrower shall give notice to the
Administrative Agent by no later than 10:00 a.m. (Chicago time):  (i) at least 3 Business Days before the date
on which the Borrower requests the Lenders to advance a Borrowing of Eurodollar
Loans and (ii) on the date the Borrower requests the Lenders to advance a
Borrowing of Base Rate Loans. The Loans included in each Borrowing shall bear
interest initially at the type of rate specified in such notice of a new
Borrowing. Thereafter, subject to the terms and conditions hereof, the Borrower
may from time to time elect to change or continue the type of interest rate
borne by each Borrowing or, subject to Section 1.4’s minimum amount requirement
for each outstanding Borrowing, a portion thereof, as follows:  (A) if such Borrowing is of Eurodollar Loans,
on the last day of the Interest Period applicable thereto, the Borrower may
continue part or all of such Borrowing as Eurodollar Loans or convert part or
all of such Borrowing into Base Rate Loans or (B) if such Borrowing is of Base
Rate Loans, on any Business Day, the Borrower may convert all or part of such
Borrowing into Eurodollar Loans for an Interest Period or Interest Periods
specified by the Borrower. The Borrower shall give all such notices requesting
the advance, continuation or conversion of a Borrowing to the Administrative
Agent by telephone or telecopy (which notice shall be irrevocable once given
and, if by telephone, shall be promptly confirmed in writing), substantially in
the form attached hereto as Exhibit B (Notice of Borrowing) or Exhibit C
(Notice of Continuation/Conversion), as applicable, or in such other form
acceptable to the Administrative Agent. Notice of the continuation of a
Borrowing of Eurodollar Loans for an additional Interest Period or of the
conversion of part or all of a Borrowing of Base Rate Loans into Eurodollar
Loans must be given by no later than 10:00 a.m. (Chicago time) at least 3
Business Days before the date of the requested continuation or conversion. All
such notices concerning the advance, continuation or conversion of a Borrowing
shall specify the date of the requested advance, continuation or conversion of
a Borrowing (which shall be a Business Day), the amount of the requested
Borrowing to be advanced, continued or converted, the type of Loans to comprise
such new, continued or converted Borrowing and, if such Borrowing is to be
comprised of Eurodollar Loans, the Interest Period applicable thereto. The
Borrower agrees that the Administrative Agent may rely on any such telephonic
or telecopy notice given by any person the Administrative Agent in good faith
believes is an Authorized Representative without the necessity of independent
investigation, and in the event any such notice by telephone conflicts with any
written confirmation such telephonic notice shall govern if the Administrative
Agent has acted in reliance thereon.

 

(b)           Notice to the Lenders.
The Administrative Agent shall give prompt telephonic or telecopy notice to
each Lender of any notice from the Borrower received pursuant to Section 1.5(a)
above and, if such notice requests the Lenders to make Eurodollar Loans, the
Administrative Agent shall give notice to the Borrower and each Lender by like
means of the interest rate applicable thereto promptly after the Administrative
Agent has made such determination.

 

6

 

(c)           Borrower’s Failure to
Notify; Automatic Continuations and Conversions. Any outstanding
Borrowing of Base Rate Loans shall automatically be continued for an additional
Interest Period on the last day of its then current Interest Period unless the
Borrower has notified the Administrative Agent within the period required by
Section 1.5(a) that the Borrower intends to convert such Borrowing, subject to
Section 7.1 hereof, into a Borrowing of Eurodollar Loans or such Borrowing is
prepaid in accordance with Section 1.8(a). If the Borrower fails to give notice
pursuant to Section 1.5(a) above of the continuation or conversion of any
outstanding principal amount of a Borrowing of Eurodollar Loans before the last
day of its then current Interest Period within the period required by Section
1.5(a) or, whether or not such notice has been given, one or more of the
conditions set forth in Section 7.1 for the continuation or conversion of a
Borrowing of Eurodollar Loans would not be satisfied, and such Borrowing is not
prepaid in accordance with Section 1.8(a), such Borrowing shall automatically
be converted into a Borrowing of Base Rate Loans. In the event the Borrower
fails to give notice pursuant to Section 1.5(a) above of a Borrowing equal to
the amount of a Reimbursement Obligation and has not notified the
Administrative Agent by 12:00 noon (Chicago time) on the day such Reimbursement
Obligation becomes due that it intends to repay such Reimbursement Obligation
through funds not borrowed under this Agreement, the Borrower shall be deemed
to have requested a Borrowing of Base Rate Loans under the Revolving Credit
(or, at the option of the Administrative Agent, under the Swing Line) on such
day in the amount of the Reimbursement Obligation then due, which Borrowing
shall be applied to pay the Reimbursement Obligation then due.

 

(d)           Disbursement of Loans.
Not later than 1:00 p.m. (Chicago time) on the date of any requested advance of
a new Borrowing, subject to Section 7 hereof, each Lender shall make available
its Loan comprising part of such Borrowing in funds immediately available at
the principal office of the Administrative Agent in Chicago, Illinois. The
Administrative Agent shall make the proceeds of each new Borrowing available to
the Borrower at the Administrative Agent’s principal office in Chicago,
Illinois, by depositing such proceeds to the credit of the Borrower’s operating
account maintained with the Administrative Agent or as the Borrower and the
Administrative Agent may otherwise agree.

 

(e)           Administrative Agent
Reliance on Lender Funding. Unless the Administrative Agent shall
have been notified by a Lender prior to (or, in the case of a Borrowing of Base
Rate Loans, by 1:00 p.m. (Chicago time) on) the date on which such Lender is
scheduled to make payment to the Administrative Agent of the proceeds of a Loan
(which notice shall be effective upon receipt) that such Lender does not intend
to make such payment, the Administrative Agent may assume that such Lender has
made such payment when due and the Administrative Agent may in reliance upon
such assumption (but shall not be required to) make available to the Borrower
the proceeds of the Loan to be made by such Lender and, if any Lender has not
in fact made such payment to the Administrative Agent, such Lender shall, on
demand, pay to the Administrative Agent the amount made available to the
Borrower attributable to such Lender together with interest thereon in respect
of each day during the period commencing on the date such amount was made
available to the Borrower and ending on (but excluding) the date such Lender
pays such amount to the Administrative Agent at a rate per annum equal to:  (i) from the date the related advance was
made by the Administrative Agent to the date 2 Business Days after payment by
such Lender is due hereunder, the Federal Funds Rate for each such day and (ii)
from the date 2 Business Days after the date such payment is due from such
Lender to the date

 

7

 

such payment is made by
such Lender, the Base Rate in effect for each such day. If such amount is not
received from such Lender by the Administrative Agent immediately upon demand,
the Borrower will, on demand, repay to the Administrative Agent the proceeds of
the Loan attributable to such Lender with interest thereon at a rate per annum
equal to the interest rate applicable to the relevant Loan, but without such
payment being considered a payment or prepayment of a Loan under Section 1.11
hereof so that the Borrower will have no liability under such Section with
respect to such payment.

 

Section
1.6            Interest Periods.
As provided in Section 1.5(a) and 1.15 hereof, at the time of each request to
advance, continue or create by conversion a Borrowing of Eurodollar Loans or
Swing Loans, the Borrower shall select an Interest Period applicable to such
Loans from among the available options. The term “Interest
Period” means the period commencing on the date a Borrowing of Loans
is advanced, continued or created by conversion and ending:  (a) in the case of Base Rate Loans, on the
last day of the calendar month in which such Borrowing is advanced, continued
or created by conversion (or on the last day of the following calendar month if
such Loan is advanced, continued or created by conversion on the last day of a
calendar month), (b) in the case of a Eurodollar Loan, 1, 2, 3 or 6 months
thereafter, and (c) in the case of a Swing Loan, on the date 1 to 5 days
thereafter as mutually agreed to by the Borrower and the Administrative Agent; provided, however, that:

 

(i)            any Interest Period for a Borrowing
of Revolving Loans or Swing Loans consisting of Base Rate Loans that otherwise
would end after the Revolving Credit Termination Date shall end on the
Revolving Credit Termination Date;

 

(ii)           no Interest Period with respect to
any portion of the Revolving Loans or Swing Loans shall extend beyond the
Revolving Credit Termination Date;

 

(iii)          whenever the last day of any Interest
Period would otherwise be a day that is not a Business Day, the last day of
such Interest Period shall be extended to the next succeeding Business Day, provided that, if such extension would cause the last day of
an Interest Period for a Borrowing of Eurodollar Loans to occur in the
following calendar month, the last day of such Interest Period shall be the
immediately preceding Business Day; and

 

(iv)          for purposes of determining an
Interest Period for a Borrowing of Eurodollar Loans, a month means a period
starting on one day in a calendar month and ending on the numerically
corresponding day in the next calendar month; provided,
however, that if there is no numerically corresponding day in the
month in which such an Interest Period is to end or if such an Interest Period
begins on the last Business Day of a calendar month, then such Interest Period
shall end on the last Business Day of the calendar month in which such Interest
Period is to end.

 

Section
1.7            Maturity of Revolving Loans
and Swing Loans. Each Revolving Loan and Swing Loan (subject
to the provisions of Section 1.15 hereof), both for principal and interest not

 

8

 

sooner paid, shall mature
and become due and payable by the Borrower on the Revolving Credit Termination
Date.

 

Section
1.8            Prepayments.
(a)  Optional. The
Borrower may prepay in whole or in part (but, if in part, then:  (i) if such Borrowing is of Base Rate Loans,
in an amount not less than $250,000, (ii) if such Borrowing is of Eurodollar
Loans, in an amount not less than $500,000, and (iii) in each case, in an
amount such that the minimum amount required for a Borrowing pursuant to
Section 1.4 and 1.15 hereof remains outstanding) any Borrowing of Eurodollar
Loans at any time upon 3 Business Days prior notice by the Borrower to the Administrative
Agent or, in the case of a Borrowing of Base Rate Loans, notice delivered by
the Borrower to the Administrative Agent no later than 10:00 a.m. (Chicago
time) on the date of prepayment (or, in any case, such shorter period of time
then agreed to by the Administrative Agent), such prepayment to be made by the
payment of the principal amount to be prepaid and, in the case of any
Eurodollar Loans or Swing Loans, accrued interest thereon to the date fixed for
prepayment plus any amounts due the Lenders under Section 1.11 hereof.

 

(b)           Mandatory. (i)  If the Borrower or any of its Wholly-owned
Subsidiaries shall at any time or from time to time make or agree to make a
Disposition or shall suffer an Event of Loss with respect to any Property, then
the Borrower shall promptly notify the Administrative Agent of such proposed
Disposition or Event of Loss (including the amount of the estimated Net Cash
Proceeds to be received by the Borrower or such Subsidiary in respect thereof)
and, promptly upon receipt by the Borrower or such Subsidiary of the Net Cash
Proceeds of such Disposition or Event of Loss, the Borrower shall prepay the
Obligations in an aggregate amount equal to 100% of the amount of all such Net
Cash Proceeds; provided that this subsection
shall not require any such prepayment with respect to Net Cash Proceeds
received on account of Dispositions during any fiscal year of the Borrower not
exceeding $5,000,000 in the aggregate so long as no Default or Event of Default
then exists. The amount of each such prepayment shall be applied first to the
outstanding Swing Loans until paid in full and then to the Revolving Credit. If
the Administrative Agent or the Required Lenders so request, all proceeds of
such Disposition or Event of Loss shall be deposited with the Administrative
Agent (or its agent) and held by it in the Collateral Account. So long as no
Default or Event of Default exists, the Administrative Agent is authorized to
disburse amounts representing such proceeds from the Collateral Account to or
at the Borrower’s direction for application to or reimbursement for the costs
of replacing, rebuilding or restoring such Property.

 

(ii)           If after the Closing Date the
Borrower shall incur any additional Subordinated Debt or the Borrower or any
Wholly-owned Subsidiary shall issue new equity securities (whether common or
preferred stock or otherwise), other than equity securities issued in
connection with the exercise of employee or director stock options, the
Borrower shall promptly notify the Administrative Agent of the estimated Net
Cash Proceeds of such incurrence or issuance to be received by or for the
account of the Borrower or such Wholly-owned Subsidiary in respect thereof. Promptly
upon receipt by the Borrower or such Wholly-owned Subsidiary of Net Cash
Proceeds of such issuance, the Borrower shall apply 100% of the amount of such
Net Cash Proceeds first to the prepayment of the outstanding Swing Loans, until
paid in full, second to the prepayment of the Revolving Loans, until paid in
full, and then to the prefunding of all L/C Obligations. The Borrower
acknowledges that its performance hereunder shall not limit the

 

9

 

rights and remedies of
the Lenders for any breach of Section 8.11 (Maintenance of Subsidiaries) or
Section 9.1(j) (Change of Control) hereof or any other terms of the Loan
Documents.

 

(iii)          The Borrower shall, on each date the
Revolving Credit Commitments are reduced pursuant to Section 1.12 hereof,
prepay the Revolving Loans, Swing Loans, and, if necessary, prefund the L/C
Obligations by the amount, if any, necessary to reduce the sum of the aggregate
principal amount of Revolving Loans, Swing Loans, and L/C Obligations then
outstanding to the amount to which the Revolving Credit Commitments have been
so reduced.

 

(iv)          If at any time the sum of the unpaid
principal balance of the Revolving Loans, Swing Loans, and the L/C Obligations
then outstanding shall be in excess of the Borrowing Base as then determined on
the basis of the most recent Borrowing Base Certificate, the Borrower shall
immediately and without notice or demand pay over the amount of the excess to
the Administrative Agent for the account of the Lenders as and for a mandatory
prepayment on such Obligations, with each such prepayment first to be applied
to the Revolving Loans and Swing Loans until payment in full thereof with any
remaining balance to be held by the Administrative Agent in the Collateral
Account as security for the Obligations owing with respect to the Letters of
Credit.

 

(v)           Prepayments of Loans under this
Section 1.8(b) shall be applied first to Swing Loans, until payment in full
thereof, second to all other Borrowings of Base Rate Loans until payment in
full thereof, and third to Borrowings of Eurodollar Loans in the order in which
their Interest Periods expire. Each prepayment of Loans under this Section
1.8(b) shall be made by the payment of the principal amount to be prepaid and,
in the case of any Eurodollar Loans or Swing Loans, accrued interest thereon to
the date of prepayment together with any amounts due the Lenders under Section
1.11 hereof. Each prefunding of L/C Obligations shall be made in accordance
with Section 9.4 hereof.

 

(c)           Any amount of Revolving Loans and
Swing Loans paid or prepaid before the Revolving Credit Termination Date may,
subject to the terms and conditions of this Agreement, be borrowed, repaid and
borrowed again.

 

Section
1.9            Default Rate.
Notwithstanding anything to the contrary contained herein, while any Event of
Default exists or after acceleration, the Borrower shall pay interest (after as
well as before entry of judgment thereon to the extent permitted by law) on the
principal amount of all Loans and Reimbursement Obligations, and letter of
credit fees at a rate per annum equal to:

 

(a)      for any Base Rate Loan or any Swing Loan,
the sum of 2.0% plus the Applicable Margin plus the Base Rate from time to time
in effect;

 

(b)      for any Eurodollar Loan, the sum of 2.0%
plus the rate of interest in effect thereon at the time of such default until
the end of the Interest Period applicable thereto and, thereafter, at a rate
per annum equal to the sum of 2.0% plus the Applicable Margin for Base Rate
Loans plus the Base Rate from time to time in effect;

 

10

 

(c)      for any Reimbursement Obligation that is
not converted to a Borrowing of a Base Rate Loan under Section 1.2 hereof, the
sum of 2.0% plus the amounts due under Section 1.2 with respect to such
Reimbursement Obligation; and

 

(d)      for any Letter of Credit, the sum of 2.0%
plus the letter of credit fee due under Section 2.1 with respect to such Letter
of Credit;

 

provided, however,
that in the absence of acceleration, any adjustments pursuant to this Section
shall be made at the election of the Administrative Agent, acting at the
request or with the consent of the Required Lenders, with written notice to the
Borrower. While any Event of Default exists or after acceleration, interest
shall be paid on demand of the Administrative Agent at the request or with the
consent of the Required Lenders.

 

Section
1.10         The Notes.

 

(a)           The Revolving Loans made to the
Borrower by a Lender shall be evidenced by a single promissory note of the
Borrower issued to such Lender in the form of Exhibit D-1 hereto. Each such
promissory note is hereinafter referred to as a “Revolving
Note” and collectively such promissory notes are referred to as the “Revolving Notes.”

 

(b)           The Swing Loans made to the Borrower
by the Administrative Agent shall be evidenced by a single promissory note of
the Borrower issued to the Administrative Agent in the form of Exhibit D-2
hereto. Such promissory note is hereinafter referred to as the “Swing Note.”

 

(c)           Each Lender shall record on its books
and records or on a schedule to its appropriate Note the amount of each Loan
advanced, continued or converted by it, all payments of principal and interest
and the principal balance from time to time outstanding thereon, the type of
such Loan, and, for any Eurodollar Loan or Swing Loan, the Interest Period and
the interest rate applicable thereto. The record thereof, whether shown on such
books and records of a Lender or on a schedule to the relevant Note, shall,
absent manifest error, be prima facie
evidence as to all such matters; provided, however,
that the failure of any Lender to record any of the foregoing or any error in
any such record shall not limit or otherwise affect the obligation of the
Borrower to repay all Loans made to it hereunder together with accrued interest
thereon. At the request of any Lender and upon such Lender tendering to the
Borrower the appropriate Note to be replaced, the Borrower shall furnish a new
Note to such Lender to replace any outstanding Note.

 

Section
1.11         Funding Indemnity.
If any Lender shall incur any loss, cost or expense (including, without
limitation, any loss (calculated as yield losses for funds incurring interest
at lower rates in the interbank Eurodollar market), cost or expense incurred by
reason of the liquidation or re-employment of deposits or other funds acquired
by such Lender to fund or maintain any Eurodollar Loan or Swing Loan or the
relending or reinvesting of such deposits or amounts paid or prepaid to such
Lender) as a result of:

 

(a)      any payment, prepayment or conversion of a
Eurodollar Loan or Swing Loan on a date other than the last day of its Interest
Period,

 

11

 

(b)      any failure (because of a failure to meet
the conditions of Section 7 or otherwise) by the Borrower to borrow or continue
a Eurodollar Loan or Swing Loan, or to convert a Base Rate Loan into a
Eurodollar Loan or Swing Loan on the date specified in a notice given pursuant
to Section 1.5(a) or 1.15 hereof,

 

(c)      any failure by the Borrower to make any
payment of principal on any Eurodollar Loan or Swing Loan when due (whether by
acceleration or otherwise), or

 

(d)      any acceleration of the maturity of a
Eurodollar Loan or Swing Loan as a result of the occurrence of any Event of
Default hereunder,

 

then, upon the demand of such Lender, the Borrower
shall pay to such Lender such amount as will reimburse such Lender for such
loss, cost or expense. If any Lender makes such a claim for compensation, it
shall provide to the Borrower, with a copy to the Administrative Agent, a
certificate setting forth the amount of such loss, cost or expense in
reasonable detail (including an explanation of the basis for and the
computation of such loss, cost or expense) and the amounts shown on such
certificate shall be deemed prime facie
correct absent manifest error.

 

Section
1.12         Revolving Credit Commitment
Terminations. (a)  Optional Revolving Credit Terminations. The Borrower shall
have the right at any time and from time to time, upon 5 Business Days prior
written notice to the Administrative Agent (or such shorter period of time
agreed to by the Administrative Agent), to terminate the Revolving Credit
Commitments without premium or penalty and in whole or in part, any partial
termination to be (i) in an amount not less than $5,000,000 or an integral multiple
of $5,000,000 in excess thereof and (ii) allocated ratably among the Lenders in
proportion to their respective Revolver Percentages, provided
that the Revolving Credit Commitments may not be reduced to an amount less than
the sum of the aggregate principal amount of Revolving Loans, Swing Loans, and
L/C Obligations then outstanding. Any termination of the Revolving Credit
Commitments shall reduce the L/C Sublimit by a percentage amount equal to the
percentage reduction in the aggregate Revolving Credit Commitments. Any
termination of the Revolving Credit Commitments below the Swing Line Sublimit
then in effect shall reduce the Swing Line Sublimit by a like amount. The
Administrative Agent shall give prompt notice to each Lender of any such
termination of the Revolving Credit Commitments.

 

(b)           Revolving Credit
Commitment Reinstatement. Any termination of the Revolving Credit
Commitments pursuant to this Section 1.12 may not be reinstated, except as
provided in Section 1.13.

 

Section
1.13         Increase in Aggregate
Revolving Credit Commitment.

 

The Borrower may, at any time and from time to time,
request, by notice to the Administrative Agent, the Administrative Agent’s
approval, such approval not to be unreasonably withheld, of an increase in the
aggregate Revolving Credit Commitments (a “Facility Increase”)
within the limitations hereafter described, which request shall set forth the
amount of each such requested Facility Increase. Within twenty (20) days of
such request, the Administrative Agent shall advise the Borrower of its
approval or disapproval of such request, and failure to so advise the Borrower
shall constitute disapproval. If the Administrative Agent

 

12

 

approves any such
Facility Increase, then the aggregate Revolving Credit Commitments may be
increased (up to the amount of such approved Facility Increase, in the
aggregate) by having one or more New Lenders increase the amount of their then
existing Revolving Credit Commitments or become Lenders, subject to and in
accordance with this Section 1.13. Any Facility Increase shall be subject to
the following limitations and conditions: 
(a) any increase in the aggregate Revolving Credit Commitments shall not
be less than $50,000,000; any increase in any Revolving Credit Commitment and
any new Revolving Credit Commitment shall (unless otherwise agreed to by the
Borrower and the Administrative Agent) not be less than $5,000,000 and shall be
in integral multiples of $1,000,000 if in excess thereof; (b) no Facility
Increase pursuant to this Section 1.13 shall increase the aggregate Revolving
Credit Commitments to an amount in excess of $700,000,000; (c) the Borrower and
each New Lender shall have executed and delivered a commitment and acceptance
(the “Commitment and Acceptance”)
substantially in the form of Exhibit I hereto, and the Administrative Agent
shall have accepted and executed the same; (d) the Borrower shall have executed
and delivered to the Administrative Agent such Note or Notes as the
Administrative Agent shall require to reflect such Facility Increase; (e) the
Borrower shall have delivered to the Administrative Agent opinions of counsel
(substantially similar to the form of opinions provided for in Section 7,
modified to apply to the Facility Increase and each Note and Commitment and
Acceptance executed and delivered in connection therewith); (f) the Guarantors
shall have consented in writing to the Facility Increase and shall have agreed
that their guaranties contained in this Agreement or elsewhere continue in full
force and effect; (g) the Borrower and each New Lender shall otherwise have
executed and delivered such other instruments and documents as the
Administrative Agent shall have reasonably requested in connection with such
Facility Increase and (h) each New Lender shall have paid to the other Lenders
an amount sufficient such that the percentage of all outstanding Loans as held
by all Lenders shall equal each Lender’s Revolver Percentage following the
Facility Increase. The form and substance of the documents required under
clauses (c) through (g) above shall be fully acceptable to the Administrative
Agent. The Administrative Agent shall provide written notice to all of the
Lenders hereunder of any Facility Increase.

 

Section
1.14         Substitution of Lenders.
In the event (a) the Borrower receives a claim from any Lender for compensation
under Section 10.3 or 13.1 hereof, (b) the Borrower receives notice from any
Lender of any illegality pursuant to Section 10.1 hereof, (c) any Lender is in
default in any material respect with respect to its obligations under the Loan
Documents, or (d) a Lender fails to consent to an amendment or waiver requested
under Section 13.13 hereof at a time when the Required Lenders have approved
such amendment or waiver (any such Lender referred to in clause (a), (b), (c),
or (d) above being hereinafter referred to as an “Affected
Lender”), the Borrower may, in addition to any other rights the
Borrower may have hereunder or under applicable law, require, at the Affected Lender’s
expense, any such Affected Lender to assign, at par plus accrued interest and
fees, without recourse, all of its interest, rights, and obligations hereunder
(including all of its Revolving Credit Commitments and the Loans and
participation interests in Letters of Credit and other amounts at any time
owing to it hereunder and the other Loan Documents) to a commercial bank or
other financial institution specified by the Borrower, provided
that (i) such assignment shall not conflict with or violate any law, rule or
regulation or order of any court or other governmental authority, (ii) the
Borrower shall have received the written consent of the Administrative Agent,
which consent shall not be unreasonably withheld, to such assignment, (iii) the
Borrower shall have paid to the Affected Lender all monies (together with
amounts due such Affected Lender under Section 1.11 hereof

 

13

 

as if the Loans owing to
it were prepaid rather than assigned) other than such principal owing to it
hereunder, and (iv) the assignment is entered into in accordance with the other
requirements of Section 13.12 hereof (provided any assignment fees and
reimbursable expenses due thereunder shall be paid by the Borrower).

 

Section
1.15         Swing Loans.
(a)  Generally. Subject
to the terms and conditions hereof, as part of the Revolving Credit, the
Administrative Agent agrees to make loans in U.S. Dollars to the Borrower under
the Swing Line (individually a “Swing Loan” and
collectively the “Swing Loans”) which shall not in
the aggregate at any time outstanding exceed the Swing Line Sublimit. The Swing
Loans may be availed of the Borrower from time to time and borrowings
thereunder may be repaid and used again during the period ending on the Revolving
Credit Termination Date; provided that
each Swing Loan must be repaid on the last day of the Interest Period
applicable thereto. Each Swing Loan shall be in a minimum amount of $500,000 or
such greater amount which is an integral multiple of $100,000.

 

(b)           Interest on Swing Loans.
Each Swing Loan shall bear interest until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the sum of the Base Rate plus the
Applicable Margin for Base Rate Loans under the Revolving Credit as from time
to time in effect (computed on the basis of a year of 360 days for the actual
number of days elapsed). Interest on each Swing Loan shall be due and payable
on the last day of its Interest Period and at maturity (whether by acceleration
or otherwise).

 

(c)           Requests for Swing Loans.
The Borrower shall give the Administrative Agent prior notice (which may be
written or oral, provided that all such written notices shall be substantially
in the form of Exhibit B (Notice of Borrowing) and all oral notices shall be
promptly confirmed in writing) no later than 12:00 Noon (Chicago time) on the
date upon which the Borrower requests that any Swing Loan be made, of the
amount and date of such Swing Loan, and the Interest Period requested therefor.
Such Swing Loan shall bear interest at the rate per annum determined by adding
the Applicable Margin for Base Rate Loans under the Revolving Credit to the
Base Rate as from time to time in effect. Subject to the terms and conditions
hereof, the proceeds of such Swing Loan shall be made available to the Borrower
on the date so requested at the offices of the Administrative Agent in Chicago,
Illinois, by depositing such proceeds to the credit of the Borrower’s operating
account maintained with the Administrative Agent or as the Borrower and the
Administrative Agent may otherwise agree. Anything contained in the foregoing
to the contrary notwithstanding, (i) the obligation of the Administrative Agent
to make Swing Loans shall be subject to all of the terms and conditions of this
Agreement and (ii) the Administrative Agent shall not be obligated to make more
than one Swing Loan during any one week.

 

(d)           Refunding Loans.
In its sole and absolute discretion, the Administrative Agent may at any time,
on behalf of the Borrower (which hereby irrevocably authorizes the
Administrative Agent to act on its behalf for such purpose) and with notice to
the Borrower, request each Lender to make a Revolving Loan in the form of a
Base Rate Loan in an amount equal to such Lender’s Revolver Percentage of the
amount of the Swing Loans outstanding on the date such notice is given. Unless
an Event of Default described in Section 9.1(l) or 9.1(m) exists with respect
to the Borrower, regardless of the existence of any other Event of Default,
each Lender shall make the proceeds of its requested Revolving Loan available
to the

 

14

 

Administrative Agent, in
immediately available funds, at the Administrative Agent’s principal office in
Chicago, Illinois, before 12:00 Noon (Chicago time) on the Business Day
following the day such notice is given. The proceeds of such Borrowing of
Revolving Loans shall be immediately applied to repay the outstanding Swing
Loans.

 

(e)           Participations.
If any Lender refuses or otherwise fails to make a Revolving Loan when
requested by the Administrative Agent pursuant to Section 1.15(d) above
(because an Event of Default described in Section 9.1(l) or 9.1(m) exists with
respect to the Borrower or otherwise), such Lender will, by the time and in the
manner such Revolving Loan was to have been funded to the Administrative Agent,
purchase from the Administrative Agent an undivided participating interest in
the outstanding Swing Loans in an amount equal to its Revolver Percentage of the
aggregate principal amount of Swing Loans that were to have been repaid with
such Revolving Loans. Each Lender that so purchases a participation in a Swing
Loan shall thereafter be entitled to receive its Revolver Percentage of each
payment of principal received on the Swing Loan and of interest received
thereon accruing from the date such Lender funded to the Administrative Agent
its participation in such Loan. The several obligations of the Lenders under
this Section shall be absolute, irrevocable and unconditional under any and all
circumstances whatsoever and shall not be subject to any set-off, counterclaim
or defense to payment which any Lender may have or have had against the
Borrower, any other Lender or any other Person whatsoever. Without limiting the
generality of the foregoing, such obligations shall not be affected by any
Default or Event of Default or by any reduction or termination of the Revolving
Credit Commitments of any Lender, and each payment made by a Lender under this
Section shall be made without any offset, abatement, withholding or reduction
whatsoever.

 

SECTION 2.           FEES.

 

Section
2.1            Fees. (a)  Revolving Credit
Commitment Fee. The Borrower shall pay to the Administrative Agent
for the ratable account of the Lenders in accordance with their Revolver
Percentages a commitment fee at the rate per annum equal to the Applicable
Margin (computed on the basis of a year of 360 days and the actual number of
days elapsed) on the average daily Unused Revolving Credit Commitments. Such
commitment fee shall be payable quarterly in arrears within 10 days following
the last day of each March, June, September, and December in each year
(commencing on the first such date occurring after the date hereof) and on the
Revolving Credit Termination Date, unless the Revolving Credit Commitments are
terminated in whole on an earlier date, in which event the commitment fee for
the period to the date of such termination in whole shall be paid on the date
of such termination.

 

(b)           Letter of Credit Fees.
On the date of issuance or extension, or increase in the amount, of any Letter
of Credit pursuant to Section 1.2 hereof, the Borrower shall pay to the L/C
Issuer for its own account a fronting fee equal to 0.125% of the face amount of
(or of the increase in the face amount of) such Letter of Credit. Quarterly in
arrears, within 10 days following the last day of each March, June, September,
and December, commencing on the first such date occurring after the date
hereof, the Borrower shall pay to the Administrative Agent, for the ratable
benefit of the Lenders in accordance with their Revolver Percentages, a letter
of credit fee at a rate per annum equal to 1.50% (computed on the basis of a
year of 360 days and the actual number of days elapsed) applied to the daily average
face amount of Letters of Credit outstanding during such quarter. In addition,
the Borrower shall pay to the L/C Issuer for its own

 

15

 

account the L/C Issuer’s
standard issuance, drawing, negotiation, amendment, assignment, and other
administrative fees for each Letter of Credit as established by the L/C Issuer
from time to time.

 

(c)           Administrative Agent Fees.
The Borrower shall pay to the Administrative Agent, for its own use and
benefit, and to Harris Nesbitt and Banc of America Securities, LLC, the fees
agreed to in the fee letters executed by the Borrowers, dated [December        ,
2005], or as otherwise agreed to in writing among such parties.

 

SECTION 3.           PLACE AND APPLICATION OF PAYMENTS.

 

Section
3.1            Place and Application of
Payments. All payments of principal of and interest on the
Loans and the Reimbursement Obligations, and of all other Obligations payable
by the Borrower under this Agreement and the other Loan Documents, shall be
made by the Borrower to the Administrative Agent by no later than 12:00 Noon
(Chicago time) on the due date thereof at the office of the Administrative
Agent in Chicago, Illinois (or such other location as the Administrative Agent
may designate to the Borrower) for the benefit of the Lender or Lenders
entitled thereto. Any payments received after such time shall be deemed to have
been received by the Administrative Agent on the next Business Day. All such
payments shall be made in U.S. Dollars, in immediately available funds at the
place of payment, in each case without set-off or counterclaim. The
Administrative Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal or interest on Loans and on
Reimbursement Obligations in which the Lenders have purchased Participating
Interests ratably to the Lenders and like funds relating to the payment of any
other amount payable to any Lender to such Lender, in each case to be applied
in accordance with the terms of this Agreement. If the Administrative Agent
causes amounts to be distributed to the Lenders in reliance upon the assumption
that the Borrower will make a scheduled payment and such scheduled payment is
not so made, each Lender shall, on demand, repay to the Administrative Agent
the amount distributed to such Lender together with interest thereon in respect
of each day during the period commencing on the date such amount was
distributed to such Lender and ending on (but excluding) the date such Lender
repays such amount to the Administrative Agent, at a rate per annum equal
to:  (i) from the date the distribution
was made to the date 2 Business Days after payment by such Lender is due
hereunder, the Federal Funds Rate for each such day and (ii) from the date 2
Business Days after the date such payment is due from such Lender to the date
such payment is made by such Lender, the Base Rate in effect for each such day.

 

Anything contained herein to the contrary
notwithstanding (including, without limitation, Section 1.8(b) hereof), all
payments and collections received in respect of the Obligations by the
Administrative Agent or any of the Lenders after acceleration or the final
maturity of the Obligations or termination of the Revolving Credit Commitments
as a result of an Event of Default shall be remitted to the Administrative
Agent and distributed as follows:

 

(a)      first, to the payment of any outstanding
costs and expenses reasonably incurred by the Administrative Agent, in
protecting, preserving or enforcing rights under the Loan Documents, and in any
event including all costs and expenses of a character which the Borrower has
agreed to pay the Administrative Agent under Section 13.15 hereof (such funds
to be retained by the Administrative Agent for its

 

16

 

own account unless it has previously been reimbursed
for such costs and expenses by the Lenders, in which event such amounts shall
be remitted to the Lenders to reimburse them for payments theretofore made to
the Administrative Agent);

 

(b)      second, to the payment of any outstanding
interest and fees due under the Loan Documents to be allocated pro rata in
accordance with the aggregate unpaid amounts owing to each holder thereof;

 

(c)      third, to the payment of principal on the
Notes, unpaid Reimbursement Obligations, together with amounts to be held by
the Administrative Agent as collateral security for any outstanding L/C
Obligations pursuant to Section 9.4 hereof (until the Administrative Agent is
holding an amount of cash equal to the then outstanding amount of all such L/C
Obligations), and Hedging Liability, the aggregate amount paid to, or held as
collateral security for, the Lenders and, in the case of Hedging Liability,
their Affiliates, to be allocated pro rata in accordance with the aggregate
unpaid amounts owing to each holder thereof;

 

(d)      fourth, to the payment of all other unpaid
Obligations and all other indebtedness, obligations, and liabilities of the
Borrower and its Subsidiaries evidenced by the Loan Documents (including,
without limitation, Funds Transfer and Deposit Account Liability) to be
allocated pro rata in accordance with the aggregate unpaid amounts owing to
each holder thereof; and

 

(e)      finally, to the Borrower or whoever else
may be lawfully entitled thereto.

 

Section
3.2            Account Debit.
The Borrower hereby irrevocably authorizes the Administrative Agent and each
Lender to charge any of the Borrower’s deposit accounts maintained with the
Administrative Agent or such Lender for the amounts from time to time necessary
to pay any then due Obligations; provided that
the Borrower acknowledges and agrees that the Administrative Agent and the
Lenders shall not be under an obligation to do so and the Administrative Agent
and the Lenders shall not incur any liability to the Borrower or any other
Person for the Administrative Agent’s or the Lender’s failure to do so. The
Administrative Agent shall provide the Borrower with written notice on the date
of any such charge and the amount thereof.

 

SECTION 4.           GUARANTIES.

 

Section
4.1            Guaranties.
The payment and performance of the Obligations, Hedging Liability, and Funds
Transfer and Deposit Account Liability shall at all times be guaranteed by each
Wholly-owned Subsidiary of the Borrower (but specifically excluding KH
Financial, L.P.) that is engaged in the acquisition and development of Real
Property and the construction of Housing Units thereon (individually a “Guarantor” and collectively the “Guarantors”)
pursuant to Section 12 hereof or pursuant to one or more guaranty agreements in
form and substance acceptable to the Administrative Agent, as the same may be
amended, modified or supplemented from time to time (individually a “Guaranty” and collectively the “Guaranties”).

 

17

 

Section
4.2            Further Assurances.
In the event the Borrower or any Guarantor forms or acquires any other entity
after the date hereof, that is to be a Wholly-owned Subsidiary engaged in the
acquisition and development of Real Property and the construction of Housing
Units thereon, then the Borrower shall promptly upon such formation or
acquisition cause such newly formed or acquired entity to execute a Guaranty,
and the Borrower shall also deliver to the Administrative Agent, or cause such
entity to deliver to the Administrative Agent, at the Borrower’s cost and
expense, such other instruments, documents, certificates, and opinions
reasonably required by the Administrative Agent in connection therewith.

 

SECTION 5.           DEFINITIONS; INTERPRETATION.

 

Section
5.1            Definitions.
The following terms when used herein shall have the following meanings:

 

“Act” is defined
in Section 13.24 hereof.

 

“Adjusted LIBOR”
is defined in Section 1.3(b) hereof.

 

“Adjusted Tangible Net Worth”
means the sum of (a) the Tangible Net Worth (b) all minority interests, as
determined in accordance with GAAP, of any Person, other than the Borrower or a
Wholly-owned Subsidiary, in any Partial Subsidiary (excluding interests
attributable to assets not yet owned by a Partial Subsidiary), and (c) 50% of
the outstanding principal of the Subordinated Debt; provided that the amount
contributed pursuant to clause (b) shall not exceed $50,000,000, and the amount
contributed pursuant to clause (c) above shall not exceed $100,000,000.

 

“Administrative Agent”
means Harris N.A. and any successor pursuant to Section 11.7 hereof.

 

 “Administrative
Costs” means costs incurred by the Borrower or its
Subsidiaries in connection with (a) the marketing and selling of Eligible Land
and (b) the administration, management and operation of the Borrower’s or its
Subsidiaries’ businesses, which costs are not directly attributable to zoning,
permitting, design, site improvement, construction upon or other similar
development activity with respect to a given parcel or lot of Eligible Land.

 

“Affected Lender”
is defined in Section 1.14 hereof.

 

“Affiliate”
means any Person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, another Person. A Person shall be
deemed to control another Person for purposes of this definition if such Person
possesses, directly or indirectly, the power to direct, or cause the direction
of, the management and policies of the other Person, whether through the
ownership of voting securities, common directors, trustees or officers, by
contract or otherwise; provided that,
in any event for purposes of this definition, any Person that owns, directly or
indirectly, 10% or more of the securities having the ordinary voting power for
the election of directors or governing body of a corporation or 10% or more of
the partnership or other ownership interest of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person.

 

18

 

“Agreement”
means this Credit Agreement, as the same may be amended, modified, restated or
supplemented from time to time pursuant to the terms hereof.

 

“Applicable Margin”
means, with respect to Loans, Reimbursement Obligations, and the commitment
fees payable under Section 2.1 hereof, until the first Pricing Date, the rates
per annum shown opposite Level II below, and thereafter from one Pricing Date
to the next the Applicable Margin means the rates per annum determined in
accordance with the following schedule:

 

	
  LEVEL

  	
   

  	
  LEVERAGE RATIO FOR SUCH
  PRICING DATE

  	
   

  	
  APPLICABLE MARGIN FOR
  BASE RATE LOANS 

  UNDER REVOLVING CREDIT AND REIMBURSEMENT OBLIGATIONS
 SHALL BE:

  	
   

  	
  APPLICABLE MARGIN FOR
  EURODOLLAR LOANS UNDER REVOLVING CREDIT SHALL BE:

  	
   

  	
  APPLICABLE MARGIN FOR
  COMMITMENT FEE SHALL

  BE:

  
	
  IV

  	
   

  	
  Greater than or equal to 2.25 to 1.0

  	
   

  	
  0.00%

  	
   

  	
  2.25%

  	
   

  	
  0.30%

  
	
  III

  	
   

  	
  Less than 2.25 to 1.0, but greater than or
  equal to 2.00 to 1.0

  	
   

  	
  0.00%

  	
   

  	
  2.00%

  	
   

  	
  0.25%

  
	
  II

  	
   

  	
  Less than 2.00 to 1.0, but greater than or
  equal to 1.75 to 1.0

  	
   

  	
  0.00%

  	
   

  	
  1.75%

  	
   

  	
  0.20%

  
	
  I

  	
   

  	
  Less than 1.75 to 1.0

  	
   

  	
  0.00%

  	
   

  	
  1.50%

  	
   

  	
  0.20%

  

 

For purposes hereof, the term “Pricing Date”
means, for any fiscal quarter of the Borrower ending on or after March 31,
2006, the date on which the Administrative Agent is in receipt of the Borrower’s
most recent financial statements for the fiscal quarter then ended, pursuant to
Section 8.5 hereof. The Applicable Margin shall be established based on the
Leverage Ratio for the most recently completed fiscal quarter and the Applicable
Margin established on a Pricing Date shall remain in effect until the next
Pricing Date. If the Borrower has not delivered its financial statements by the
date such financial statements are required to be delivered under Section 8.5
hereof, until such financial statements and audit report are delivered, the
Applicable Margin, in the discretion of the Administrative Agent, shall be the
highest Applicable Margin (i.e., Level IV
shall apply). If the Borrower subsequently delivers such financial statements
before the next Pricing Date, the Applicable Margin established by such late
delivered financial statements shall take effect from the date of delivery
until the next Pricing Date. In all other circumstances, the Applicable Margin
established by such financial statements shall be in effect from the Pricing
Date that occurs immediately after the end of the fiscal quarter covered by
such financial statements until the next Pricing Date. Each determination of
the Applicable Margin made by the Administrative Agent in accordance with the
foregoing shall be conclusive and binding on the Borrower and the Lenders if
reasonably determined.

 

“Application” is
defined in Section 1.2(b) hereof.

 

“Authorized Representative”
means those persons shown on the list of officers provided by the Borrower
pursuant to Section 7.2 hereof or on any update of any such list provided by
the

 

19

 

Borrower to the
Administrative Agent, or any further or different officers of the Borrower so
named by any Authorized Representative of the Borrower in a written notice to
the Administrative Agent.

 

“Base Rate” is
defined in Section 1.3(a) hereof.

 

“Base Rate Loan”
means a Loan bearing interest at a rate specified in Section 1.3(a) hereof.

 

“Borrower” is
defined in the introductory paragraph of this Agreement.

 

“Borrowing”
means the total of Loans of a single type advanced, continued for an additional
Interest Period, or converted from a different type into such type by the
Lenders under a Credit on a single date and, in the case of Eurodollar Loans,
for a single Interest Period. Borrowings of Loans are made and maintained
ratably from each of the Lenders according to their Revolver Percentages. A
Borrowing is “advanced” on the day Lenders
advance funds comprising such Borrowing to the Borrower, is “continued” on the date a new Interest Period for the same
type of Loans commences for such Borrowing, and is “converted”
when such Borrowing is changed from one type of Loans to the other, all as
determined pursuant to Section 1.5 hereof. Borrowings of Swing Loans are made
by the Administrative Agent in accordance with the procedures set forth in
Section 1.15 hereof.

 

“Borrowing Base”
means, as of the date of determination, the sum of the following amounts:  (a) 90% of the Housing Unit Book Value for
all Housing Units Under Contract, (b) 80% of the Housing Unit Book Value for
all Speculative Housing Units, (c) 70% of the Finished Lot Book Value for all
Finished Lots, (d) 60% of the Finished Lot Book Value for all Lots Under
Development, and (e) 50% of the Eligible Land Book Value for all Entitled Land;
provided that (i) the Borrowing Base shall be computed only as against and on
so much of such Property (which shall be Property that is not subject to any Lien
other than as allowed under Section 8.8(a), (b), (f) or (n)) as is included on
the Borrowing Base Certificates furnished from time to time by the Borrower
pursuant to this Agreement and, if required by the Administrative Agent
pursuant to any of the terms hereof, as verified by such other evidence
reasonably required to be furnished to the Administrative Agent pursuant
hereto; (ii) on any date of determination, the aggregate amounts derived from
the above clauses (c), (d) and (e) shall not contribute an amount to the
Borrowing Base greater than 50% of the aggregate Revolving Credit Commitments
then in effect; (iii) on any date of determination, the amount derived from the
above clause (e) shall not contribute an amount to the Borrowing Base greater
than 25% of the aggregate Revolving Credit Commitments then in effect, (iv) the
sum of all amounts included in the Borrowing Base attributable to Property
owned by the Special Project Subsidiaries shall not exceed (A) $50,000,000 at
any one time prior to or on December 31, 2006, (B) $40,000,000 at any one time
after December 31, 2006 until December 31, 2007, (C) $30,000,000 at any one
time after December 31, 2007 until December 31, 2008, and (D) $0 at any time
after December 31, 2008; and (v) the Borrowing Base as calculated at any time
shall be reduced by an amount equal to the outstanding principal balance of any
Indebtedness for Borrowed Money allowed under Section 8.7(g) hereof.

 

20

 

“Borrowing Base Certificate”
means the certificate in the form of Exhibit E hereto, or in such other form
acceptable to the Administrative Agent, to be delivered to the Administrative
Agent pursuant to Sections 7.2 and 8.5 hereof.

 

“Borrowing Capacity” means for
any given month, the difference between (a) the
lesser of (i) the Borrowing Base and (ii) the aggregate Revolving Credit
Commitments and (b) the sum of the outstanding principal of the Loans and all
L/C Obligations.

 

“Builder Leverage Ratio” means
the ratio of Builder Liabilities to Adjusted Tangible Net Worth.

 

“Builder Liabilities” means
Indebtedness for Borrowed Money of the Borrower and its Subsidiaries, less, to
the extent included in such amount, all purchase money indebtedness or
obligations in respect of assets that have not been acquired by the Borrower or
any of its Subsidiaries as of the date of determination.

 

“Building Region” means the
following areas or regions in which the Borrower and its Subsidiaries conduct
business: (a) Florida, (b) Texas, (c) the Midwest (being the general
metropolitan areas of Chicago, Illinois; Cleveland, Ohio; and Milwaukee,
Wisconsin) (d) Nevada, (e) the Pacific Coast (being the general metropolitan
areas of Sacramento, California; Stockton, California; Portland, Oregon and
Vancouver, Washington), and (f) such other regions as designated by the
Administrative Agent pursuant to Section 8.18.

 

“Business Day”
means any day (other than a Saturday or Sunday) on which banks are not
authorized or required to close in Chicago, Illinois and, if the applicable
Business Day relates to the advance or continuation of, or conversion into, or
payment of a Eurodollar Loan, on which banks are dealing in U.S. Dollar
deposits in the interbank eurodollar market in London, England and Nassau,
Bahamas.

 

“Capital Lease”
means any lease of Property which in accordance with GAAP is required to be
capitalized on the balance sheet of the lessee.

 

“Capitalized Lease
Obligation” means, for any Person, the amount of the liability shown
on the balance sheet of such Person in respect of a Capital Lease determined in
accordance with GAAP.

 

“CERCLA” means
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986,
42 U.S.C. §§9601 et seq., and any future
amendments.

 

“Change of Control”
means (a) any transfer of any class of stock in the Borrower that individually
or in the aggregate with other transfers, whether voluntary or involuntary,
results in the Permitted Holders not owning at least 51% of the outstanding
Voting Stock in the Borrower, or (b) following any offering of new equity
securities by the Borrower (whether common or preferred stock or otherwise),
other than equity securities issued in connection with the exercise of employee
or director stock options, during any period of two consecutive years,
individuals who at the beginning of such period constituted the board of
directors of the Borrower (together with any new directors whose election to
such board of directors or whose nomination for

 

21

 

election by the
stockholders of the Borrower was approved by a vote of the majority of the
directors of the Borrower then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of directors of the Borrower.

 

“Closing Date”
means the date of this Agreement or such later Business Day upon which each
condition described in Section 7.2 shall be satisfied or waived in a manner
acceptable to the Administrative Agent in its discretion.

 

“Code” means the
Internal Revenue Code of 1986, as amended, and any successor statute thereto.

 

“Collateral Account”
is defined in Section 9.4 hereof.

 

“Commitment and Acceptance” is
defined in Section 1.13.

 

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

 

“Credit” means
any of the Revolving Credit or the Swing Line.

 

“Credit Event”
means the advancing of any Loan, the continuation of or conversion into a
Eurodollar Loan, or the issuance of, or extension of the expiration date or
increase in the amount of, any Letter of Credit.

 

“Default” means
any event or condition the occurrence of which would, with the passage of time
or the giving of notice, or both, constitute an Event of Default.

 

“Disposition”
means the sale, lease, conveyance or other disposition of Property, other than
sales or other dispositions expressly permitted under Section 8.10(a) through
(g) hereof.

 

“EBITDA” means,
with reference to any period, Net Income for such period plus
the sum of all amounts deducted in arriving at such Net Income amount in
respect of (a) Interest Expense for such period, (b) federal, state, and local
income taxes for such period, (c) depreciation of fixed assets and amortization
of intangible assets for such period and (d) any non-recurring, non-cash items
for such period.

 

“Eligible Land” means Real
Property owned by the Borrower, a Wholly-owned Subsidiary or a Special Project
Subsidiary in fee simple, which is not subject to any Lien (other than as
allowed under Section 8.8(a), (b), (f) or (n)), which, subject to non-material
and customary conditions imposed by the applicable governmental authority, is
(i) zoned by the appropriate governmental authority to allow for the construction
and use of Housing Units, (ii) properly and legally subdivided for residential
development or with respect to which the Borrower, a Wholly-owned Subsidiary or
a Special Project Subsidiary has obtained all necessary approvals for
subdivision into residential lots, and (iii) not subject to any governmental
moratoriums regarding the construction of Housing Units or the connection to
necessary infrastructure or utilities.

 

22

 

“Eligible Land Book Value” means
the acquisition cost of a parcel or lot of Eligible Land, including closing
costs incurred in connection with such acquisition, less, to the extent a
particular Property is owned by a Special Project Subsidiary, the Minority
Interest Percentage of such costs.

 

“Entitled Land” means Eligible
Land which is not also a Lot Under Development, Finished Lot, Speculative
Housing Unit or Housing Unit Under Contract; provided that Eligible Land shall
not be included in the calculation of the Borrowing Base as Entitled Land at
any time following the date that is 12 months after the first date on which
such Eligible Land was first classified as Entitled Land.

 

“Environmental Claim”
means any investigation, notice, violation, demand, allegation, action, suit,
injunction, judgment, order, consent decree, penalty, fine, lien, proceeding or
claim (whether administrative, judicial or private in nature) arising (a)
pursuant to, or in connection with an actual or alleged violation of, any
Environmental Law, (b) in connection with any Hazardous Material, (c) from any
abatement, removal, remedial, corrective or response action in connection with
a Hazardous Material, Environmental Law or order of a governmental authority or
(d) from any actual or alleged damage, injury, threat or harm to health,
safety, natural resources or the environment.

 

“Environmental Law”
means any current or future Legal Requirement pertaining to (a) the protection
of health, safety and the indoor or outdoor environment, (b) the conservation,
management or use of natural resources and wildlife, (c) the protection or use
of surface water, groundwater or wetlands, (d) the management, manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation or
handling of, or exposure to, any Hazardous Material or (e) pollution (including
any Release to air, land, surface water or groundwater), and any amendment,
rule, regulation, order or directive issued thereunder.

 

“ERISA” means
the Employee Retirement Income Security Act of 1974, as amended, or any
successor statute thereto.

 

“Eurodollar Loan”
means a Loan bearing interest at the rate specified in Section 1.3(b) hereof.

 

“Eurodollar Reserve
Percentage” is defined in Section 1.3(b) hereof.

 

“Event of Default”
means any event or condition identified as such in Section 9.1 hereof.

 

“Event of Loss”
means, with respect to any Property, any of the following:  (a) any loss, destruction or damage of such
Property or (b) any condemnation, seizure, or taking, by exercise of the power
of eminent domain or otherwise, of such Property, or confiscation of such
Property or the requisition of the use of such Property by any governmental
body having authority to exercise such rights.

 

“Excess Interest”
is defined in Section 13.20 hereof.

 

“Facility Increase” is defined in
Section 1.13.

 

23

 

“Federal Funds Rate”
means the fluctuating interest rate per annum described in part (x) of clause
(ii) of the definition of Base Rate appearing in Section 1.3(a) hereof.

 

“Finished Lot Book Value” means
the Eligible Land Book Value with respect to a given parcel or lot of Eligible
Land plus the Lot Costs allocable to such Eligible Land, but excluding Administrative
Costs, and further excluding, to the extent a particular Property is owned by a
Special Project Subsidiary, the Minority Interest Percentage of such Lot Costs.

 

“Finished Lots” mean Eligible
Land that has been properly and legally subdivided for residential development
and with respect to which a building permit from the applicable governmental
authority has been or could be obtained; provided such Eligible Land does not
also qualify as a Speculative Housing Unit or a Housing Unit Under Contract.

 

“Funds Transfer and Deposit
Account Liability” means the liability of the Borrower or any of its
Subsidiaries owing to any of the Lenders, or any Affiliates of such Lenders,
arising under or with respect to this Agreement and (a) the execution or
processing of electronic transfers of funds by automatic clearing house
transfer, wire transfer or otherwise to or from deposit accounts of the
Borrower and/or any of its Subsidiaries now or hereafter maintained with any of
the Lenders or their Affiliates, (b) the acceptance for deposit or the honoring
for payment of any check, draft or other item with respect to any such deposit
accounts, and (c) any other deposit, disbursement, and cash management services
afforded to the Borrower or any of its Subsidiaries by any of such Lenders or
their Affiliates.

 

“GAAP” means
generally accepted accounting principles set forth from time to time in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting profession), which
are applicable to the circumstances as of the date of determination.

 

“Guarantor” and “Guarantors” each is defined in Section 4.1 hereof.

 

“Guaranty” and “Guaranties” each is defined in Section 4.1 hereof.

 

“Hazardous Material”
means any substance, chemical, compound, product, solid, gas, liquid, waste,
byproduct, pollutant, contaminant or material which is hazardous or toxic, and
includes, without limitation, (a) toxic mold, toxic fungus, asbestos,
polychlorinated biphenyls and petroleum (including crude oil or any fraction
thereof) and (b) any material classified or regulated as “hazardous” or “toxic”
or words of like import pursuant to an Environmental Law.

 

“Hazardous Material
Activity” means any activity, event or occurrence involving a
Hazardous Material, including, without limitation, the manufacture, possession,
presence, use, generation, transportation, treatment, storage, disposal,
Release, threatened Release, abatement, removal, remediation, handling of or
corrective or response action to any Hazardous Material.

 

“Hedging Liability” means the liability of the Borrower or
any of its Subsidiaries to any of the Lenders, or any Affiliates of such
Lenders, in respect of any interest rate, foreign currency, and/or commodity
swap, exchange, cap, collar, floor, forward, future or option agreement, or any

 

24

 

other similar interest
rate, currency or commodity hedging arrangement, as the Borrower or such
Subsidiary, as the case may be, may from time to time enter into with any one
or more of the Lenders party to this Agreement or their Affiliates in
connection with any Indebtedness for Borrowed Money arising under or in
connection with this Agreement.

 

“Housing Unit” means a
single-family dwelling, whether such dwelling is detached or attached
(including condominiums and town houses but excluding mobile and manufactured
homes), which dwelling is either under construction or completed and is (or,
upon completion of construction thereof, will be) available for sale.

 

“Housing Unit Book Value” means
the Finished Lot Book Value with respect to a given parcel or lot of Eligible
Land, plus all costs incurred by the Borrower, the Wholly-owned Subsidiaries or
the Special Project Subsidiaries in connection with the construction of a
Housing Unit thereon, but excluding Administrative Costs, and further
excluding, to the extent a particular Property is owned by a Special Project
Subsidiary, the Minority Interest Percentage of such costs.

 

“Housing Unit Closing” means a
closing of the sale of a Housing Unit, together with the Real Property upon
which such Housing Unit is located, by the Borrower, a Wholly-owned Subsidiary
or a Special Project Subsidiary pursuant to a Housing Unit Contract.

 

“Housing Unit Contract” means a bona
fide contract of sale for a Housing Unit, together with the Real
Property upon which such Housing Unit is located, in a form customarily
employed by the Borrower, a Wholly-owned Subsidiary, or a Special Project
Subsidiary and reasonably satisfactory to the Administrative Agent, entered
into not more than 15 months prior to the date of determination with a Person
who is not an Affiliate of the Borrower or any of its Subsidiaries, under which
contract no defaults then exist and not less than $1,000 of the purchase price
has been paid as a deposit; provided, however, that in the case
of any Housing Unit the purchase of which is to be financed in whole or in part
by a loan insured by the Federal Housing Administration or guaranteed by the
Veterans Administration, the required minimum down payment shall be the amount
(if any) required under the rules of the relevant agency.

 

“Housing Unit Under Contract”
means Eligible Land that otherwise qualifies as a Finished Lot, together with
the Housing Unit located or to be located thereon, with respect to which
construction has commenced beyond the foundation and with respect to which a
Housing Unit Contract is in full force and effect but with respect to which no
Housing Unit Closing has occurred.

 

“Indebtedness for Borrowed
Money” means for any Person (without duplication) (a) all
indebtedness created, assumed or incurred in any manner by such Person
representing money borrowed (including by the issuance of debt securities), (b)
all indebtedness (as determined in accordance with GAAP) for the deferred
purchase price of property or services (other than trade accounts payable
arising in the ordinary course of business), (c) all indebtedness secured by
any Lien upon Property of such Person, whether or not such Person has assumed
or become liable for the payment of such indebtedness, (d) all Capitalized
Lease Obligations of such Person, (e) all obligations of such Person on or with
respect to letters of credit, bankers’ acceptances and other extensions of
credit whether or not representing obligations for borrowed money, and (f) all

 

25

 

indebtedness in respect
of any interest rate, foreign currency, and/or commodity swap, exchange, cap,
collar, floor, forward, future or option agreement, or any other similar
interest rate, currency or commodity hedging arrangement.

 

“Interest Expense”
means, with reference to any period, the sum of all interest charges (including
imputed interest charges with respect to Capitalized Lease Obligations and all
amortization of debt discount and expense) of the Borrower, the Wholly-owned
Subsidiaries and the Special Project Subsidiaries for such period determined on
a consolidated basis in accordance with GAAP.

 

“Interest Incurred” means, for
any period, the total interest paid or accrued by the Borrower, the
Wholly-owned Subsidiaries and the Special Project Subsidiaries (including the
interest component of any Capital Lease) as calculated in accordance with GAAP.

 

“Interest Period”
is defined in Section 1.6 hereof.

 

“Joint Venture” means any Person
(other than an individual or a Subsidiary of the Borrower) in which the
Borrower or any of its Subsidiaries invests or acquires an equity or beneficial
interest.

 

“L/C Issuer”
means the Administrative Agent, or any other Lender requested by the Borrower
and approved by the Administrative Agent in its sole discretion as an issuer
with respect to any Letter of Credit, and includes Harris N.A. with respect to
the Letters of Credit listed on Schedule 1.2 attached hereto.

 

“L/C Obligations”
means the aggregate undrawn face amounts of all outstanding Letters of Credit
and all unpaid Reimbursement Obligations.

 

“L/C Sublimit”
means $100,000,000, as reduced pursuant to the terms hereof.

 

“Legal Requirement”
means any treaty, convention, statute, law, regulation, ordinance, license,
permit, governmental approval, injunction, judgment, order, consent decree or
other requirement of any governmental authority, whether federal, state, or
local.

 

“Lenders” means
and includes Harris N.A. and the other financial institutions from time to time
party to this Agreement, including each New Lender and each assignee Lender
pursuant to Section 13.12 hereof.

 

“Lending Office”
is defined in Section 10.4 hereof.

 

“Letter of Credit”
is defined in Section 1.2(a) hereof.

 

“Leverage Ratio” means the ratio
of Total Liabilities to Adjusted Tangible Net Worth.

 

“LIBOR” is
defined in Section 1.3(b) hereof.

 

“LIBOR Index Rate”
is defined in Section 1.3(b) hereof.

 

26

 

“Lien” means any
mortgage, lien, security interest, pledge, charge or encumbrance of any kind in
respect of any Property, including the interests of a vendor or lessor under
any conditional sale, Capital Lease or other title retention arrangement.

 

“Loan” means any
Revolving Loan or Swing Loan whether outstanding as a Base Rate Loan or Eurodollar
Loan or otherwise, each of which is a “type” of Loan hereunder.

 

“Loan Documents”
means this Agreement, the Notes, the Applications, the Guaranties, and each
other instrument or document to be delivered hereunder or thereunder or
otherwise in connection herewith.

 

“Lot Costs” means the actual
costs incurred by the Borrower, the Wholly-owned Subsidiaries or the Special
Project Subsidiaries in connection with the zoning, permitting, design, site
engineering, site improvement and other similar development activity with
respect to the subject Eligible Land, excluding costs related to the
construction of Housing Units.

 

“Lot Under Development” means
Eligible Land upon which the Borrower, a Wholly-owned Subsidiary or the Special
Project Subsidiary has commenced, or intends to commence within 6 months of the
date of original determination, grading and the installation of infrastructure;
provided, such Eligible Land does not also qualify as a Finished Lot,
Speculative Housing Unit or Housing Unit Under Contract; and provided further
that if grading and the installation of infrastructure has not commenced within
the above referenced 6 month period, such Eligible Land shall cease to qualify
as a Lot Under Development, but may then qualify as Entitled Land, subject to
the qualification criteria therefor; provided that grading and the installation
of infrastructure must actually commence upon any such disqualified Property
before it may again qualify as a Lot Under Development.

 

“Material Adverse Effect”
means (a) a material adverse change in, or material adverse effect upon, the
operations, business, condition (financial or otherwise) or prospects of the
Borrower or its Subsidiaries, taken individually (as to the Borrower and its
Significant Subsidiaries) or as a whole, (b) a material impairment of the
ability of the Borrower or any of its Significant Subsidiaries to perform its
obligations under any Loan Document or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the Borrower or
any of its Subsidiaries of any Loan Document or the rights and remedies of the
Administrative Agent and the Lenders thereunder.

 

“Maximum Rate”
is defined in Section 13.20 hereof.

 

 “Minority
Interest Percentage” means with respect to a given Special
Project Subsidiary, the sum of all percentage ownership interests in such
entity as owned by all Persons that are not a Borrower or a Wholly-owned
Subsidiary.

 

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

 

“Net Cash Proceeds”
means, as applicable, (a) with respect to any Disposition by a Person, cash and
cash equivalent proceeds received by or for such Person’s account, net of (i)
reasonable direct costs relating to such Disposition and (ii) sale, use or
other transactional taxes paid or payable by such Person as a direct result of
such Disposition, (b) with respect to any

 

27

 

Event of Loss of a
Person, cash and cash equivalent proceeds received by or for such Person’s
account (whether as a result of payments made under any applicable insurance
policy therefor or in connection with condemnation proceedings or otherwise),
net of reasonable direct costs incurred in connection with the collection of
such proceeds, awards or other payments, and (c) with respect to any offering
of debt or equity securities of a Person cash and cash equivalent proceeds
received by or for such Person’s account, net of reasonable legal,
underwriting, and other fees and expenses incurred as a direct result thereof.

 

“Net Income”
means, with reference to any period, the net income (or net loss) of the
Borrower and its Subsidiaries for such period computed on a consolidated basis
in accordance with GAAP; provided that
there shall be excluded from Net Income (a) the net income (or net loss) of any
Person accrued prior to the date it becomes a Subsidiary of, or has merged into
or consolidated with, the Borrower or another of its Subsidiaries, and (b) the
net income (or net loss) of any Person (other than a Wholly-owned Subsidiary)
in which the Borrower or a Wholly-owned Subsidiary has an equity interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Borrower or a Wholly-owned Subsidiary during such period.

 

“Net Worth”
means all shareholders’ equity in the Borrower and its Subsidiaries, determined
on a consolidated basis in accordance with GAAP, such calculation to (a)
include preferred stock, (b) include capital stock, (c) include additional
paid-in capital and retained earnings, (d) exclude interests attributable to
option or land bank arrangements that would be required to be included on the
Borrower’s balance sheet solely due to Interpretation Number 46, as issued by
the Financial Accounting Standards Board in January 2003, and (e) exclude
minority interests of any other Person in any Partial Subsidiary.

 

“New Lender” means a Lender that
either (a) becomes a new Lender pursuant to Section 1.13 by making a new
Revolving Credit Commitment or (b) increases its existing Revolving Credit
Commitment pursuant to Section 1.13.

 

“Notes” means
and includes the Revolving Notes and the Swing Note.

 

“Obligations”
means all obligations of the Borrower to pay principal and interest on the
Loans, all Reimbursement Obligations owing under the Applications, all fees and
charges payable hereunder or under the other Loan Documents, and all other
payment obligations of the Borrower or any of its Subsidiaries arising under or
in relation to any Loan Document, in each case whether now existing or hereafter
arising, due or to become due, direct or indirect, absolute or contingent, and
howsoever evidenced, held or acquired.

 

“Offering Memorandum” means the
Offering Memorandum dated [December              ,
2005] for the Borrower’s Subordinated Debt.

 

“Outside Stockholders” means any
Person owning an interest in the Borrower or its Subsidiaries, which Person is
not (a) a Permitted Holder or (b) an officer or director of the Borrower.

 

“Partial Subsidiary” means any
Subsidiary of the Borrower that is not a Wholly-owned Subsidiary.

 

28

 

“Participating Interest”
is defined in Section 1.2(d) hereof.

 

“Participating Lender”
is defined in Section 1.2(d) hereof.

 

“PBGC” means the
Pension Benefit Guaranty Corporation or any Person succeeding to any or all of
its functions under ERISA.

 

“Permitted Holders” means (a)
David K. Hill, Diane G. Hill, their immediate family members (as defined by the
New York Stock Exchange’s listing requirements) or the respective spouses and
former spouses (including widows and widowers), heirs or lineal descendants of
any of the foregoing; (b) an estate, trust (including a revocable trust,
declaration of trust or a voting trust), guardianship, other legal
representative relationship or custodianship for the primary benefit of one or
more individuals described in clause (a) above or controlled by one or more
individuals described in clause (a) above; (c) a corporation, partnership,
limited liability company, foundation, charitable organization or other entity
if a majority of the voting power and, if applicable, a majority of the value
of the equity ownership of such corporation, partnership, limited liability
company, foundation, charitable organization or other entity is directly or
indirectly owned by or for the primary benefit of one or more individuals or
entities described in clauses (a) or (b) above; and (d) a corporation,
partnership, limited liability company, foundation, charitable organization or
other entity controlled directly or indirectly by one or more individuals or
entities described in clauses (a), (b) or (c) above.

 

“Person” means
an individual, partnership, corporation, limited liability company,
association, trust, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision
thereof.

 

“Plan” means any
employee pension benefit plan covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code that either (a) is
maintained by a member of the Controlled Group for employees of a member of the
Controlled Group or (b) is maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one employer makes
contributions and to which a member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the preceding five
plan years made contributions.

 

“Premises” means
the Real Property owned or leased by the Borrower or any of its Subsidiaries.

 

“Property”
means, as to any Person, all types of real, personal, tangible, intangible or
mixed property owned by such Person whether or not included in the most recent
balance sheet of such Person and its subsidiaries under GAAP.

 

 “RCRA” means the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. §§6901 et seq., and
any future amendments.

 

“Real Property” means real
property, together with all of the tenements, hereditaments, easements,
rights-of-way, rights, privileges and appurtenances thereunto belonging or in
any way pertaining thereto and all horizontal improvements thereon.

 

29

 

“Reimbursement Obligation”
is defined in Section 1.2(c) hereof.

 

“Release” means
any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, migration, dumping, or disposing into the indoor
or outdoor environment, including, without limitation, the abandonment or
discarding of barrels, drums, containers, tanks or other receptacles containing
or previously containing any Hazardous Material.

 

“Required Lenders”
means, as of the date of determination thereof, Lenders whose outstanding Loans
and interests in Letters of Credit and Unused Revolving Credit Commitments
constitute more than 50% of the sum of the total outstanding Loans, interests
in Letters of Credit, and Unused Revolving Credit Commitments of the Lenders.

 

“Revolver Percentage”
means, for each Lender, the percentage of the Revolving Credit Commitments
represented by such Lender’s Revolving Credit Commitment or, if the Revolving
Credit Commitments have been terminated, the percentage held by such Lender
(including through participation interests in Reimbursement Obligations) of the
aggregate principal amount of all Revolving Loans and L/C Obligations then
outstanding.

 

“Revolving Credit”
means the credit facility for making Revolving Loans and issuing Letters of
Credit described in Sections 1.1 and 1.2 hereof.

 

“Revolving Credit
Commitment” means, as to any Lender, the obligation of such Lender
to make Revolving Loans and to participate in Swing Loans and Letters of Credit
issued for the account of the Borrower or any of its Wholly-owned Subsidiaries hereunder
in an aggregate principal or face amount at any one time outstanding not to
exceed the amount set forth opposite such Lender’s name on Schedule 1 attached
hereto and made a part hereof, as the same may be increased, reduced or
modified at any time or from time to time pursuant to the terms hereof. The
Borrower and the Lenders acknowledge and agree that the Revolving Credit
Commitments of the Lenders aggregate $500,000,000 on the date hereof.

 

“Revolving Credit
Termination Date” means December [        ],
2009, or such earlier date on which the Revolving Credit Commitments are
terminated in whole pursuant to Section 1.12, 9.2 or 9.3 hereof.

 

“Revolving Loan”
is defined in Section 1.1 hereof and, as so defined, includes a Base Rate Loan
or a Eurodollar Loan, each of which is a “type” of
Revolving Loan hereunder.

 

“Revolving Note”
is defined in Section 1.10 hereof.

 

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

 

“Significant Subsidiary” means
any Subsidiary of the Borrower having total assets, as calculated in accordance
with GAAP, of $20,000,000 or more.

 

“Special Project Subsidiaries”
means (a) Terramina LLC, (b) Wynndam, LLC, (c) Regency Oaks LP, and (d)
Sunridge Park LP.

 

30

 

“Speculative Housing Unit” means
Eligible Land that otherwise qualifies as a Finished Lot, together with the
Housing Unit located or to be located thereon, with respect to which
construction has commenced beyond the foundation and with respect to which no
Housing Unit Contract exists.

 

“Subordinated Debt”
means Indebtedness for Borrowed Money which is subordinated in right of payment
to the prior payment of the Obligations, Hedging Liability and Funds Transfer
and Deposit Account Liability pursuant to subordination provisions and
instruments approved in writing by the Administrative Agent and the Required
Lenders and is otherwise pursuant to documentation that is, which is in an
amount that is, and which contains interest rates, payment terms, maturities,
amortization schedules, covenants, defaults, remedies and other material terms
that are in form and substance, in each case satisfactory to the Administrative
Agent and the Required Lenders, it being acknowledged and agreed that the
Indebtedness for Borrowed Money incurred by the Borrower on the Closing Date in
connection with the Offering Memorandum qualifies as Subordinated Debt.

 

“Subsidiary”
means, as to any particular parent corporation, limited liability company,
partnership, limited partnership, association or other business entity, any
other business entity more than 50% of the outstanding Voting Stock of which is
at the time directly or indirectly owned by such parent entity or by any one or
more other entities which are themselves subsidiaries of such parent entity.
Unless otherwise expressly noted herein, the term “Subsidiary”
means a Subsidiary of the Borrower or of any of its direct or indirect
Subsidiaries.

 

“Swing Line”
means the credit facility for making one or more Swing Loans described in
Section 1.15 hereof.

 

“Swing Line Sublimit”
means $10,000,000, as reduced pursuant to the terms hereof.

 

“Swing Loan” and
“Swing Loans” each is defined in Section
1.15 hereof.

 

“Swing Note” is
defined in Section 1.10 hereof.

 

“Tangible Net Worth” means the
Net Worth, less, to the extent included in the calculation of Net Worth, the
sum of (a) the value of all assets properly classified as intangible assets
under GAAP and (b) all amounts representing any write-up in the book value of
any assets occurring since September 30, 2005.

 

“Total Liabilities” means the
total liabilities of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP (excluding liabilities attributable
to option or land bank arrangements that would be required to be included on
the Borrower’s balance sheet solely due to Interpretation Number 46, as issued
by the Financial Accounting Standards Board in January 2003).

 

“Unfunded Vested
Liabilities” means, for any Plan at any time, the amount (if any) by
which the present value of all vested nonforfeitable accrued benefits under
such Plan exceeds the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such Plan,
but only to the extent that such excess represents a potential liability of a
member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA.

 

31

 

“Unused Revolving Credit
Commitments” means, at any time, the difference between the
Revolving Credit Commitments then in effect and the aggregate outstanding
principal amount of Revolving Loans and L/C Obligations.

 

“U.S. Dollars”
and “$” each means the lawful currency of the
United States of America.

 

“Voting Stock”
of any Person means capital stock or other equity interests of any class or
classes (however designated) having ordinary power for the election of
directors or other similar governing body of such Person (including the general
partner or managing member of such Person, if applicable), other than stock or
other equity interests having such power only by reason of the happening of a
contingency.

 

“Welfare Plan”
means a “welfare plan” as defined in Section 3(1) of ERISA.

 

“Wholly-owned Subsidiary”
means a Subsidiary of which all of the issued and outstanding shares of capital
stock (other than directors’ qualifying shares as required by law) or other
equity interests are owned by the Borrower and/or one or more Wholly-owned
Subsidiaries within the meaning of this definition.

 

Section
5.2            Interpretation.
The foregoing definitions are equally applicable to both the singular and
plural forms of the terms defined. The words “hereof”,
“herein”, and “hereunder”
and words of like import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
references to time of day herein are references to Chicago, Illinois, time
unless otherwise specifically provided. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, it shall be done in accordance with GAAP except
where such principles are inconsistent with the specific provisions of this
Agreement.

 

Section
5.3            Change in Accounting
Principles. If, after the date of this Agreement, there shall
occur any change in GAAP from those used in the preparation of the financial statements
referred to in Section 6.5 hereof and such change shall result in a change in
the method of calculation of any financial covenant, standard or term found in
this Agreement, either the Borrower or the Required Lenders may by notice to
the Lenders and the Borrower, respectively, require that the Lenders and the
Borrower negotiate in good faith to amend such covenants, standards, and terms
so as equitably to reflect such change in accounting principles, with the
desired result being that the criteria for evaluating the financial condition
of the Borrower and its Subsidiaries shall be the same as if such change had
not been made. No delay by the Borrower or the Required Lenders in requiring
such negotiation shall limit their right to so require such a negotiation at
any time after such a change in accounting principles. Until any such covenant,
standard, or term is amended in accordance with this Section 5.3, financial
covenants shall be computed and determined in accordance with GAAP in effect
prior to such change in accounting principles. Without limiting the generality
of the foregoing, the Borrower shall neither be deemed to be in compliance with
any financial covenant hereunder nor out of compliance with any financial
covenant hereunder if such state of compliance or noncompliance, as the case
may be, would not exist but for the occurrence of a change in accounting
principles after the date hereof.

 

32

 

SECTION 6.           REPRESENTATIONS AND
WARRANTIES.

 

The Borrower represents and warrants to the
Administrative Agent and the Lenders as follows:

 

Section
6.1            Organization and
Qualification. The Borrower is duly organized, validly
existing, and in good standing as a corporation under the laws of the State of
Illinois, has full and adequate power to own its Property and conduct its
business as now conducted, and, except as could not reasonably be expected to
have a Material Adverse Effect, is duly licensed or qualified and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the nature of the Property owned or leased by it requires such licensing
or qualifying.

 

Section
6.2            Subsidiaries.
Each Subsidiary is duly organized, validly existing, and in good standing under
the laws of the jurisdiction in which it is organized, has full and adequate
power to own its Property and conduct its business as now conducted, and,
except as could not reasonably be expected to have a Material Adverse Effect,
is duly licensed or qualified and in good standing in each jurisdiction in
which the nature of the business conducted by it or the nature of the Property
owned or leased by it requires such licensing or qualifying. Schedule 6.2
hereto identifies each Subsidiary, the jurisdiction of its organization, the
percentage of issued and outstanding shares of each class of its capital stock
or other equity interests owned by the Borrower and the other Subsidiaries and,
if such percentage is not 100% (excluding directors’ qualifying shares as
required by law), a description of each class of its authorized capital stock
and other equity interests and the number of shares of each class issued and
outstanding. All of the outstanding shares of capital stock and other equity
interests of each Subsidiary are validly issued and outstanding and fully paid
and nonassessable and all such shares and other equity interests indicated on
Schedule 6.2 as owned by the Borrower or another Subsidiary are owned,
beneficially and of record, by the Borrower or such Subsidiary free and clear
of all Liens. Except as specified on Schedule 6.2, there are no outstanding
commitments or other obligations of any Wholly-owned Subsidiary or Special
Project Subsidiary to issue, and no options, warrants or other rights of any
Person to acquire, any shares of any class of capital stock or other equity
interests of any Wholly-owned Subsidiary or Special Project Subsidiary.

 

Section
6.3            Authority and Validity of
Obligations. The Borrower has full right and authority to
enter into this Agreement and the other Loan Documents executed by it, to make
the borrowings herein provided for, to issue its Notes in evidence thereof, and
to perform all of its obligations hereunder and under the other Loan Documents
executed by it. Each Subsidiary has full right and authority to enter into the
Loan Documents executed by it, to guarantee the Obligations, Hedging Liability,
and Funds Transfer and Deposit Account Liability, and to perform all of its
obligations under the Loan Documents executed by it. The Loan Documents
delivered by the Borrower and its Subsidiaries have been duly authorized,
executed, and delivered by such Persons and constitute valid and binding
obligations of the Borrower and its Subsidiaries enforceable against them in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors’ rights generally and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law); and this Agreement and the other Loan Documents do not, nor
does the performance or observance by the Borrower or any Subsidiary of any of
the matters and things herein or therein provided for, (a) contravene or

 

33

 

constitute a default
under any provision of law or any judgment, injunction, order or decree binding
upon the Borrower or any Subsidiary or any provision of the organizational
documents (e.g., charter, certificate or articles
of incorporation and by laws, certificate or articles of association and
operating agreement, partnership agreement, or other similar organizational
documents) of the Borrower or any Subsidiary, (b) contravene or constitute a
default under any covenant, indenture or agreement of or affecting the Borrower
or any Subsidiary or any of their Property, in each case where such
contravention or default, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, or (c) except as expressly provided
herein, result in the creation or imposition of any Lien on any Property of the
Borrower or any Subsidiary.

 

Section
6.4            Use of Proceeds; Margin
Stock. The Borrower shall use the proceeds of the Revolving
Credit to refinance existing indebtedness and to provide funding for its
general operations consistent with Section 8.18, including without limitation
the acquisition of Real Property for residential development, residential
development, and the construction of Housing Units. Neither the Borrower nor
any Subsidiary is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any Loan or any other extension of credit made hereunder will be
used to purchase or carry any such margin stock or to extend credit to others
for the purpose of purchasing or carrying any such margin stock. Margin stock
constitutes no portion of the assets of the Borrower and its Subsidiaries which
are subject to any limitation on sale, pledge or other restriction hereunder.

 

Section
6.5            Financial Reports.
The consolidated balance sheet of the Borrower and its Subsidiaries as at
September 30, 2005, and the related consolidated statements of income, retained
earnings and cash flows of the Borrower and its Subsidiaries for the fiscal
year then ended, and accompanying notes thereto, which financial statements are
accompanied by the audit report of Deloitte & Touche LLP, heretofore
furnished to the Administrative Agent and the Lenders, fairly present in all
material respects the consolidated financial condition of the Borrower and its
Subsidiaries as at said date and the consolidated results of their operations
and cash flows for the periods then ended in conformity with GAAP applied on a
consistent basis. Neither the Borrower nor any of its Subsidiaries has
contingent liabilities which are material to it other than as indicated or
disclosed on such financial statements or disclosed in the Offering Memorandum,
or, with respect to future periods, on the financial statements furnished
pursuant to Section 8.5 hereof.

 

Section
6.6            No Material Adverse Change.
Since September 30, 2005, there has been no change in the condition (financial
or otherwise) or business prospects of the Borrower or any Subsidiary except
those occurring in the ordinary course of business, none of which individually
or in the aggregate could reasonably be expected to have a Material Adverse
Effect.

 

Section
6.7            Full Disclosure.
The statements and information furnished in writing to the Administrative Agent
and the Lenders in connection with the negotiation of this Agreement  and the other Loan Documents (including the
Offering Memorandum) and the commitments by the Lenders to provide all or part
of the financing contemplated hereby do not contain any untrue statements of a
material fact or omit a material fact necessary to make the material statements
contained herein or therein not misleading, the Administrative Agent and the
Lenders

 

34

 

acknowledging that as to
any projections furnished in writing to the Administrative Agent and the
Lenders, the Borrower only represents that the same were prepared on the basis
of information and estimates the Borrower believed to be reasonable at the time
made. Notwithstanding anything contained herein to the contrary, it is hereby
acknowledged and agreed by the Administrative Agent and each Lender that (a)
any financial or business projections furnished to the Administrative Agent or
any Lender by the Borrower or any of its Subsidiaries are subject to
significant uncertainties and contingencies, which may be beyond the Borrower’s
or its Subsidiaries’ control, (b) no assurance is given by the Borrower or its
Subsidiaries that the results forecast in such projections will be realized,
and (c) the actual results may differ from the forecast results set forth in
such projections and such differences may be material.

 

Section
6.8            Trademarks, Franchises, and
Licenses. Except as could not reasonably be expected to have
a Material Adverse Effect, the Borrower and its Subsidiaries own, possess, or
have the right to use all necessary patents, licenses, franchises, trademarks,
trade names, trade styles, copyrights, trade secrets, know how, and
confidential commercial and proprietary information to conduct their businesses
as now conducted, without known conflict with any patent, license, franchise,
trademark, trade name, trade style, copyright or other proprietary right of any
other Person.

 

Section
6.9            Governmental Authority and
Licensing. The Borrower and its Subsidiaries have received or
made all necessary filings or applications for all licenses, permits, and approvals
of all federal, state, and local governmental authorities, if any, necessary to
conduct their businesses, in each case where the failure to obtain or maintain
the same could reasonably be expected to have a Material Adverse Effect. No
investigation or proceeding which, if adversely determined, could reasonably be
expected to result in revocation or denial of any material license, permit or
approval is pending or, to the knowledge of the Borrower, threatened.

 

Section
6.10         Good Title.
The Borrower and its Subsidiaries have good and marketable title (or valid
leasehold interests) to their assets as reflected on the most recent
consolidated balance sheet  of the
Borrower and its Subsidiaries furnished to the Administrative Agent and the
Lenders (except for sales of assets as permitted under Section 8.10), subject
to no Liens other than such thereof as are permitted by Section 8.8 hereof.

 

Section
6.11         Litigation and Other
Controversies. There is no litigation or governmental or
arbitration proceeding or labor controversy pending, nor to the knowledge of
the Borrower threatened, against the Borrower or any Subsidiary or any of their
Property which if adversely determined, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.

 

Section
6.12         Taxes.
Except as could not reasonably be expected to have a Material Adverse Effect,
all tax returns required to be filed by the Borrower or any Subsidiary in any
jurisdiction have, in fact, been filed, and all taxes, assessments, fees, and
other governmental charges upon the Borrower or any Subsidiary or upon any of
its Property, income or franchises, which are shown to be due and payable in
such returns, have been paid, except such taxes, assessments, fees and
governmental charges, if any, as are being contested in good faith and by
appropriate proceedings which prevent enforcement of the matter under contest
and as to which

 

35

 

adequate reserves
established in accordance with GAAP have been provided. The Borrower does not
know of any proposed additional tax assessment against it or its Subsidiaries
for which adequate provisions in accordance with GAAP have not been made on
their accounts. Adequate provisions in accordance with GAAP for taxes on the
books of the Borrower and each Subsidiary have been made for all open years,
and for its current fiscal period.

 

Section
6.13         Approvals.
No material authorization, consent, license or exemption from, or filing or
registration with, any court or governmental department, agency or
instrumentality, nor any approval or consent of any other Person, is or will be
necessary to the valid execution, delivery or performance by the Borrower or
any Subsidiary of any Loan Document, except for
such approvals which have been obtained prior to the date of this Agreement and
remain in full force and effect.

 

Section
6.14         Affiliate Transactions.
Neither the Borrower nor any Subsidiary is a party to any contracts or
agreements with any of its Affiliates on terms and conditions which are
materially less favorable to the Borrower or such Subsidiary than would be
usual and customary in similar contracts or agreements between Persons not
affiliated with each other.

 

Section
6.15         Investment Company; Public
Utility Holding Company. Neither the Borrower nor any
Subsidiary is an “investment company” or a company “controlled” by an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended, or a “public utility holding company” within the meaning of the
Public Utility Holding Company Act of 1935, as amended.

 

Section
6.16         ERISA. The
Borrower and each other member of its Controlled Group have fulfilled in all
material respects their obligations under the minimum funding standards of and
are in compliance in all material respects with ERISA and the Code to the
extent applicable to them and have not incurred any material liability to the
PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA. Neither the Borrower nor any Subsidiary
has any material contingent liabilities with respect to any post retirement
benefits under a Welfare Plan, other than liability for continuation coverage
described in article 6 of Title I of ERISA.

 

Section 6.17         Compliance with Laws.
(a)  The Borrower and its Subsidiaries
are in compliance with the requirements of all existing (as of the date this
representation is made or later deemed made) federal, state and local laws,
rules and regulations applicable to or pertaining to their Property or business
operations (including, without limitation, all applicable zoning ordinances and
building codes, the Occupational Safety and Health Act of 1970, the Americans
with Disabilities Act of 1990, and laws and regulations establishing quality
criteria and standards for air, water, land and toxic or hazardous wastes and
substances), where any such non-compliance, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.

 

(b)           Without limiting the representations
and warranties set forth in Section 6.17(a) above, except for such matters,
individually or in the aggregate, which could not reasonably be expected to
result in a Material Adverse Effect, the Borrower represents and warrants that:  (i) the Borrower and its Subsidiaries, and
each of the Premises, comply in all material respects with

 

36

 

all applicable
Environmental Laws; (ii) the Borrower and its Subsidiaries have obtained all
governmental approvals required for their operations and each of the Premises
by any applicable Environmental Law; (iii) the Borrower and its Subsidiaries
have not, and the Borrower has no knowledge of any other Person who has, caused
any Release, threatened Release or disposal of any Hazardous Material at, on,
about, or off any of the Premises in any material quantity and, to the
knowledge of the Borrower, none of the Premises are adversely affected by any
Release, threatened Release or disposal of a Hazardous Material originating or
emanating from any other property; (iv) except as disclosed in writing to and
approved by the Administrative Agent, none of the Premises contain or have
contained any:  (1) underground storage
tank, (2) material amounts of asbestos containing building material, (3)
landfills or dumps, (4) hazardous waste management facility as defined pursuant
to RCRA or any comparable state law, or (5) site on or nominated for the
National Priority List promulgated pursuant to CERCLA or any state remedial
priority list promulgated or published pursuant to any comparable state law;
(v) other than as customarily utilized in the homebuilding business, the
Borrower and its Subsidiaries have not used a material quantity of any
Hazardous Material and have conducted no Hazardous Material Activity at any of
the Premises; (vi) the Borrower and its Subsidiaries have no material liability
for response or corrective action, natural resource damage or other harm
pursuant to CERCLA, RCRA or any comparable state law; (vii) the Borrower and
its Subsidiaries are not subject to, have no notice or knowledge of and are not
required to give any notice of any Environmental Claim involving the Borrower
or any Subsidiary or any of the Premises, and there are no conditions or occurrences
at any of the Premises which could reasonably be anticipated to form the basis
for an Environmental Claim against the Borrower or any Subsidiary or such
Premises; (viii) none of the Premises are subject to any, and the Borrower has
no knowledge of any imminent restriction on the ownership, occupancy, use or
transferability of the Premises in connection with any (1) Environmental Law or
(2) Release, threatened Release or disposal of a Hazardous Material; and (ix)
there are no conditions or circumstances at any of the Premises which pose an
unreasonable risk to the environment or the health or safety of Persons.

 

Section
6.18         Other Agreements.
Neither the Borrower nor any Subsidiary is in default under the terms of any
covenant, indenture or agreement of or affecting such Person or any of its
Property, which default if uncured could reasonably be expected to have a
Material Adverse Effect.

 

Section
6.19         Solvency.
The Borrower and its Subsidiaries are solvent, able to pay their debts as they
become due, and have sufficient capital to carry on their business and all
businesses in which they are about to engage.

 

Section
6.20         No Broker Fees.
No broker’s or finder’s fee or commission will be payable with respect to the
transaction contemplated by this Agreement, and the Borrower hereby agrees to
indemnify the Administrative Agent and the Lenders against, and agree that it
will hold the Administrative Agent and the Lenders harmless from, any claim,
demand, or liability for any such broker’s or finder’s fees alleged to have
been incurred in connection herewith and any expenses (including reasonable
attorneys’ fees) arising in connection with any such claim, demand, or
liability.

 

Section
6.21         No Default.
No Default or Event of Default has occurred and is continuing, and no default
by the Borrower or its Subsidiaries exists with respect to any other

 

37

 

Indebtedness for Borrowed
Money, except for defaults with respect to Indebtedness for Borrowed Money, the
principal amount of which is less than $3,000,000, provided such defaults,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

 

SECTION 7.           CONDITIONS PRECEDENT.

 

The obligation of each Lender to advance, continue or
convert any Loan (other than the continuation of, or conversion into, a Base
Rate Loan) or of the L/C Issuer to issue, extend the expiration date (including
by not giving notice of non-renewal) of or increase the amount of any Letter of
Credit under this Agreement, shall be subject to the following conditions
precedent:

 

Section
7.1            All Credit Events.
At the time of each Credit Event hereunder:

 

(a)      each of the representations and warranties
set forth herein and in the other Loan Documents shall be and remain true and
correct as of said time, except to the extent the same expressly relate to an
earlier date;

 

(b)      no Default or Event of Default shall have
occurred and be continuing or would occur as a result of such Credit Event;

 

(c)      in the case of a Borrowing the
Administrative Agent shall have received the notice required by Section 1.5
hereof, in the case of the issuance of any Letter of Credit the L/C Issuer
shall have received a duly completed Application for such Letter of Credit
together with any fees called for by Section 2.1 hereof, and, in the case of an
extension or increase in the amount of a Letter of Credit, a written request
therefor in a form acceptable to the L/C Issuer together with fees called for
by Section 2.1 hereof; and

 

(d)      such Credit Event shall not violate any
order, judgment or decree of any court or other authority or any provision of
law or regulation applicable to the Administrative Agent, the L/C Issuer, or
any Lender (including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System) as then in effect.

 

Each request for a Borrowing hereunder and each
request for the issuance of, increase in the amount of, or extension of the
expiration date of, a Letter of Credit shall be deemed to be a representation
and warranty by the Borrower on the date of such Credit Event as to the matters
specified in subsections (a) through (d) of this Section.

 

38

 

Section
7.2            Initial Credit Event.
Before or concurrently with the initial Credit Event:

 

(a)      the Administrative Agent shall have
received for each Lender this Agreement duly executed by the Borrower and its
Subsidiaries, as Guarantors, and the Lenders;

 

(b)      the Administrative Agent shall have
received for each Lender such Lender’s duly executed Note(s) of the Borrower
dated the date hereof and otherwise in compliance with the provisions of
Section 1.10 hereof;

 

(c)      the Administrative Agent shall have
received for each Lender copies of the Borrower’s and each Wholly-owned
Subsidiary’s articles of incorporation and bylaws (or comparable organizational
documents) and any amendments thereto, certified in each instance by its
Secretary or Assistant Secretary;

 

(d)      the Administrative Agent shall have
received for each Lender copies of resolutions of the Borrower’s and each
Wholly-owned Subsidiary’s Board of Directors (or similar governing body)
authorizing the execution, delivery and performance of this Agreement and the
other Loan Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby, together with specimen signatures
of the persons authorized to execute such documents on the Borrower’s and each
Wholly-owned Subsidiary’s behalf, all certified in each instance by its
Secretary or Assistant Secretary;

 

(e)      the Administrative Agent shall have
received for each Lender copies of the certificates of good standing for the
Borrower and each Wholly-owned Subsidiary (dated no earlier than 30 days prior
to the date hereof) from the office of the secretary of the state of its
incorporation or organization and of each state in which it is qualified to do
business as a foreign corporation or organization;

 

(f)       the Administrative Agent shall have
received for each Lender a list of the Borrower’s Authorized Representatives;

 

(g)      the Administrative Agent shall have
received for itself and for the Lenders the initial fees called for by Section
2.1 hereof;

 

(h)      the capital and organizational structure
of the Borrower and its Subsidiaries shall be satisfactory to the
Administrative Agent;

 

(i)       the Administrative Agent shall have
received such evaluations and certifications as it may reasonably require
(including a Borrowing Base Certificate containing calculations of the
Borrowing Base) in order to satisfy itself as to the financial condition of the
Borrower and its Subsidiaries, and the lack of material contingent liabilities
of the Borrower and its Subsidiaries;

 

(j)       the Administrative Agent shall have
received pay-off and lien release letters from secured creditors of the
Borrower and each of its Subsidiaries with respect to the Eligible Land setting
forth, among other things, the total amount of indebtedness

 

39

 

outstanding and owing to them (or outstanding letters
of credit issued for the account of the Borrower or any of its Subsidiaries)
and containing an undertaking to cause to be delivered to the Administrative
Agent any lien release instruments necessary to release their Liens on the
assets of the Borrower and each of its Subsidiaries, which pay-off and lien
release letters shall be in form and substance acceptable to the Administrative
Agent;

 

(k)      the Administrative Agent shall have
received the favorable written opinion of counsel to the Borrower and each
Wholly-owned Subsidiary, in form and substance satisfactory to the
Administrative Agent;

 

(l)       the Administrative Agent and the Required
Lenders shall have approved all documentation evidencing and subordinating the
Subordinated Debt contemplated by the Offering Memorandum as permitted
hereunder, and the Subordinated Debt contemplated by the Offering Memorandum
shall have been funded in full pursuant to such documentation; and

 

(m)     the Administrative Agent shall have
received for the account of the Lenders such other agreements, instruments,
documents, certificates, and opinions as the Administrative Agent may
reasonably request.

 

SECTION 8.           COVENANTS.

 

The Borrower agrees that, so long as any Credit is
available to or in use by the Borrower hereunder, except to the extent
compliance in any case or cases is waived in writing pursuant to the terms of
Section 13.13 hereof:

 

Section
8.1            Maintenance of Business.
Except as otherwise provided in Sections 8.10(b) and 8.11 hereof, the Borrower
shall, and shall cause each of its Subsidiaries to, preserve and maintain its
existence, and shall not, and shall not allow any of its Subsidiaries to,
materially amend or modify any of its respective formation or organizational
documents without the prior written consent of the Administrative Agent, such
consent not to be unreasonably withheld. The Borrower shall, and shall cause
each Subsidiary to, preserve and keep in force and effect all licenses,
permits, franchises, approvals, patents, trademarks, trade names, trade styles,
copyrights, and other proprietary rights necessary to the proper conduct of its
business where the failure to do so could
reasonably be expected to have a Material Adverse Effect.

 

Section
8.2            Maintenance of Properties.
The Borrower shall, and shall cause each of its Subsidiaries to, maintain,
preserve, and keep its property and equipment in good repair, working order and
condition (ordinary wear and tear excepted) consistent with commercially
reasonable standards for its business.

 

Section
8.3            Taxes and Assessments.
The Borrower shall duly pay and discharge, and shall cause each Subsidiary to
duly pay and discharge, all taxes, rates, assessments, fees, and governmental
charges upon or against it or its Property, in each case before the same become
delinquent and before penalties accrue thereon, unless and to the extent that
the same are being contested in good faith and by appropriate proceedings which
prevent foreclosure upon such

 

40

 

Property or enforcement
of the matter under contest and provided adequate reserves are provided
therefor.

 

Section
8.4            Insurance.
The Borrower shall, and shall cause each of its Subsidiaries to, maintain
insurance with financially sound reputable insurance companies or associations
in such amounts and covering such risks as are usually carried by companies
engaged in the same or a similar business and similarly situated, which
insurance may provide for reasonable deductibility from coverage thereof. The
Borrower shall, upon the request of the Administrative Agent, furnish to the
Administrative Agent certificates setting forth in summary form the nature and
extent of the insurance maintained pursuant to this Section.

 

Section
8.5            Financial Reports.
The Borrower shall, and shall cause each Subsidiary to, maintain a standard
system of accounting in accordance with GAAP and shall furnish to the
Administrative Agent (for subsequent delivery to the Lenders) such information
respecting the business and financial condition of the Borrower and each of its
Subsidiaries as the Administrative Agent may reasonably request; and without
any request (unless otherwise specified), shall furnish to the Administrative
Agent (for subsequent delivery to the Lenders):

 

(a)      as soon as available, and in any event
within 15 days after the last day of each calendar month, a Borrowing Base
Certificate showing the computation of the Borrowing Base and Borrowing
Capacity in reasonable detail as of the close of business on the last day of
the subject month, together with such supporting documentation as the
Administrative Agent may reasonably request and together with a summary report
of accounts receivable and accounts payable aging (with any supporting
documentation that the Administrative Agent may reasonably request), all
prepared by the Borrower and certified by its chief financial officer or
another officer of the Borrower acceptable to the Administrative Agent, all
being in form acceptable to the Administrative Agent;

 

(b)      as soon as available, and in any event
within 45 days after the last day of each fiscal quarter of each fiscal year of
the Borrower, a report detailing sales of Property by the Borrower and its
Subsidiaries and the progress of construction and pace of sales within each
Building Region, and, if requested by the Administrative Agent, a report
detailing the volume of prospective buyers visiting or making inquiry with
respect to such Property, certified by the chief financial officer or another
officer of the Borrower acceptable to the Administrative Agent, all being in
form and scope acceptable to the Administrative Agent;

 

(c)      as soon as available, and in any event
within 45 days after the last day of each fiscal quarter of each fiscal year of
the Borrower, a copy of the consolidated 
balance sheet of the Borrower and its Subsidiaries as of the last day of
such fiscal quarter and the consolidated statements of income, retained
earnings, and cash flows of the Borrower and its Subsidiaries for the fiscal
quarter and for the fiscal year-to-date period then ended, each in reasonable
detail showing in comparative form the figures for the corresponding date and
period in the previous fiscal year, prepared by the Borrower in accordance with
GAAP, certified to by its chief financial officer or

 

41

 

another officer of the Borrower acceptable to the
Administrative Agent, all being in form and scope acceptable to the
Administrative Agent;

 

(d)      as soon as available, and in any event within
90 days after the last day of each fiscal year of the Borrower, a copy of the
consolidated balance sheet of the Borrower and its Subsidiaries as of the last
day of the fiscal year then ended and the consolidated statements of income,
retained earnings, and cash flows of the Borrower and its Subsidiaries for the
fiscal year then ended, and accompanying notes thereto, each in reasonable
detail, all in form and scope acceptable to the Administrative Agent, showing
in comparative form the figures for the previous fiscal year, accompanied by an
independent auditor’s report from Deloitte & Touche LLP, or another firm of
independent public accountants of recognized standing, selected by the Borrower
and reasonably satisfactory to the Administrative Agent, to the effect that the
consolidated financial statements have been prepared in accordance with GAAP
and present fairly in accordance with GAAP the consolidated financial condition
of the Borrower and its Subsidiaries as of the close of such fiscal year and the
results of their operations and cash flows for the fiscal year then ended and
that an examination of such accounts in connection with such financial
statements has been made in accordance with GAAP and, accordingly, such
examination included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;

 

(e)      within the period provided in subsection
(d) above, the written statement of the accountants who certified the audit
report thereby required that in the course of their audit they have obtained no
knowledge of any Default or Event of Default with respect to Sections 8.7(b),
(g) or (h), 8.9(j), 8.22 or 8.23 hereof, or, if such accountants have obtained
knowledge of any such Default or Event of Default, they shall disclose in such
statement the nature and period of the existence thereof;

 

(f)       promptly after receipt thereof, any
additional written reports, management letters or other detailed information
contained in writing concerning material weakness or going concern of the
Borrowers or any of its Subsidiaries given to it by its independent public
accountants;

 

(g)      promptly after the sending or filing
thereof, copies of each financial statement, report, notice or proxy statement
sent by the Borrower or any Subsidiary of the Borrower to any Outside
Stockholders;

 

(h)      as soon as available, and in any event
within 60 days after the end of each fiscal year of the Borrower, a copy of the
Borrower’s and its Subsidiaries’ consolidated business plan for the then
current fiscal year, such business plan to show the Borrower’s and its
Subsidiaries’ projected consolidated revenues, expenses and balance sheet on a
quarter-by-quarter basis, such business plan to be in reasonable detail
prepared by the Borrower and in form satisfactory to the Administrative Agent
(which shall include a summary of all assumptions made in preparing such
business plan);

 

(i)       promptly upon the occurrence thereof,
notice of any Change of Control;

 

42

 

(j)       promptly after knowledge thereof shall
have come to the attention of any responsible officer of the Borrower, written
notice of (i) any threatened (in writing) or pending litigation or governmental
or arbitration proceeding or labor controversy against the Borrower or any of
its Subsidiaries or any of their Property, pursuant to which an amount in
excess of $1,000,000 is claimed, or with respect to any group of similar or
related claims, an amount in excess of $5,000,000 in the aggregate is claimed,
(ii) the occurrence of any other event that could reasonably be expected to
have a Material Adverse Effect, or (iii) the occurrence of any Default or Event
of Default hereunder;

 

(k)      promptly upon the request of the
Administrative Agent, copies of all federal or state income tax returns and
amendments as filed;

 

(l)       with each of the financial statements
furnished to the Administrative Agent pursuant to subsection (c) above, a written certificate in the form attached hereto as
Exhibit F signed by the chief financial officer of the Borrower or another
officer of the Borrower acceptable to the Administrative Agent to the effect
that to the best of such officer’s knowledge and belief no Default or Event of
Default has occurred during the period covered by such statements or, if any
such Default or Event of Default has occurred during such period, setting forth
a description of such Default or Event of Default and specifying the action, if
any, taken by the Borrower or any Subsidiary to remedy the same (such
certificate shall also set forth the amounts, calculations, and values
supporting such statements in respect of Sections 8.7(b), 8.7(g), 8.7(h),
8.9(j), 8.22 and 8.23 hereof); and

 

(m)     copies of all certificates and reports
given to the holders of or trustees for the Subordinated Debt,
contemporaneously with the transmission thereof, except to the extent such
materials are duplicative of materials otherwise delivered to the
Administrative Agent hereunder.

 

Section
8.6            Inspection.
The Borrower shall, and shall cause each of its Subsidiaries to, permit the
Administrative Agent, each Lender, and each of their duly authorized
representatives and agents to visit and inspect any of its Property, corporate
books, and financial records, to examine and make copies of its books of
accounts and other financial records, and to discuss its affairs, finances, and
accounts with, and to be advised as to the same by, its officers, employees and
independent public accountants (and by this provision the Borrower hereby authorizes
such accountants to discuss with the Administrative Agent and such Lenders the
finances and affairs of the Borrower and its Subsidiaries) at such reasonable
times and intervals as the Administrative Agent or any such Lender may
designate and, so long as no Default or Event of Default exists, with
reasonable prior notice to the Borrower. All costs and expenses of the above
visits, inspections and examinations shall be the responsibility of the
Lenders; provided that the Borrower shall reimburse the Lenders or the
Administrative Agent, as the case may be for any of the above visits,
inspections, and examinations that either (a) occur during the continuance of
any Default or Event of Default or (b) disclose the existence of any Default or
Event of Default or a material variance from any report submitted by the
Borrower to the Administrative Agent.

 

43

 

Section
8.7            Borrowings and Guaranties.
The Borrower shall not, nor shall it permit any of its Subsidiaries to, issue,
incur, assume, create or have outstanding any Indebtedness for Borrowed Money,
or be or become liable as endorser, guarantor, surety or otherwise for any
Indebtedness for Borrowed Money of any other Person, or otherwise agree to
provide funds for payment of the obligations of another, or supply funds
thereto or invest therein (except as allowed under Section 8.9 hereof) or
otherwise assure a creditor of another against loss, or apply for or become
liable to the issuer of a letter of credit which supports an obligation of
another, or subordinate any claim or demand it may have to the claim or demand
of any other Person; provided, however,
that the foregoing shall not restrict nor operate to prevent:

 

(a)      the Obligations, Hedging Liability, and
Funds Transfer and Deposit Account Liability of the Borrower and its
Subsidiaries owing to the Administrative Agent and the Lenders (and their
Affiliates);

 

(b)      indebtedness of the Borrower and its
Subsidiaries secured by Property of the Borrower or its Subsidiaries (which
indebtedness shall not be secured by the Property identified in the most recent
Borrowing Base Certificate), such principal indebtedness in the aggregate at
any one time outstanding not to exceed 25% of the Tangible Net Worth;

 

(c)      endorsement of items for deposit or
collection of commercial paper received in the ordinary course of business;

 

(d)      intercompany advances from time to time
owing by any Subsidiary of the Borrower to the Borrower or another Subsidiary
of the Borrower or by the Borrower to a Subsidiary of the Borrower in the
ordinary course of business to finance working capital and business operation
needs; provided that all advances made by the Borrower or a Wholly-owned
Subsidiary to a Special Project Subsidiary shall be made pursuant to a budget
for such Special Project Subsidiary, which budget shall be subject to the
reasonable approval of the Administrative Agent; and provided further that all
advances made by the Borrower or a Wholly-owned Subsidiary to a Special Project
Subsidiary shall hereafter be evidenced by a written promissory note in form
and upon terms reasonably acceptable to the Administrative Agent;

 

(e)      Subordinated Debt in a principal amount
not to exceed $203,000,000 in the aggregate on the Closing Date or $300,000,000
thereafter (subject to the requirements of Section 1.8 hereof), as reduced by
permitted payments thereon;

 

(f)       indebtedness of the Borrower or its
Subsidiaries with respect to contracts executed in the ordinary course of
business for the acquisition of Real Property (excluding purchase money
financing) or the procurement of services consistent with Section 8.18 hereof;
and

 

(g)      indebtedness of the Borrower or its
Subsidiaries not contemplated by the other clauses of this Section 8.7,
incurred after the Closing Date, in an amount not to exceed $25,000,000 at any
one time outstanding; provided such indebtedness shall not at any time be
secured by any Property of the Borrower or its Subsidiaries;

 

44

 

(h)      indebtedness in the form of a guarantee of
the indebtedness of any Joint Venture; provided all such guaranties shall not
exceed in the aggregate 35% of the Adjusted Tangible Net Worth; and

 

(i)       indemnification, adjustment of purchase
price or similar obligations, including title insurance, of the Borrower or any
Subsidiary, in each case incurred in connection with the acquisition of
disposition of any Property of the Borrower or any Subsidiary (other than
guarantees of indebtedness incurred by any Person acquiring all or any portion
of such assets for the purpose of financing such acquisition); provided,
however, that such indebtedness is not reflected on the balance sheet of the
Borrower or any Subsidiary and provided further that, contingent obligations referred
to in a footnote to financial statements, and not otherwise reflected on the
balance sheet will not be deemed to be reflected on such balance sheet for
purposes hereof.

 

Section
8.8            Liens.
The Borrower shall not, nor shall it permit any of its Subsidiaries to, create,
incur or permit to exist any Lien of any kind on any Property owned by any such
Person; provided, however, that the foregoing shall not apply to nor operate to
prevent:

 

(a)      Liens arising by statute in connection
with worker’s compensation, unemployment insurance, old age benefits, social
security obligations, taxes, assessments, statutory obligations or other
similar charges (other than Liens arising under ERISA), good faith cash
deposits in connection with tenders, contracts or leases to which the Borrower
or any of its Subsidiaries is a party or other cash deposits required to be
made in the ordinary course of business, provided in each case that the
obligation is not for borrowed money and that the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate
proceedings which prevent enforcement of the matter under contest and adequate
reserves have been established therefor;

 

(b)      mechanics’, workmen’s, materialmen’s,
landlords’, carriers’ or other similar Liens arising in the ordinary course of
business with respect to obligations which are not due or which are being
contested in good faith by appropriate proceedings which prevent enforcement of
the matter under contest;

 

(c)      judgment liens and judicial attachment
liens not constituting an Event of Default under Section 9.1(h) hereof and the
pledge of assets (excluding Property identified in the most recent Borrowing
Base Certificate) for the purpose of securing an appeal, stay or discharge in
the course of any legal proceeding, provided that
the aggregate amount of such judgment liens and attachments and liabilities of
the Borrower and its Subsidiaries secured by a pledge of assets permitted under
this subsection, including interest and penalties thereon, if any, shall not be
in excess of $3,000,000 at any one time outstanding;

 

(d)      Liens on Property of the Borrower or any
Subsidiary of the Borrower created solely for the purpose of securing
indebtedness permitted by Section 8.7(b) hereof, representing or incurred to
finance the purchase price or development of such Property, provided that no
such Lien shall extend to or cover any Property identified in

 

45

 

the most recent Borrowing Base Certificate or any
other Property of the Borrower or its Subsidiaries other than the Property that
is the subject of such acquisition or development;

 

(e)      any interest or title of a lessor under
any operating lease;

 

(f)       easements, rights-of-way, licenses,
restrictions, zoning restrictions, and other similar encumbrances against Real
Property incurred in the ordinary course of business which do not materially
detract from the value of the Real Property subject thereto or materially
interfere with development thereof, the construction of Housing Units thereon
or the ordinary conduct of the business of the Borrower or any of its
Subsidiaries;

 

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

 

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

 

(i)       bankers’ Liens, rights of setoff and
other similar Liens existing solely with respect to cash and cash equivalents
on deposit in one or more accounts maintained by the Borrower or any
Subsidiary, in each case granted in the ordinary course of business in favor of
the bank or banks with which such accounts are maintained, securing amounts
owing to such bank with respect to cash management and operating account
arrangements, including those involving pooled accounts and netting
arrangements; provided that in no case shall any such Liens secure (either
directly or indirectly) the repayment of any indebtedness;

 

(j)       leases or subleases (or any Liens related
thereto) granted to others that do not materially interfere with the ordinary
course of business of the Borrower or any Subsidiary; provided that no such
leases or subleases pertain to Property identified on the most recent Borrowing
Base Certificate;

 

(k)      Liens arising from filing Uniform
Commercial Code financing statements regarding leases or subleases; provided
that no such leases or subleases pertain to Property identified on the most
recent Borrowing Base Certificate;

 

(l)       Liens in favor of the Borrower or a
Wholly-owned Subsidiary, other than KH Financial, L.P.;

 

(m)     Liens on mortgage loans and related assets
securing Indebtedness for Borrowed Money and indebtedness under purchase and
sale agreements and repurchase agreements permitted to be incurred under this
Agreement; and

 

46

 

(n)      any right of first refusal, right of first
offer, option, contract or other agreement to sell Property; provided such
Liens shall be allowed with respect to Property identified on the most recent
Borrowing Base Certificate only to the extent related to Housing Unit
Contracts.

 

Section
8.9            Investments, Acquisitions,
Loans and Advances. The Borrower shall not, nor shall it
permit any of its Subsidiaries to, directly or indirectly, make, retain or have
outstanding any investments (whether through purchase of stock or obligations
or otherwise) in, or loans or advances to (other than for travel advances and
other similar cash advances made to employees in the ordinary course of business),
any other Person, or acquire all or any substantial part of the assets or
business of any other Person or division thereof; provided, however, that the
foregoing shall not apply to nor operate to prevent:

 

(a)      investments in direct obligations of the
United States of America or of any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the United States
of America, provided that any such obligations shall
mature within one year of the date of issuance thereof;

 

(b)      investments in commercial paper rated at
least P-1 by Moody’s and at least A-1 by S&P maturing within one year of
the date of issuance thereof;

 

(c)      investments in certificates of deposit
issued by any Lender or by any United States commercial bank having capital and
surplus of not less than $100,000,000 which have a maturity of one year or
less;

 

(d)      investments in repurchase obligations with
a term of not more than 7 days for underlying securities of the types described
in subsection (a) above entered into with any bank meeting the qualifications
specified in subsection (c) above, provided all such agreements require
physical delivery of the securities securing such repurchase agreement, except
those delivered through the Federal Reserve Book Entry System;

 

(e)      investments in money market funds that
invest solely, and which are restricted by their respective charters to invest
solely, in investments of the type described in the immediately preceding
subsections (a), (b), (c), and (d) above;

 

(f)       the Borrower’s or its Subsidiaries’
investments from time to time in their Subsidiaries; provided that neither the
Borrower nor any of its Subsidiaries may invest any further funds in any
Special Project Subsidiary after the Closing Date, except as may be done
pursuant to Section 8.7(d) and 8.9(i);

 

(g)      investments in Real Estate and
improvements thereon for the purposes of residential development and
construction;

 

(h)      investments in equipment or other assets
reasonably necessary for the ordinary conduct of the business of the Borrower
and its Subsidiaries;

 

47

 

(i)       intercompany advances made from time to
time by the Borrower or its Subsidiaries to another Subsidiary or by a
Subsidiary to the Borrower in the ordinary course of business to finance
working capital or other business operation needs; provided that all advances
made by the Borrower or a Wholly-owned Subsidiary to a Special Project
Subsidiary shall be made pursuant to a budget for such Special Project
Subsidiary, which budget shall be subject to the reasonable approval of the
Administrative Agent; and provided further that all advances made by the
Borrower or a Wholly-owned Subsidiary to a Special Project Subsidiary shall
hereafter be evidenced by a written promissory note in form and upon terms
reasonably acceptable to the Administrative Agent;

 

(j)       investments in Joint Ventures having a
business or purpose of residential development or construction, which
investments are non-recourse to the Borrower and its investing Subsidiaries
(except as evidenced by a written guaranty as allowed under Section 8.7(h)
hereof), which investments shall not exceed in the aggregate 30% of the
Tangible Net Worth;

 

(k)      loans and advances to directors, employees
and officers of the Borrower and its Subsidiaries for bona fide business
purposes or to purchase the Voting Stock of the Borrower not in excess of $2.0
million at any one time outstanding;

 

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

 

(m)     investments in mortgage loans and related
assets originated by KH Financial, L.P. in the ordinary course of its mortgage
lending business;

 

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

 

(o)      investments (including indebtedness
obligations) received in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent obligations of, an
other disputes with, customers and suppliers arising in the ordinary course of
business;

 

(p)      transfers of assets by the Borrower to a
Subsidiary, or by a Subsidiary to another Subsidiary; provided that any
transfers to a Special Project Subsidiary shall be deemed to be an investment
contemplated by Section 8.9(j) hereof;

 

(q)      securities acquired in connection with the
satisfaction or enforcement of indebtedness or claims due or owing or as
security for any such indebtedness or claim; and

 

(r)       interests in interest rate hedging
agreements entered into with respect to Indebtedness for Borrowed Money
permitted under Section 8.7 hereof and not for

 

48

 

speculative purposes; provided any such agreements
shall not be in a notional amount greater than the subject Indebtedness for
Borrowed Money.

 

In determining the amount of investments,
acquisitions, loans, and advances permitted under this Section, investments and
acquisitions shall always be taken at the original cost thereof (regardless of
any subsequent appreciation or depreciation therein), and loans and advances
shall be taken at the principal amount thereof then remaining unpaid.

 

Section
8.10         Mergers, Consolidations and
Sales. The Borrower shall not, nor shall it permit any
Subsidiary to, be a party to any merger or consolidation, or sell, transfer,
lease or otherwise dispose of all or any part of its Property, including any
disposition of Property as part of a sale and leaseback transaction, or in any
event sell or discount (with or without recourse) any of its notes or accounts
receivable; provided, however, that so long as no Default or Event of Default
exists, this Section shall not apply to nor
operate to prevent:

 

(a)      the sale of Property in the ordinary
course of business to non-Affiliated third parties pursuant to Housing Unit
Contracts or the conveyance of Real Property upon which no Housing Unit is to
be constructed to third parties in connection with residential infrastructure
or amenity development and completion;

 

(b)      the merger of any Subsidiary of the
Borrower with and into the Borrower or any other Subsidiary of the Borrower,
provided that, in the case of any merger involving the Borrower, the Borrower
is the corporation surviving the merger;

 

(c)      the sale or transfer of Property by the
Borrower or any Subsidiary to any Subsidiary, other than a Special Project
Subsidiary;

 

(d)      the sale or transfer of Voting Stock by
any Subsidiary of the Borrower to the Borrower or any Wholly-owned Subsidiary;

 

(e)      the sale, transfer or other disposition of
any tangible personal property that, in the reasonable business judgment of the
Borrower or its Subsidiaries, has become obsolete or worn out, and which is
disposed of in the ordinary course of business;

 

(f)       the sale, transfer, lease or other
disposition by the Borrower or its Subsidiaries of Property as part of a sale
and leaseback transaction, aggregating for the Borrower and its Subsidiaries
not more than $5,000,000 during any fiscal year of the Borrower;

 

(g)      the sale or transfer of Real Property to
third parties pursuant to land banking arrangements provided such arrangements
are non-recourse to the Borrower and its Subsidiaries, and provided the
aggregate book value of assets transferred pursuant to such arrangements shall
not exceed $10,000,000 during any fiscal year of the Borrower; and

 

(h)      Dispositions of Property, subject to the
requirements of Section 1.8(b); provided such Dispositions are conducted in
compliance with Section 8.18.

 

49

 

Section
8.11         Maintenance of Subsidiaries.
The Borrower shall not assign, sell or transfer, nor shall it permit any of its
Subsidiaries to issue, assign, sell or transfer, any shares of capital stock or
other equity interests of a Subsidiary; provided, however, that the foregoing
shall not operate to prevent any transaction permitted by Section 8.10(b) or
(h) above or to prevent the repurchase or acquisition by a Partial Subsidiary
or the Borrower of any interest owned by another Person in such Partial
Subsidiary. Except as allowed under Section 8.10(b) or (h), all Wholly-owned
Subsidiaries whether now existing or hereafter acquired or formed shall be and
remain Wholly-owned Subsidiaries. Notwithstanding anything to the contrary in
this Section 8.11, the Borrower or its Subsidiaries shall be permitted to
dissolve any Subsidiary if all or substantially all of such Subsidiaries’
Property or other assets have been sold or transferred as permitted in this
Agreement.

 

Section
8.12         Dividends and Certain Other
Restricted Payments. The Borrower
and its Subsidiaries may make distributions and declare or pay dividends to the
shareholders of the Borrower and may directly or indirectly purchase, redeem,
or otherwise acquire or retire any of its capital stock or other equity
interests; provided the foregoing (a) does not occur at any time that a Default
or Event of Default exists, (b) result in any Default or Event of Default, or
(c) without limiting the generality of the foregoing clause (b), result in any
Change of Control or any violation of Section 8.22(a).

 

Section
8.13         ERISA. The
Borrower shall, and shall cause each Subsidiary to, promptly pay and discharge
all obligations and liabilities arising under ERISA of a character which if
unpaid or unperformed could reasonably be expected to result in the imposition of
a Lien against any of its Property. The Borrower shall, and shall cause each
Subsidiary to, promptly notify the Administrative Agent and each Lender
of:  (a) the occurrence of any reportable
event (as defined in ERISA) with respect to a Plan, (b) receipt of any notice
from the PBGC of its intention to seek termination of any Plan or appointment
of a trustee therefor, (c) its intention to terminate or withdraw from any
Plan, and (d) the occurrence of any event with respect to any Plan which would
result in the incurrence by the Borrower or any Subsidiary of any material
liability, fine or penalty, or any material increase in the contingent
liability of the Borrower or any Subsidiary with respect to any post-retirement
Welfare Plan benefit.

 

Section
8.14         Compliance with Laws.
(a)  The Borrower shall, and shall cause
each Subsidiary to, comply in all respects with the requirements of all
federal, state, and local laws, rules, regulations, ordinances and orders
applicable to or pertaining to its Property or business operations, including,
without limitation, the construction of Housing Units and the development of
Real Property in compliance with all applicable zoning ordinances and building
codes, where any such non-compliance, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.

 

(b)           Without limiting the agreements set
forth in Section 8.14(a) above, the Borrower shall, and shall cause each
Subsidiary to, at all times, do the following to the extent the failure to do
so, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect:  (i) comply in
all material respects with, and maintain each of the Premises in compliance in
all material respects with, all applicable Environmental Laws; (ii) obtain and
maintain in full force and effect all material governmental approvals required
by any applicable Environmental Law for operations at each of the Premises;
(iii) cure any material violation by it or at any of the

 

50

 

Premises of applicable
Environmental Laws; (iv) not allow the presence or operation at any of the
Premises of any (1) landfill or dump or (2) hazardous waste management facility
or solid waste disposal facility as defined pursuant to RCRA or any comparable
state law; (vi) not manufacture, use, generate, transport, treat, store,
release, dispose or handle any Hazardous Material at any of the Premises except
in the ordinary course of its business in compliance with Environmental Laws
and in de minimis amounts; (vii) within 10
Business Days notify the Administrative Agent in writing of and provide any
reasonably requested documents upon learning of any of the following in
connection with the Borrower or any Subsidiary or any of the Premises: (1) any
material liability for response or corrective action, natural resource damage
or other harm pursuant to CERCLA, RCRA or any comparable state law; (2) any
material Environmental Claim; (3) any material violation of an Environmental
Law or material Release, threatened Release or disposal of a Hazardous
Material; (4) any restriction on the ownership, occupancy, use or
transferability arising pursuant to any (x) Release, threatened Release or
disposal of a Hazardous Material or (y) Environmental Law; or (5) any
environmental, natural resource, health or safety condition, which could
reasonably be expected to have a Material Adverse Effect; (viii) conduct at its
expense any investigation, study, sampling, testing, abatement, cleanup,
removal, remediation or other response action necessary to remove, remediate,
clean up or abate any material Release, threatened Release or disposal of a
Hazardous Material as required by any applicable Environmental Law, (ix) abide
by and observe any restrictions on the use of the Premises imposed by any
governmental authority as set forth in a deed or other instrument affecting the
Borrower’s or any Subsidiary’s interest therein; (x) promptly provide or
otherwise make available to the Administrative Agent any reasonably requested
environmental record concerning the Premises which the Borrower or any
Subsidiary possesses or can reasonably obtain; and (xi) perform, satisfy, and
implement any operation or maintenance actions required by any governmental
authority or Environmental Law, or included in any no further action letter or
covenant not to sue issued by any governmental authority under any
Environmental Law.

 

Section
8.15         Burdensome Contracts With
Affiliates. The Borrower shall not, nor shall it permit any
of its Subsidiaries to, enter into any contract, agreement or business
arrangement with any of its Affiliates on terms and conditions which are less
favorable to the Borrower or such Subsidiary than would be usual and customary
in similar contracts, agreements or business arrangements between Persons not
affiliated with each other.

 

Section
8.16         No Changes in Fiscal Year.
The fiscal year of the Borrower and its Subsidiaries ends on September 30 of
each year; and the Borrower shall not, nor shall it permit any Subsidiary to,
change its fiscal year from its present basis, unless the Administrative Agent
shall have approved such change, such approval not to be unreasonably withheld.

 

Section
8.17         Formation of Subsidiaries.
Promptly upon the formation or acquisition of any Wholly-owned Subsidiary, the
Borrower shall provide the Administrative Agent notice thereof and timely
comply with the requirements of Section 4 hereof (at which time Schedule 6.2
shall be deemed amended to include reference to such Subsidiary).

 

Section
8.18         Change in the Nature of
Business. The Borrower shall not, nor shall it permit any of
its Subsidiaries to, engage in any business or activity if as a result the
general nature or conduct of the business of the Borrower or any Subsidiary
would be changed in any

 

51

 

material respect from the
general nature or conduct of the business engaged in by it as of the Closing
Date. Notwithstanding the foregoing, the Borrower and its Subsidiaries may
conduct residential development and home building activities in areas outside
of the current Building Regions; provided the Borrower gives the Administrative
Agent prior written notice of such activity, in which event the Administrative
Agent, in its reasonable discretion, may designate a new Building Region or
include such new area within an existing Building Region.

 

Section
8.19         Use of Proceeds.
The Borrower shall use the credit extended under this Agreement solely for the
purposes set forth in, or otherwise permitted by, Section 6.4 hereof.

 

Section
8.20         No Restrictions.
Except as provided herein or in the other Loan Documents, the Borrower shall
not, nor shall it permit any of its Subsidiaries to, directly or indirectly
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of the Borrower or any of
its Subsidiaries to:  (a) pay dividends
or make any other distribution on any Subsidiary’s capital stock or other
equity interests owned by the Borrower or any other Subsidiary, (b) pay any
indebtedness owed to the Borrower or any other Subsidiary, (c) make loans or
advances to the Borrower or any other Subsidiary, (d) transfer any of its
Property to the Borrower or any other Subsidiary, (e) encumber any of its
Property with Liens or (f) guarantee the Obligations and/or grant Liens on its
assets to the Administrative Agent; provided, however, that so long as no
Default or Event of Default exists, this Section shall not apply to nor operate
to prevent:

 

(a)      encumbrances or restrictions existing
under or by reason of applicable law or required by any regulatory authority
having jurisdiction over the Borrower or its Subsidiaries;

 

(b)      encumbrances or restrictions existing
under this Agreement or as contemplated in the Offering Memorandum;

 

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

 

(d)      encumbrances or restrictions existing
under agreements existing on the date of this Agreement as in effect on that
date;

 

(e)      restrictions on additional Liens and the
transfer of assets subject to any Lien permitted under this Agreement as
imposed by the holder of such Liens;

 

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

 

(g)      any instrument governing indebtedness or
any other agreement of any acquired Person, which encumbrance or restriction is
not applicable to any Person, or the assets of any Person, other than the
Person or the assets so acquired;

 

(h)      customary provisions in leases,
partnership agreements, limited liability company organizational governance
documents, joint venture agreements and other

 

52

 

similar agreements entered into in the ordinary course
of business that restrict (i) the transfer of leasehold interests or ownership
interest in such partnership, limited liability company, joint venture or
similar Person, (ii) in the case of a Partial Subsidiary, the transfer or
distribution of assets of such Subsidiary or the creation of Liens on the
Property of such entity, or (iii) other related-party transactions;

 

(i)       customary encumbrances or restrictions
imposed under any indebtedness (or refinancings thereof) of a Subsidiary
incurred pursuant to Section 8.7 hereof; and

 

(j)       restrictions on cash or other deposits or
net worth imposed by suppliers or landlords under contracts entered into in the
ordinary course of business.

 

Section
8.21         Subordinated Debt.
The Borrower shall not, nor shall it permit any of its Subsidiaries to, (a)
without the prior written consent of the Required Lenders, such consent not to
be unreasonably withheld, amend or modify any of the terms or conditions
relating to Subordinated Debt, (b) without the prior written consent of the
Required Lenders, such consent not to be unreasonably withheld, make any
voluntary prepayment of Subordinated Debt, effect any voluntary redemption
thereof, or effect any defeasance thereof, or (c) make any payment on account
of Subordinated Debt which is prohibited under the terms of any instrument or
agreement subordinating the same to the Obligations. Notwithstanding the
foregoing, the Borrower may agree to a decrease in the interest rate applicable
thereto or to a deferral of repayment of any of the principal of or interest on
the Subordinated Debt beyond the current due dates therefor.

 

Section
8.22         Financial Covenants.
(a)  Tangible Net Worth.
The Borrower shall, as of the end of each fiscal quarter of the Borrower,
maintain a Tangible Net Worth in an amount not less than the sum of (i)
$225,000,000 and (ii) 50% of the positive Net Income as earned subsequent to
September 30, 2005.

 

(b)           Leverage Ratio. The Borrower shall not, at the end of any fiscal quarter
of the Borrower, permit the Leverage Ratio to exceed 2.50 to 1.00.

 

(c)           Builder Leverage Ratio. The
Borrower shall not permit the Builder Leverage Ratio to exceed 2.00 to 1.00 as
of the end of any fiscal quarter of the Borrower ending on or before December
31, 2006, or permit the Builder Leverage Ratio to exceed 1.75 to 1.00 as of the
end of any fiscal quarter of the Borrower ending after December 31, 2006.

 

(d)           Interest Coverage Ratio. The
Borrower shall not, at the end of any fiscal quarter of the Borrower, permit
the ratio of EBITDA to Interest Incurred, as calculated over the preceding 4
fiscal quarters of the Borrower, to be less than 2.25 to 1.00.

 

Section
8.23         Inventory Restrictions.
The Borrower shall not at any time allow (a) the number of Speculative Housing
Units (including Housing Units held for exhibition to prospective buyers), as
owned by the Borrower and its Subsidiaries in the aggregate, to exceed 30% of
the total number of Housing Units actually sold and transferred by the Borrower
and its Subsidiaries pursuant to Housing Unit Contracts during the preceding 12
calendar months then ended, or (b) the number of Speculative Housing Units
(including Housing Units held for

 

53

 

exhibition to prospective
buyers), as owned by the Borrower and its Subsidiaries in any Building Region,
to exceed 35% of the total number of Housing Units actually sold and
transferred by the Borrower and its Subsidiaries pursuant to Housing Unit
Contracts within such Building Region during the preceding 12 calendar months
then ended. In the event the Borrower or any of its Subsidiaries begins to
conduct business in a new Building Region, the Administrative Agent and the
Borrower shall reasonably agree upon the number of Speculative Housing Units
that may be constructed or held at any one time during the first 12 calendar
months in which the Borrower or its Subsidiaries conduct activities in such
Building Region.

 

SECTION 9.           EVENTS OF DEFAULT AND
REMEDIES.

 

Section
9.1            Events of Default.
Any one or more of the following shall constitute an “Event of
Default” hereunder:

 

(a)      any default in the payment when due of all
or any part of the principal of or interest on any Note, any Reimbursement
Obligation (to the extent such Reimbursement Obligation is not funded by a
Borrowing of a Base Rate Loan), or any fee or other Obligation payable
hereunder or under any other Loan Document, which default continues for a
period of 5 days following the Borrower’s receipt of written notice of such
default from the Administrative Agent; provided, however, that no such notice
and cure period shall be applicable with respect to amounts owed upon the
Revolving Credit Termination Date, and in the event that the Borrower shall
have received 2 notices of a default of similar nature in any trailing 12 month
period, the Borrower shall not be entitled to any notice or grace period or the
opportunity to cure such default, and any similar default shall immediately
constitute an Event of Default;

 

(b)      any default in the observance or
performance of any covenant set forth in Sections 8.6, 8.7, 8.9, 8.10, 8.11,
8.12, 8.16, 8.17, 8.20, 8.21, 8.22, or 8.23 hereof or any covenant contained
herein requiring the Borrower or its Subsidiaries to notify the Administrative
Agent of a particular occurrence;

 

(c)      any default in the observance or
performance of any covenant set forth in Section 8.5, which default continues
for a period of 5 days following the Borrower’s receipt of written notice of
such default from the Administrative Agent; provided, however, in the event
that the Borrower shall have received 2 notices of a default of similar nature
in any trailing 12 month period, the Borrower shall not be entitled to any
notice or grace period or the opportunity to cure such default, and any similar
default shall immediately constitute an Event of Default;

 

(d)      any default in the observance or
performance of any other provision hereof or of any other Loan Document which
is not remedied within 30 days after the earlier of (i) the date on which such
failure shall first become known to any officer of the Borrower or (ii) written
notice thereof is given to the Borrower by the Administrative Agent;

 

(e)      any representation or warranty made herein
or in any other Loan Document or in any certificate furnished to the
Administrative Agent or the Lenders

 

54

 

pursuant hereto or thereto or in connection with any
transaction contemplated hereby or thereby proves untrue in any material
respect as of the date of the issuance or making or deemed making thereof;

 

(f)       any event occurs or condition exists
(other than those described in subsections (a) through (d) above) which is
specified as an event of default under any of the other Loan Documents, or any
of the Loan Documents shall for any reason not be or shall cease to be in full
force and effect or is declared to be null and void, or any Subsidiary of the
Borrower takes any action for the purpose of terminating, repudiating or
rescinding any Loan Document executed by it or any of its obligations
thereunder;

 

(g)      any default shall occur under any
Indebtedness for Borrowed Money issued, assumed or guaranteed by the Borrower
or any Subsidiary aggregating in excess of $3,000,000, or under any indenture,
agreement or other instrument under which the same may be issued, and such
default shall continue for a period of time sufficient to permit the
acceleration of the maturity of any such Indebtedness for Borrowed Money
(whether or not such maturity is in fact accelerated), or any such Indebtedness
for Borrowed Money shall not be paid when due (whether by demand, lapse of time,
acceleration or otherwise);

 

(h)      any judgment or judgments, writ or writs
or warrant or warrants of attachment, or any similar process or processes,
shall be entered or filed against the Borrower or any Subsidiary, or against
any of its Property, in an aggregate amount in excess of $3,000,000 (except to
the extent fully covered by insurance pursuant to which the insurer has
accepted liability therefor in writing), and which remains undischarged,
unvacated, unbonded or unstayed for a period of 30 days;

 

(i)       the Borrower or any Subsidiary, or any
member of its Controlled Group, shall fail to pay when due an amount or amounts
aggregating in excess of $1,000,000 which it shall have become liable to pay to
the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate
a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of
$1,000,000 (collectively, a “Material Plan”)
shall be filed under Title IV of ERISA by the Borrower or any Subsidiary, or
any other member of its Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Material Plan or a proceeding shall be instituted by a fiduciary
of any Material Plan against the Borrower or any Subsidiary, or any member of
its Controlled Group, to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated;

 

(j)       any Change of Control shall occur;

 

(k)      David K. Hill shall no longer hold one of
the following positions: (i) Chairman, or (ii) Chief Executive Officer, and
Borrower shall have failed to appoint or establish a successor to David K. Hill
who is reasonably acceptable to Administrative

 

55

 

Agent, within ninety (90) days after the date David K.
Hill no longer holds any one of such positions;

 

(l)       the Borrower or any Subsidiary of the
Borrower shall (i) have entered involuntarily against it an order for relief
under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in
writing its inability to pay, its debts generally as they become due, (iii)
make an assignment for the benefit of creditors, (iv) apply for, seek, consent
to or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any substantial part of its
Property, (v) institute any proceeding seeking to have entered against it an
order for relief under the United States Bankruptcy Code, as amended, to
adjudicate it insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors or fail to file an answer or other pleading denying the material allegations
of any such proceeding filed against it, (vi) take any action in furtherance of
any matter described in parts (i) through (v) above, or (vii) fail to contest
in good faith any appointment or proceeding described in Section 9.1(m) hereof;
or

 

(m)     a custodian, receiver, trustee, examiner,
liquidator or similar official shall be appointed for the Borrower or any
Subsidiary, or any substantial part of any of its Property, or a proceeding
described in Section 9.1(l)(v) shall be instituted against the Borrower or any
Subsidiary, and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of 60 days.

 

Section
9.2            Non-Bankruptcy Defaults.
When any Event of Default other than those described in subsection (l) or (m)
of Section 9.1 hereof has occurred and is continuing, the Administrative Agent
shall, by written notice to the Borrower: (a) if so directed by the Required
Lenders, terminate the remaining Revolving Credit Commitments and all other
obligations of the Lenders hereunder on the date stated in such notice (which
may be the date thereof); (b) in its discretion or if so directed by the
Required Lenders, declare the principal of and the accrued interest on all
outstanding Notes to be forthwith due and payable and thereupon all outstanding
Notes, including both principal and interest thereon, shall be and become
immediately due and payable together with all other amounts payable under the
Loan Documents without further demand, presentment, protest or notice of any
kind; and (c) in its discretion or if so directed by the Required Lenders,
demand that the Borrower immediately pay to the Administrative Agent the full
amount then available for drawing under each or any Letter of Credit, and the
Borrower agrees to immediately make such payment and acknowledges and agrees
that the Lenders would not have an adequate remedy at law for failure by the
Borrower to honor any such demand and that the Administrative Agent, for the
benefit of the Lenders, shall have the right to require the Borrower to
specifically perform such undertaking whether or not any drawings or other
demands for payment have been made under any Letter of Credit. The
Administrative Agent, after giving notice to the Borrower pursuant to Section
9.1 or this Section 9.2, shall also promptly send a copy of such notice to the
other Lenders, but the failure to do so shall not impair or annul the effect of
such notice.

 

Section
9.3            Bankruptcy Defaults.
When any Event of Default described in subsections (l) or (m) of Section 9.1
hereof has occurred and is continuing, then all outstanding Notes shall

 

56

 

immediately become due and payable together with all
other amounts payable under the Loan Documents without presentment, demand,
protest or notice of any kind; the obligation of the Lenders to extend further
credit pursuant to any of the terms hereof shall immediately terminate; and the
Borrower shall immediately pay to the Administrative Agent the full amount then
available for drawing under all outstanding Letters of Credit, the Borrower
acknowledging and agreeing that the Lenders would not have an adequate remedy
at law for failure by the Borrower to honor any such demand and that the
Lenders, and the Administrative Agent on their behalf, shall have the right to
require the Borrower to specifically perform such undertaking whether or not
any draws or other demands for payment have been made under any of the Letters
of Credit.

 

Section
9.4            Collateral for Undrawn Letters
of Credit. (a)  If the
prepayment of the amount available for drawing under any or all outstanding
Letters of Credit is required under Section 1.8(b) or under Section 9.2 or 9.3
above, the Borrower shall forthwith pay the amount required to be so prepaid,
to be held by the Administrative Agent as provided in subsection (b) below.

 

(b)           All amounts prepaid pursuant to
subsection (a) above shall be held by the Administrative Agent in one or more
separate collateral accounts (each such account, and the credit balances,
properties, and any investments from time to time held therein, and any
substitutions for such account, any certificate of deposit or other instrument
evidencing any of the foregoing and all proceeds of and earnings on any of the
foregoing being collectively called the “Collateral Account”)
as security for, and for application by the Administrative Agent (to the extent
available) to, the reimbursement of any payment under any Letter of Credit then
or thereafter made by the Administrative Agent, and to the payment of the
unpaid balance of all other Obligations (and to all Hedging Liability and Funds
Transfer and Deposit Account Liability). The Collateral Account shall be held
in the name of and subject to the exclusive dominion and control of the
Administrative Agent for the benefit of the Administrative Agent, the Lenders,
and the L/C Issuer. If and when requested by the Borrower, the Administrative
Agent shall invest funds held in the Collateral Account from time to time in
direct obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, the United States of America with a
remaining maturity of one year or less, provided that
the Administrative Agent is irrevocably authorized to sell investments held in
the Collateral Account when and as required to make payments out of the
Collateral Account for application to amounts due and owing from the Borrower
to the L/C Issuer, the Administrative Agent or the Lenders; provided, however, that (i) if the Borrower shall have made
payment of all obligations referred to in subsection (a) above required under
Section 1.8(b) hereof, at the request of the Borrower the Administrative Agent
shall release to the Borrower amounts held in the Collateral Account so long as
at the time of the release and after giving effect thereto no Default or Event
of Default exists, and (ii) if the Borrower shall have made payment of all
obligations referred to in subsection (a) above required under Section 9.2 or
9.3 hereof, so long as no Letters of Credit, Revolving Credit Commitments,
Loans or other Obligations, Hedging
Liability, or Funds Transfer and Deposit Account Liability remain outstanding,
at the request of the Borrower the Administrative Agent shall release to the
Borrower any remaining amounts held in the Collateral Account.

 

Section
9.5            Notice of Default.
The Administrative Agent shall give notice to the Borrower under Section
9.1(a), (c) or (d) hereof, as the case may be, at any time in its discretion

 

57

 

or promptly upon being requested to do so by the
Required Lenders and shall thereupon notify all the Lenders thereof.

 

Section
9.6            Expenses.
The Borrower agrees to pay to the Administrative Agent and each Lender, and any
other holder of any Note outstanding hereunder, all costs and expenses
reasonably incurred or paid by the Administrative Agent and such Lender or any
such holder, including reasonable attorneys’ fees and court costs, in
connection with any Default or Event of Default hereunder or in connection with
the enforcement of any of the Loan Documents (including all such costs and
expenses incurred in connection with any proceeding under the United States
Bankruptcy Code involving the Borrower or any Subsidiary as a debtor
thereunder).

 

SECTION 10.         CHANGE IN CIRCUMSTANCES.

 

Section
10.1         Change of Law.
Notwithstanding any other provisions of this Agreement or any Note, if at any
time any change in applicable law or regulation or in the interpretation
thereof makes it unlawful for any Lender to make or continue to maintain any
Eurodollar Loans or to perform its obligations as contemplated hereby, such
Lender shall promptly give notice thereof to the Borrower and such Lender’s
obligations to make or maintain Eurodollar Loans under this Agreement shall be
suspended until it is no longer unlawful for such Lender to make or maintain
Eurodollar Loans. The Borrower shall prepay on demand the outstanding principal
amount of any such affected Eurodollar Loans, together with all interest
accrued thereon and all other amounts then due and payable to such Lender under
this Agreement; provided, however, subject to all
of the terms and conditions of this Agreement, the Borrower may then elect to
borrow the principal amount of the affected Eurodollar Loans from such Lender
by means of Base Rate Loans from such Lender, which Base Rate Loans shall not
be made ratably by the Lenders but only from such affected Lender.

 

Section
10.2         Unavailability of Deposits or
Inability to Ascertain, or Inadequacy of, LIBOR. If on or
prior to the first day of any Interest Period for any Borrowing of Eurodollar
Loans:

 

(a)      the Administrative Agent determines that
deposits in U.S. Dollars (in the applicable amounts) are not being offered to
it in the interbank eurodollar market for such Interest Period, or that by
reason of circumstances affecting the interbank eurodollar market adequate and
reasonable means do not exist for ascertaining the applicable LIBOR, or

 

(b)      the Required Lenders advise the
Administrative Agent that (i) LIBOR as determined by the Administrative Agent
will not adequately and fairly reflect the cost to such Lenders of funding
their Eurodollar Loans for such Interest Period or (ii) that the making or
funding of Eurodollar Loans become impracticable,

 

then the Administrative Agent shall forthwith give
notice thereof to the Borrower and the Lenders, whereupon until the
Administrative Agent notifies the Borrower that the circumstances giving rise
to such suspension no longer exist, the obligations of the Lenders to make
Eurodollar Loans shall be suspended.

 

58

 

Section
10.3         Increased Cost and Reduced
Return. (a)  If, on or
after the date hereof, the adoption of any applicable law, rule or regulation,
or any change therein, 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 any
Lender (or its Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:

 

(i)            shall subject any Lender (or its
Lending Office) to any tax, duty or other charge with respect to its Eurodollar
Loans, its Notes, its Letter(s) of Credit, or its participation in any thereof,
any Reimbursement Obligations owed to it or its obligation to make Eurodollar
Loans, issue a Letter of Credit, or to participate therein, or shall change the
basis of taxation of payments to any Lender (or its Lending Office) of the
principal of or interest on its Eurodollar Loans, Letter(s) of Credit, or
participations therein or any other amounts due under this Agreement or any
other Loan Document in respect of its Eurodollar Loans, Letter(s) of Credit,
any participation therein, any Reimbursement Obligations owed to it, or its
obligation to make Eurodollar Loans, or issue a Letter of Credit, or acquire
participations therein (except for changes in the rate of tax on the overall net
income or equivalent of such Lender or its Lending Office imposed by the
jurisdiction in which such Lender’s principal executive office or Lending
Office is located); or

 

(ii)           shall impose, modify or deem
applicable any reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board of Governors of
the Federal Reserve System, but excluding with respect to any Eurodollar Loans
any such requirement included in an applicable Eurodollar Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended by,
any Lender (or its Lending Office) or shall impose on any Lender (or its
Lending Office) or on the interbank market any other condition affecting its
Eurodollar Loans, its Notes, its Letter(s) of Credit, or its participation in
any thereof, any Reimbursement Obligation owed to it, or its obligation to make
Eurodollar Loans, or to issue a Letter of Credit, or to participate therein;

 

and the result of any of the foregoing is to increase
the cost to such Lender (or its Lending Office) of making or maintaining any
Eurodollar Loan, issuing or maintaining a Letter of Credit, or participating
therein, or to reduce the amount of any sum received or receivable by such
Lender (or its Lending Office) under this Agreement or under any other Loan
Document with respect thereto, by an amount deemed by such Lender to be
material, then, within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall be obligated to pay to such Lender
such additional amount or amounts as will compensate such Lender for such
increased cost or reduction; provided that the Borrower shall not be required
to compensate a Lender pursuant to this Section for any increased costs or
reductions incurred more than 60 days prior to the date such Lender notifies
the Borrower of the change in law giving rise to such increased costs or
reductions and of such Lender’s intention to claim compensation therefore.

 

(b)           If, after the date hereof, any Lender
or the Administrative Agent shall have determined that the adoption of any
applicable law, rule or regulation regarding capital

 

59

 

adequacy, or any change therein, 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 any Lender (or its Lending Office) or any corporation
controlling such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has had the effect of reducing the rate of
return on such Lender’s or such corporation’s capital as a consequence of its
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender’s or such corporation’s policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, within 15 days after demand by such Lender (with a copy
to the Administrative Agent), the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction;
provided that the Borrower shall not be required to compensate a Lender
pursuant to this Section for any reduced returns more than 60 days prior to the
date such Lender notifies the Borrower of the change in law giving rise to such
reduced returns and of such Lender’s intention to claim compensation therefore.

 

(c)           A certificate of a Lender claiming
compensation under this Section 10.3 and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive if reasonably determined.
In determining such amount, such Lender may use any reasonable averaging and
attribution methods.

 

(d)           Failure or delay on the part of any
Lender to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender’s right to demand such compensation; provided that the
Borrower shall not be required to compensate a Lender pursuant to this Section
for any increased costs or reductions incurred more than 60 days prior to the
date that such Lender, as the case may be, notifies the Borrower of the
relevant change giving rise to such increased cots or reductions and of such
Lender’s intention to claim compensation therefore; provided further that, if
the change giving rise to such increased costs or reductions is retroactive,
then the 60-day period referred to above shall be extended to include the
period of retroactive effect thereof.

 

(e)           If any Lender requests compensation
or gives a notice pursuant to this Section 10.3, then such Lender shall use
reasonable efforts to designate a different Lending Office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder
to another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to this Section 10.3 in the future or eliminate the need for
the notice pursuant to this Section 10.3, as applicable, and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

 

Section
10.4         Lending Offices.
Each Lender may, at its option, elect to make its Loans hereunder at the
branch, office or affiliate specified on the appropriate signature page hereof
(each a “Lending Office”) for each type of Loan
available hereunder or at such other of its branches, offices or affiliates as
it may from time to time elect and designate in a written notice to the
Borrower and the Administrative Agent. To the extent reasonably possible, a
Lender shall

 

60

 

designate an alternative branch or funding office with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Section 10.3 hereof or to avoid the unavailability of Eurodollar
Loans under Section 10.2 hereof, so long as such designation is not otherwise
disadvantageous to the Lender.

 

Section
10.5         Discretion of Lender as to
Manner of Funding. Notwithstanding any other provision of
this Agreement, each Lender shall be entitled to fund and maintain its funding
of all or any part of its Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations hereunder
with respect to Eurodollar Loans shall be made as if each Lender had actually
funded and maintained each Eurodollar Loan through the purchase of deposits in
the interbank eurodollar market having a maturity corresponding to such Loan’s
Interest Period, and bearing an interest rate equal to LIBOR for such Interest
Period.

 

SECTION 11.         THE ADMINISTRATIVE AGENT.

 

Section
11.1         Appointment and Authorization
of Administrative Agent. Each Lender hereby appoints Harris
N.A. as the Administrative Agent under the Loan Documents and hereby authorizes
the Administrative Agent to take such action as Administrative Agent on its
behalf and to exercise such powers under the Loan Documents as are delegated to
the Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto. The Lenders expressly agree that the
Administrative Agent is not acting as a fiduciary of the Lenders in respect of
the Loan Documents, the Borrower or otherwise, and nothing herein or in any of
the other Loan Documents shall result in any duties or obligations on the
Administrative Agent or any of the Lenders except as expressly set forth
herein.

 

Section
11.2         Administrative Agent and its
Affiliates. The Administrative Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any
other Lender and may exercise or refrain from exercising such rights and power
as though it were not the Administrative Agent, and the Administrative Agent
and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any Affiliate of the
Borrower as if it were not the Administrative Agent under the Loan Documents. The
term “Lender” as used herein and in all other
Loan Documents, unless the context otherwise clearly requires, includes the
Administrative Agent in its individual capacity as a Lender. References in
Section 1 hereof to the Administrative Agent’s Loans, or to the amount owing to
the Administrative Agent for which an interest rate is being determined, refer
to the Administrative Agent in its individual capacity as a Lender.

 

Section
11.3         Action by Administrative Agent.
If the Administrative Agent receives from the Borrower a written notice of an
Event of Default pursuant to Section 8.5 hereof, the Administrative Agent shall
promptly give each of the Lenders written notice thereof. The obligations of
the Administrative Agent under the Loan Documents are only those expressly set
forth therein. Without limiting the generality of the foregoing, the
Administrative Agent shall not be required to take any action hereunder with
respect to any Default or Event of Default, except as expressly provided in
Sections 9.2 and 9.5. Unless and until the Required Lenders give such
direction, the Administrative Agent may (but shall not be obligated to) take or
refrain from taking such actions as it deems appropriate and in the best interest
of all the Lenders. In no event, however, shall the Administrative Agent be
required to take any action in violation of

 

61

 

applicable law or of any provision of any Loan
Document, and the Administrative Agent shall in all cases be fully justified in
failing or refusing to act hereunder or under any other Loan Document unless it
first receives any further assurances of its indemnification from the Lenders
that it may require, including prepayment of any related expenses and any other
protection it requires against any and all costs, expense, and liability which
may be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall be entitled to assume that no Default or Event
of Default exists unless notified in writing to the contrary by a Lender or the
Borrower. In all cases in which the Loan Documents do not require the
Administrative Agent to take specific action, the Administrative Agent shall be
fully justified in using its discretion in failing to take or in taking any
action thereunder. Any instructions of the Required Lenders, or of any other
group of Lenders called for under the specific provisions of the Loan
Documents, shall be binding upon all the Lenders and the holders of the
Obligations.

 

Section
11.4         Consultation with Experts.
The Administrative Agent may consult with legal counsel, independent public
accountants, and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.

 

Section
11.5         Liability of Administrative
Agent; Credit Decision. Neither the Administrative Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or not taken by it in connection with the Loan Documents:  (i) with the consent or at the request of the
Required Lenders or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Administrative Agent nor any of its directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify:  (i)
any statement, warranty or representation made in connection with this
Agreement, any other Loan Document or any Credit Event; (ii) the performance or
observance of any of the covenants or agreements of the Borrower or any
Subsidiary contained herein or in any other Loan Document; (iii) the
satisfaction of any condition specified in Section 7 hereof, except receipt of
items required to be delivered to the Administrative Agent; or (iv) the
validity, effectiveness, genuineness, enforceability, perfection, value, worth
or collectibility hereof or of any other Loan Document or of any other
documents or writing furnished in connection with any Loan Document; and the
Administrative Agent makes no representation of any kind or character with
respect to any such matter mentioned in this sentence. The Administrative Agent
may execute any of its duties under any of the Loan Documents by or through
employees, agents, and attorneys in fact and shall not be answerable to the
Lenders, the Borrower, or any other Person for the default or misconduct of any
such agents or attorneys-in-fact selected with reasonable care. The Administrative
Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, other document or statement (whether written or oral)
believed by it to be genuine or to be sent by the proper party or parties. In
particular and without limiting any of the foregoing, the Administrative Agent
shall have no responsibility for confirming the accuracy of any compliance
certificate or other document or instrument received by it under the Loan
Documents. The Administrative Agent may treat the payee of any Note as the
holder thereof until written notice of transfer shall have been filed with the
Administrative Agent signed by such payee in form satisfactory to the
Administrative Agent. Each Lender acknowledges that it has independently and
without reliance on the Administrative Agent or any other Lender, and based
upon such information, investigations and inquiries as it deems appropriate,
made its own credit analysis and decision to extend credit to the Borrower in
the manner set forth in the Loan

 

62

 

Documents. It shall be the responsibility of each
Lender to keep itself informed as to the creditworthiness of the Borrower and
its Subsidiaries, and the Administrative Agent shall have no liability to any
Lender with respect thereto.

 

Section
11.6         Indemnity. The
Lenders shall ratably, in accordance with their respective Revolver
Percentages, indemnify and hold the Administrative Agent, and its directors,
officers, employees, agents, and representatives harmless from and against any
liabilities, losses, costs or expenses suffered or incurred by it under any
Loan Document or in connection with the transactions contemplated thereby,
regardless of when asserted or arising, except to the extent they are promptly
reimbursed for the same by the Borrower and except to the extent that any event
giving rise to a claim was caused by the gross negligence or willful misconduct
of the party seeking to be indemnified. The obligations of the Lenders under
this Section shall survive termination of this Agreement. The Administrative
Agent shall be entitled to offset amounts received for the account of a Lender
under this Agreement against unpaid amounts due from such Lender to the
Administrative Agent hereunder (whether as fundings of participations,
indemnities or otherwise), but shall not be entitled to offset against amounts
owed to the Administrative Agent by any Lender arising outside of this
Agreement and the other Loan Documents.

 

Section
11.7         Resignation of Administrative
Agent and Successor Administrative Agent. The Administrative
Agent may resign at any time by giving written notice thereof to the Lenders
and the Borrower. Upon any such resignation of the Administrative Agent, the
Required Lenders shall have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent’s giving of notice of resignation then
the retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent, which may be any Lender hereunder or any
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$200,000,000. Upon the acceptance of its appointment as the Administrative
Agent hereunder, such successor Administrative Agent shall thereupon succeed to
and become vested with all the rights and duties of the retiring Administrative
Agent under the Loan Documents, and the retiring Administrative Agent shall be
discharged from its duties and obligations thereunder. After any retiring
Administrative Agent’s resignation hereunder as Administrative Agent, the
provisions of this Section 11 and all protective provisions of the other Loan
Documents shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent, but no successor Administrative
Agent shall in any event be liable or responsible for any actions of its
predecessor. If the Administrative Agent resigns and no successor is appointed,
the rights and obligations of such Administrative Agent shall be automatically
assumed by the Required Lenders and the Borrower shall be directed to make all
payments due each Lender hereunder directly to such.

 

Section
11.8         L/C Issuer.
The L/C Issuer shall act on behalf of the Lenders with respect to any Letters
of Credit issued by it and the documents associated therewith. The L/C Issuer
shall have all of the benefits and immunities (i) provided to the
Administrative Agent in this Section 11 with respect to any acts taken or
omissions suffered by the L/C Issuer in connection with Letters of Credit issued
by it or proposed to be issued by it and the Applications pertaining

 

63

 

to such Letters of Credit as fully as if the term “Administrative
Agent”, as used in this Section 11, included the L/C Issuer with respect to
such acts or omissions and (ii) as additionally provided in this Agreement with
respect to such L/C Issuer.

 

Section
11.9         Hedging Liability and Funds
Transfer and Deposit Account Liability Arrangements. By
virtue of a Lender’s execution of this Agreement or an assignment agreement
pursuant to Section 13.12 hereof, as the case may be, any Affiliate of such
Lender with whom the Borrower or any Subsidiary has entered into an agreement
creating Hedging Liability or Funds Transfer and Deposit Account Liability
shall be deemed a Lender party hereto for purposes of any reference in a Loan
Document to the parties for whom the Administrative Agent is acting, it being
understood and agreed that the rights and benefits of such Affiliate under the
Loan Documents consist exclusively of such Affiliate’s right to share in
payments and collections out of the Guaranties as more fully set forth in
Section 4.1 hereof. In connection with any such distribution of payments and
collections, the Administrative Agent shall be entitled to assume no amounts
are due to any Lender or its Affiliate with respect to Hedging Liability or
Funds Transfer and Deposit Account Liability unless such Lender has notified
the Administrative Agent in writing of the amount of any such liability owed to
it or its Affiliate prior to such distribution.

 

Section
11.10       Designation of Additional
Agents. The Administrative Agent shall have the continuing
right, for purposes hereof, at any time and from time to time to designate one
or more of the Lenders (and/or its or their Affiliates) as “syndication agents,”
“documentation agents,” “arrangers,” or other designations for purposes hereto,
but such designation shall have no substantive effect, and such Lenders and
their Affiliates shall have no additional powers, duties or responsibilities as
a result thereof.

 

SECTION 12.         THE GUARANTEES.

 

Section
12.1         The Guarantees.
To induce the Lenders to provide the credits described herein and in
consideration of benefits expected to accrue to the Borrower by reason of the
Revolving Credit Commitments and for other good and valuable consideration,
receipt of which is hereby acknowledged, each Subsidiary party hereto
(including any Subsidiary formed or acquired after the Closing Date executing
an Additional Guarantor Supplement in the form attached hereto as Exhibit G or
such other form acceptable to the Administrative Agent) hereby unconditionally
and irrevocably guarantees jointly and severally to the Administrative Agent,
the Lenders, and their Affiliates, the due and punctual payment of all present
and future Obligations, Hedging Liability, and Funds Transfer and Deposit
Account Liability, including, but not limited to, the due and punctual payment
of principal of and interest on the Notes, the Reimbursement Obligations, and
the due and punctual payment of all other Obligations now or hereafter owed by
the Borrower under the Loan Documents and the due and punctual payment of all
Hedging Liability and Funds Transfer and Deposit Account Liability, in each
case as and when the same shall become due and payable, whether at stated
maturity, by acceleration, or otherwise, according to the terms hereof and
thereof (including interest which, but for the filing of a petition in
bankruptcy, would otherwise accrue on any such indebtedness, obligation, or
liability). In case of failure by the Borrower or other obligor punctually to
pay any Obligations, Hedging Liability, or Funds Transfer and Deposit Account
Liability guaranteed hereby, each Guarantor hereby unconditionally agrees to
make such payment or to cause such payment to be made

 

64

 

punctually as and when the same shall become due and
payable, whether at stated maturity, by acceleration, or otherwise, and as if
such payment were made by the Borrower or such obligor, it being agreed that
this is a guaranty of payment as opposed to a guaranty of collection.

 

Section
12.2         Guarantee Unconditional.
The obligations of each Guarantor under this Section 12 shall be unconditional
and absolute and, without limiting the generality of the foregoing, shall not
be released, discharged, or otherwise affected by:

 

(a)      any extension, renewal, settlement,
compromise, waiver, or release in respect of any obligation of the Borrower or
other obligor or of any other guarantor under this Agreement or any other Loan
Document or by operation of law or otherwise;

 

(b)      any modification or amendment of or
supplement to this Agreement or any other Loan Document or any agreement
relating to Hedging Liability or Funds Transfer and Deposit Account Liability;

 

(c)      any change in the corporate existence,
structure, or ownership of, or any insolvency, bankruptcy, reorganization, or
other similar proceeding affecting, the Borrower or other obligor, any other
guarantor, or any of their respective assets, or any resulting release or
discharge of any obligation of the Borrower or other obligor or of any other
guarantor contained in any Loan Document;

 

(d)      the existence of any claim, set-off, or
other rights which the Borrower or other obligor or any other guarantor may
have at any time against the Administrative Agent, any Lender, or any other
Person, whether or not arising in connection herewith;

 

(e)      any failure to assert, or any assertion
of, any claim or demand or any exercise of, or failure to exercise, any rights
or remedies against the Borrower or other obligor, any other guarantor, or any
other Person or Property;

 

(f)       any application of any sums by whomsoever
paid or howsoever realized to any obligation of the Borrower or other obligor,
regardless of what obligations of the Borrower or other obligor remain unpaid;

 

(g)      any invalidity or unenforceability
relating to or against the Borrower or other obligor or any other guarantor for
any reason of this Agreement or of any other Loan Document or any agreement
relating to Hedging Liability or Funds Transfer and Deposit Account Liability
or any provision of applicable law or regulation purporting to prohibit the
payment by the Borrower or other obligor or any other guarantor of the
principal of or interest on any Note or any Reimbursement Obligation or any
other amount payable under the Loan Documents or any agreement relating to
Hedging Liability or Funds Transfer and Deposit Account Liability; or

 

(h)      any other act or omission to act or delay
of any kind by the Administrative Agent, any Lender, or any other Person or any
other circumstance

 

65

 

whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the obligations of any
Guarantor under this Section 12.

 

Section
12.3         Discharge Only upon Payment
in Full; Reinstatement in Certain Circumstances. Each
Guarantor’s obligations under this Section 12 shall remain in full force and
effect until the Revolving Credit Commitments are terminated, all Letters of
Credit have expired, and the principal of and interest on the Notes and all
other amounts payable by the Borrower and the Guarantors under this Agreement
and all other Loan Documents and, if then outstanding and unpaid, all Hedging
Liability and Funds Transfer and Deposit Account Liability shall have been paid
in full. If at any time any payment of the principal of or interest on any Note
or any Reimbursement Obligation or any other amount payable by the Borrower or
other obligor or any Guarantor under the Loan Documents or any agreement
relating to Hedging Liability or Funds Transfer and Deposit Account Liability
is rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy, or reorganization of the Borrower or other obligor or of any
guarantor, or otherwise, each Guarantor’s obligations under this Section 12
with respect to such payment shall be reinstated at such time as though such
payment had become due but had not been made at such time.

 

Section
12.4         Subrogation.
Each Guarantor agrees it will not exercise any rights which it may acquire by
way of subrogation by any payment made hereunder, or otherwise, until all the
Obligations, Hedging Liability, and Funds Transfer and Deposit Account
Liability shall have been paid in full subsequent to the termination of all the
Revolving Credit Commitments and expiration of all Letters of Credit. If any
amount shall be paid to a Guarantor on account of such subrogation rights at
any time prior to the later of (x) the payment in full of the Obligations,
Hedging Liability, and Funds Transfer and Deposit Account Liability and all
other amounts payable by the Borrower hereunder and the other Loan Documents
and (y) the termination of the Revolving Credit Commitments and expiration of
all Letters of Credit, such amount shall be held in trust for the benefit of
the Administrative Agent and the Lenders (and their Affiliates) and shall
forthwith be paid to the Administrative Agent for the benefit of the Lenders
(and their Affiliates) or be credited and applied upon the Obligations, Hedging
Liability, and Funds Transfer and Deposit Account Liability, whether matured or
unmatured, in accordance with the terms of this Agreement.

 

Section
12.5         Waivers. Each
Guarantor irrevocably waives acceptance hereof, presentment, demand, protest,
and any notice not provided for herein, as well as any requirement that at any
time any action be taken by the Administrative Agent, any Lender, or any other
Person against the Borrower or other obligor, another guarantor, or any other
Person.

 

Section
12.6         Limit on Recovery.
Notwithstanding any other provision hereof, the right of recovery against each
Guarantor under this Section 12 shall not exceed $1.00 less than the lowest
amount which would render such Guarantor’s obligations under this Section 12
void or voidable under applicable law, including, without limitation,
fraudulent conveyance law.

 

Section
12.7         Stay of Acceleration.
If acceleration of the time for payment of any amount payable by the Borrower
or other obligor under this Agreement or any other Loan Document, or under any
agreement relating to Hedging Liability or Funds Transfer and Deposit Account
Liability, is stayed upon the insolvency, bankruptcy or reorganization of the
Borrower

 

66

 

or such obligor, all such amounts otherwise subject to
acceleration under the terms of this Agreement or the other Loan Documents, or
under any agreement relating to Hedging Liability or Funds Transfer and Deposit
Account Liability, shall nonetheless be payable by the Guarantors hereunder
forthwith on demand by the Administrative Agent made at the request of the
Required Lenders.

 

Section
12.8         Benefit to Guarantors.
The Borrower and the Guarantors are engaged in related businesses and
integrated to such an extent that the financial strength and flexibility of the
Borrower has a direct impact on the success of each Guarantor. Each Guarantor
will derive substantial direct and indirect benefit from the extensions of
credit hereunder.

 

Section
12.9         Guarantor Covenants.
Each Guarantor shall take such action as the Borrower is required by this
Agreement to cause such Guarantor to take, and shall refrain from taking such
action as the Borrower is required by this Agreement to prohibit such Guarantor
from taking.

 

SECTION 13.         MISCELLANEOUS.

 

Section
13.1         Withholding Taxes.
(a)  Payments Free of
Withholding. Except as otherwise required by law and subject to
Section 13.1(b) hereof, each payment by the Borrower and the Guarantors under
this Agreement or the other Loan Documents shall be made without withholding
for or on account of any present or future taxes (other than overall net income
taxes on the recipient) imposed by or within the jurisdiction in which the
Borrower or such Guarantor is domiciled, any jurisdiction from which the
Borrower or such Guarantor makes any payment, or (in each case) any political
subdivision or taxing authority thereof or therein, excluding, in the case of
the Administrative Agent and each Lender, (i) taxes imposed on or measured by
its net income, and franchise taxes imposed on it (in lieu of net income
taxes), by the jurisdiction (or any political subdivision thereof) under the
Legal Requirements of which the Administrative Agent or such Lender, as the
case may be, is organized or maintains a lending office and (ii) in the case of
a foreign Lender, any withholding tax that is imposed on amounts payable to
such Lender at the time such foreign Lender becomes a party to this Agreement
(or designates a new Lending Office) or is attributable to such foreign Lender’s
failure to comply with Section 13.1(b). If any such withholding is so required,
the Borrower or such Guarantor shall make the withholding, pay the amount
withheld to the appropriate governmental authority before penalties attach
thereto or interest accrues thereon, and forthwith pay such additional amount
as may be necessary to ensure that the net amount actually received by each Lender
and the Administrative Agent free and clear of such taxes (including such taxes
on such additional amount) is equal to the amount which that Lender or the
Administrative Agent (as the case may be) would have received had such
withholding not been made. If the Administrative Agent or any Lender pays any
amount in respect of any such taxes, penalties or interest, the Borrower or
such Guarantor shall reimburse the Administrative Agent or such Lender for that
payment on demand in the currency in which such payment was made. If the
Borrower or such Guarantor pays any such taxes, penalties or interest, it shall
deliver official tax receipts evidencing that payment or certified copies
thereof to the Lender or Administrative Agent on whose account such withholding
was made (with a copy to the Administrative Agent if not the recipient of the
original) on or before the thirtieth day after payment. Notwithstanding
anything to the contrary herein, the Borrower and the Guarantors shall have no
liability or responsibility for payment of

 

67

 

any penalties, interest or fines accruing on any taxes
pursuant to this Section 13 which arise or result from the Administrative Agent’s
or any Lender’s failure to comply with any Legal Requirement.

 

(b)           U.S. Withholding Tax
Exemptions. Each Lender that is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) shall submit to the
Borrower and the Administrative Agent on or before the date the initial Credit
Event is made hereunder or, if later, the date such financial institution
becomes a Lender hereunder, two duly completed and signed copies of (i) either
Form W-8 BEN (relating to such Lender and entitling it to a complete exemption
from withholding under the Code on all amounts to be received by such Lender,
including fees, pursuant to the Loan Documents and the Obligations) or Form W-8
ECI (relating to all amounts to be received by such Lender, including fees,
pursuant to the Loan Documents and the Obligations) of the United States
Internal Revenue Service or (ii) solely if such Lender is claiming exemption
from United States withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of “portfolio interest”, a Form W-8 BEN, or any
successor form prescribed by the Internal Revenue Service, and a certificate
representing that such Lender is not a bank for purposes of Section 881(c) of
the Code, is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign
corporation related to the Borrower (within the meaning of Section 864(d)(4) of
the Code). Thereafter and from time to time, each Lender shall submit to the
Borrower and the Administrative Agent such additional duly completed and signed
copies of one or the other of such Forms (or such successor forms as shall be
adopted from time to time by the relevant United States taxing authorities) and
such other certificates as may be (i) requested by the Borrower in a written
notice, directly or through the Administrative Agent, to such Lender and (ii)
required under then current United States law or regulations to avoid or reduce
United States withholding taxes on payments in respect of all amounts to be
received by such Lender, including fees, pursuant to the Loan Documents or the
Obligations. Upon the request of the Borrower or the Administrative Agent, each
Lender that is a United States person (as such term is defined in Section
7701(a)(30) of the Code) shall submit to the Borrower and the Administrative
Agent a certificate to the effect that it is such a United States person.

 

(c)           Inability of Lender to
Submit Forms. If any Lender determines, as a result of any change in
applicable law, regulation or treaty, or in any official application or
interpretation thereof, that it is unable to submit to the Borrower or the
Administrative Agent any form or certificate that such Lender is obligated to
submit pursuant to subsection (b) of this Section 13.1 or that such Lender is
required to withdraw or cancel any such form or certificate previously
submitted or any such form or certificate otherwise becomes ineffective or
inaccurate, such Lender shall promptly notify the Borrower and Administrative
Agent of such fact and the Lender shall to that extent not be obligated to
provide any such form or certificate and will be entitled to withdraw or cancel
any affected form or certificate, as applicable.

 

(d)           Refunds. If the
Administrative Agent or any Lender determines, in its sole discretion, that it
has received a refund of any taxes as to which it has been indemnified by the
Borrower under this Agreement or with respect to which the Borrower has paid
additional amounts pursuant to this Section, it shall pay to the Borrower an
amount equal to such refund (but only to the extent of indemnity payments made
under this Agreement or additional amounts paid by the Borrower under this
Section with respect to the taxes giving rise to such refund), net

 

68

 

of all out-of-pocket expenses of the Administrative
Agent or such Lender, as the case may be, and without interest (other than any
interest paid by the relevant governmental authority with respect to such
refund, provided that the Borrower, upon the request of the Administrative
Agent or such Lender, agrees to repay the amount paid over to the Borrower to
the Administrative Agent or such Lender in the event the Administrative Agent
or such Lender is required to repay such refund to such governmental authority.

 

(e)           Change of Lending Office. If
Borrower is required to pay any additional amount to any Lender or any
governmental authority for the account of any Lender pursuant to Section 13.1,
then such Lender shall use reasonable efforts to designate a different Lending
Office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 13.1 in the future and (ii) would
not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

 

Section
13.2         No Waiver, Cumulative
Remedies. No delay or failure on the part of the
Administrative Agent or any Lender or on the part of the holder or holders of any
of the Obligations in the exercise of any power or right under any Loan
Document shall operate as a waiver thereof or as an acquiescence in any
default, nor shall any single or partial exercise of any power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. The rights and remedies hereunder of the Administrative Agent,
the Lenders and of the holder or holders of any of the Obligations are
cumulative to, and not exclusive of, any rights or remedies which any of them
would otherwise have.

 

Section
13.3         Non-Business Days.
If any payment hereunder becomes due and payable on a day which is not a
Business Day, the due date of such payment shall be extended to the next
succeeding Business Day on which date such payment shall be due and payable. In
the case of any payment of principal falling due on a day which is not a
Business Day, interest on such principal amount shall continue to accrue during
such extension at the rate per annum then in effect, which accrued amount shall
be due and payable on the next scheduled date for the payment of interest.

 

Section
13.4         Documentary Taxes.
The Borrower agrees to pay on demand any documentary, stamp or similar taxes
payable in respect of this Agreement or any other Loan Document, including
interest and penalties, in the event any such taxes are assessed, irrespective
of when such assessment is made and whether or not any credit is then in use or
available hereunder.

 

Section
13.5         Survival of Representations.
All representations and warranties made herein or in any other Loan Document or
in certificates given pursuant hereto or thereto shall survive the execution
and delivery of this Agreement and the other Loan Documents, and shall continue
in full force and effect with respect to the date as of which they were made as
long as any credit is in use or available hereunder.

 

69

 

Section
13.6         Survival of Indemnities.
All indemnities and other provisions relative to reimbursement to the Lenders
of amounts sufficient to protect the yield of the Lenders with respect to the
Loans and Letters of Credit, including, but not limited to, Sections 1.11,
10.3, and 13.15 hereof, shall survive the termination of this Agreement and the
other Loan Documents and the payment of the Obligations.

 

Section
13.7         Sharing of Set-Off.
Each Lender agrees with each other Lender a party hereto that if such Lender
shall receive and retain any payment, whether by set-off or application of
deposit balances or otherwise, on any of the Loans or Reimbursement Obligations
in excess of its ratable share of payments on all such Obligations then
outstanding to the Lenders, then such Lender shall purchase for cash at face
value, but without recourse, ratably from each of the other Lenders such amount
of the Loans or Reimbursement Obligations, or participations therein, held by
each such other Lenders (or interest therein) as shall be necessary to cause
such Lender to share such excess payment ratably with all the other Lenders; provided, however, that if any such purchase is made by any
Lender, and if such excess payment or part thereof is thereafter recovered from
such purchasing Lender, the related purchases from the other Lenders shall be
rescinded ratably and the purchase price restored as to the portion of such
excess payment so recovered, but without interest. For purposes of this
Section, amounts owed to or recovered by the L/C Issuer in connection with
Reimbursement Obligations in which Lenders have been required to fund their
participation shall be treated as amounts owed to or recovered by the L/C
Issuer as a Lender hereunder.

 

Section
13.8         Notices. Except
as otherwise specified herein, all notices hereunder and under the other Loan
Documents shall be in writing (including, without limitation, notice by
telecopy) and shall be given to the relevant party at its address or telecopier
number set forth below, or such other address or telecopier number as such
party may hereafter specify by notice to the Administrative Agent and the
Borrower given by courier, by United States certified or registered mail, by
telecopy or by other telecommunication device capable of creating a written
record of such notice and its receipt. Notices under the Loan Documents to the
Lenders and the Administrative Agent shall be addressed to their respective
addresses or telecopier numbers set forth on the signature pages hereof, and to
the Borrower or any Guarantor to:

 

Kimball Hill, Inc.

5999 New Wilke Road,
Suite 504

Rolling Meadows, Illinois
60008

Attention:              Hal H. Barber

Telephone:            (847) 364-7300

Telecopy:              (847) 439-0875

 

and a copy to:

 

Kimball Hill, Inc.

5999 New Wilke Road,
Suite 504

Rolling Meadows, Illinois
60008

Attention:              General Counsel

Telephone:            (847) 364-7300

Telecopy:              (847) 439-0875

 

70

 

Each such notice, request or other communication shall
be effective (i) if given by telecopier, when such telecopy is transmitted to
the telecopier number specified in this Section or on the signature pages
hereof and a confirmation of such telecopy has been received by the sender,
(ii) if given by mail, 5 days after such communication is deposited in the
mail, certified or registered with return receipt requested, addressed as
aforesaid or (iii) if given by any other means, when delivered at the addresses
specified in this Section or on the signature pages hereof; provided that any notice given pursuant to Section 1 hereof
shall be effective only upon receipt.

 

Section
13.9         Counterparts.
This Agreement may be executed in any number of counterparts, and by the
different parties hereto on separate counterpart signature pages, and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.

 

Section
13.10       Successors and Assigns.
This Agreement shall be binding upon the Borrower and the Guarantors and their
successors and assigns, and shall inure to the benefit of the Administrative
Agent and each of the Lenders and the benefit of their respective successors
and assigns, including any subsequent holder of any of the Obligations. The
Borrower and the Guarantors may not assign any of their rights or obligations
under any Loan Document without the written consent of all of the Lenders.

 

Section
13.11       Participants.
Each Lender shall have the right at its own cost to grant participations (to be
evidenced by one or more agreements or certificates of participation) in the
Loans made and Reimbursement Obligations and/or Revolving Credit Commitments
held by such Lender at any time and from time to time to one or more other
Persons; provided that no such participation
shall relieve any Lender of any of its obligations under this Agreement, and, provided, further that no such participant shall have any
rights under this Agreement except as provided in this Section, and the
Administrative Agent shall have no obligation or responsibility to such
participant. Any agreement pursuant to which such participation  is granted shall provide that the granting
Lender shall retain the sole right and responsibility to enforce the
obligations of the Borrower under this Agreement and the other Loan Documents
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of the Loan Documents, except that such agreement
may provide that such Lender will not agree to any modification, amendment or
waiver of the Loan Documents that would reduce the amount of or postpone any
fixed date for payment of any Obligation in which such participant has an
interest. Any party to which such a participation has been granted shall have
the benefits of Section 1.11 and Section 10.3 hereof. The Borrower authorizes
each Lender to disclose to any participant or prospective participant under
this Section any financial or other information pertaining to the Borrower or
any Subsidiary, provided such participant expressly agrees to be bound by the
provisions of Section 13.25 hereof.

 

Section
13.12       Assignments.
(a)  Each Lender shall have the right at
any time, with the prior consent of the Administrative Agent (and the L/C
Issuers, if other than the Administrative Agent) (except in the case of
assignments to an existing Lender or an Affiliate thereof, in which case no
consent by the Administrative Agent shall be needed) and, so long as no Event
of Default then exists, the Borrower (which consent of the Borrower shall not
be unreasonably withheld) to sell, assign, transfer or negotiate all or any
part of its rights and obligations under the Loan Documents (including, without
limitation, the indebtedness evidenced by the Notes

 

71

 

then held by such assigning Lender, together with an
equivalent percentage of its obligation to make Loans and participate in
Letters of Credit) to one or more commercial banks or other financial
institutions or investors, provided that,
unless otherwise agreed to by the Administrative Agent, such assignment shall
be of a fixed percentage (and not by its terms of varying percentage) of the
assigning Lender’s rights and obligations under the Loan Documents; provided, however, that in order to make any such assignment
(i) unless the assigning Lender is assigning all of its Revolving Credit
Commitments, outstanding Loans and interests in L/C Obligations, the assigning
Lender shall retain at least $5,000,000 in unused Revolving Credit Commitments,
outstanding Loans and interests in Letters of Credit, (ii) the assignee Lender
shall have Revolving Credit Commitments, outstanding Loans and interests in
Letters of Credit of at least $5,000,000, (iii) each such assignment shall be
evidenced by a written agreement (substantially in the form attached hereto as
Exhibit H or in such other form acceptable to the Administrative Agent)
executed by such assigning Lender, such assignee Lender or Lenders, the
Administrative Agent (and the L/C Issuers, if other than the Administrative
Agent) and, if required as provided above, the Borrower, which agreement shall
specify in each instance the portion of the Obligations which are to be
assigned to the assignee Lender and the portion of the Revolving Credit
Commitments of the assigning Lender to be assumed by the assignee Lender, and
(iv) the assigning Lender shall pay to the Administrative Agent a processing
fee of $3,500 and any out-of-pocket attorneys’ fees and expenses incurred by
the Administrative Agent in connection with any such assignment agreement. Any
such assignee shall become a Lender for all purposes hereunder to the extent of
the rights and obligations under the Loan Documents it assumes and the
assigning Lender shall be released from its obligations, and will have released
its rights, under the Loan Documents to the extent of such assignment. The
address for notices to such assignee Lender shall be as specified in the
assignment agreement executed by it. Promptly upon the effectiveness of any
such assignment agreement, the Borrower shall execute and deliver replacement
Notes to the assignee Lender and the assigning Lender in the respective amounts
of their Revolving Credit Commitments (or assigned principal amounts, as
applicable) after giving effect to the reduction occasioned by such assignment
(all such Notes to constitute “Notes” for all
purposes of the Loan Documents), and the assignee Lender shall thereafter
surrender to the Borrower its old Notes. The Borrower authorizes each Lender to
disclose to any purchaser or prospective purchaser of an interest in the Loans
and interest in Letters of Credit owed to it or its Revolving Credit
Commitments under this Section any financial or other information pertaining to
the Borrower or any Subsidiary.

 

(b)           Any Lender may at any time pledge or
grant a security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender, including any such pledge or
grant to a Federal Reserve Bank, and this Section shall not apply to any such
pledge or grant of a security interest; provided that
no such pledge or grant of a security interest shall release a Lender from any
of its obligations hereunder or substitute any such pledgee or secured party
for such Lender as a party hereto; provided further, however,
the right of any such pledgee or grantee (other than any Federal Reserve Bank)
to further transfer all or any portion of the rights pledged or granted to it,
whether by means of foreclosure or otherwise, shall be at all times subject to
the terms of this Agreement.

 

Section
13.13       Amendments. Any
provision of this Agreement or the other Loan Documents may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
(a) the Borrower, (b) the Required Lenders, and (c) if the rights or duties of
the

 

72

 

Administrative Agent or the L/C Issuer are affected
thereby, the Administrative Agent or such L/C Issuer, as applicable; provided that:

 

(i)            no amendment or waiver pursuant to
this Section 13.13 shall (A) increase any Revolving Credit Commitment of any
Lender without the consent of such Lender or (B) reduce the amount of or
postpone the date for any scheduled payment of any principal of or interest on
any Loan or of any Reimbursement Obligation or of any fee payable hereunder
without the consent of the Lender to which such payment is owing or which has
committed to make such Loan or Letter of Credit (or participate therein)
hereunder;

 

(ii)           no amendment or waiver pursuant to
this Section 13.13 shall, unless signed by each Lender, increase the aggregate
Revolving Credit Commitments of the Lenders (except as provided in Section
1.13), change the definitions of Revolving Credit Termination Date or Required
Lenders, change the provisions of this Section 13.13, release any material
guarantor, or affect the number of Lenders required to take any action
hereunder or under any other Loan Document; and

 

(iii)          no amendment to Section 12 hereof
shall be made without the consent of the Guarantor(s) affected thereby.

 

Section
13.14       Headings. Section
headings used in this Agreement are for reference only and shall not affect the
construction of this Agreement.

 

Section
13.15       Costs and Expenses;
Indemnification. (a) 
The Borrower agrees to pay all costs and expenses of the Administrative
Agent in connection with the preparation, negotiation, syndication, and
administration of the Loan Documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, in
connection with the preparation and execution of the Loan Documents, and any
amendment, waiver or consent related thereto, whether or not the transactions
contemplated herein are consummated. The Borrower further agrees to indemnify
the Administrative Agent, each Lender, and their respective directors,
officers, employees, agents, financial advisors, and consultants against all
losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or preparation
therefor, whether or not the indemnified Person is a party thereto, or any
settlement arrangement arising from or relating to any such litigation) which
any of them may pay or incur arising out of or relating to any Loan Document or
any of the transactions contemplated thereby or the direct or indirect
application or proposed application of the proceeds of any Loan or Letter of
Credit, other than those which arise from the gross negligence or willful
misconduct of the party claiming indemnification. The Borrower, upon demand by
the Administrative Agent or a Lender at any time, shall reimburse the
Administrative Agent or such Lender for any legal or other expenses incurred in
connection with investigating or defending against any of the foregoing
(including any settlement costs relating to the foregoing) except if the same
is directly due to the gross negligence or willful misconduct of the party to be
indemnified. The obligations of the Borrower under this Section shall survive
the termination of this Agreement.

 

73

 

(b)           The Borrower unconditionally agrees
to forever indemnify, defend and hold harmless, and covenants not to sue for
any claim for contribution against, the Administrative Agent and the Lenders
for any damages, costs, loss or expense, including without limitation,
response, remedial or removal costs, arising out of any of the following:  (i) any presence, release, threatened release
or disposal of any hazardous or toxic substance or petroleum by the Borrower or
any Subsidiary or otherwise occurring on or with respect to its Property
(whether owned or leased), (ii) the operation or violation of any environmental
law, whether federal, state, or local, and any regulations promulgated
thereunder, by the Borrower or any Subsidiary or otherwise occurring on or with
respect to its Property (whether owned or leased), (iii) any claim for personal
injury or property damage in connection with the Borrower or any Subsidiary or
otherwise occurring on or with respect to its Property (whether owned or
leased), and (iv) the inaccuracy or breach of any environmental representation,
warranty or covenant by the Borrower or any Subsidiary made herein or in any
other Loan Document evidencing or securing any Obligations or setting forth
terms and conditions applicable thereto or otherwise relating thereto, except
for damages arising from the willful misconduct or gross negligence of the
party claiming indemnification. This indemnification shall survive the payment
and satisfaction of all Obligations and the termination of this Agreement, and
shall remain in force beyond the expiration of any applicable statute of
limitations and payment or satisfaction in full of any single claim under this
indemnification. This indemnification shall be binding upon the successors and
assigns of the Borrower and shall inure to the benefit of Administrative Agent
and the Lenders directors, officers, employees, agents, and collateral
trustees, and their successors and assigns.

 

Section
13.16       Set-off. In
addition to any rights now or hereafter granted under applicable law and not by
way of limitation of any such rights, upon the occurrence of any Event of
Default, each Lender and each subsequent holder of any Obligation is hereby
authorized by the Borrower and each Guarantor at any time or from time to time,
without notice to the Borrower or such Guarantor or to any other Person, any
such notice being hereby expressly waived, to set-off and to appropriate and to
apply any and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or
unmatured, but not including trust accounts, and in whatever currency
denominated) and any other indebtedness at any time held or owing by that
Lender or that subsequent holder to or for the credit or the account of the
Borrower or such Guarantor, whether or not matured, against and on account of
the Obligations of the Borrower or such Guarantor to that Lender or that
subsequent holder under the Loan Documents, including, but not limited to, all
claims of any nature or description arising out of or connected with the Loan
Documents, irrespective of whether or not (a) that Lender or that subsequent
holder shall have made any demand hereunder or (b) the principal of or the
interest on the Loans or Notes and other amounts due hereunder shall have
become due and payable pursuant to Section 9 and although said obligations and
liabilities, or any of them, may be contingent or unmatured.

 

Section
13.17       Entire Agreement.
The Loan Documents constitute the entire understanding of the parties thereto
with respect to the subject matter thereof and any prior agreements, whether
written or oral, with respect thereto are superseded hereby.

 

74

 

Section
13.18       Governing Law.
This Agreement and the other Loan Documents (except as otherwise specified
therein), and the rights and duties of the parties hereto, shall be construed
and determined in accordance with the internal laws of the State of Illinois.

 

Section
13.19       Severability of Provisions.
Any provision of any Loan Document which is unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. All rights, remedies and powers provided in this Agreement and
the other Loan Documents may be exercised only to the extent that the exercise
thereof does not violate any applicable mandatory provisions of law, and all
the provisions of this Agreement and other Loan Documents are intended to be
subject to all applicable mandatory provisions of law which may be controlling
and to be limited to the extent necessary so that they will not render this
Agreement or the other Loan Documents invalid or unenforceable.

 

Section
13.20       Excess Interest.
Notwithstanding any provision to the contrary contained herein or in any other
Loan Document, no such provision shall require the payment or permit the
collection of any amount of interest in excess of the maximum amount of
interest permitted by applicable law to be charged for the use or detention, or
the forbearance in the collection, of all or any portion of the Loans or other
obligations outstanding under this Agreement or any other Loan Document (“Excess Interest”). If any Excess Interest is provided for,
or is adjudicated to be provided for, herein or in any other Loan Document,
then in such event (a) the provisions of this Section shall govern and control,
(b) neither the Borrower nor any guarantor or endorser shall be obligated to
pay any Excess Interest, (c) any Excess Interest that the Administrative Agent
or any Lender may have received hereunder shall, at the option of the
Administrative Agent, be (i) applied as a credit against the then outstanding
principal amount of Obligations hereunder and accrued and unpaid interest
thereon (not to exceed the maximum amount permitted by applicable law), (ii)
refunded to the Borrower, or (iii) any combination of the foregoing, (d) the
interest rate payable hereunder or under any other Loan Document shall be
automatically subject to reduction to the maximum lawful contract rate allowed
under applicable usury laws (the “Maximum Rate”),
and this Agreement and the other Loan Documents shall be deemed to have been,
and shall be, reformed and modified to reflect such reduction in the relevant
interest rate, and (e) neither the Borrower nor any guarantor or endorser shall
have any action against the Administrative Agent or any Lender for any damages
whatsoever arising out of the payment or collection of any Excess Interest. Notwithstanding
the foregoing, if for any period of time interest on any of Borrower’s
Obligations is calculated at the Maximum Rate rather than the applicable rate
under this Agreement, and thereafter such applicable rate becomes less than the
Maximum Rate, the rate of interest payable on the Borrower’s Obligations shall
remain at the Maximum Rate until the Lenders have received the amount of
interest which such Lenders would have received during such period on the
Borrower’s Obligations had the rate of interest not been limited to the Maximum
Rate during such period.

 

Section
13.21       Construction.
The provisions of this Agreement relating to Subsidiaries shall only apply
during such times as the Borrower has one or more Subsidiaries.

 

Section
13.22       Lender’s Obligations Several.
The obligations of the Lenders hereunder are several and not joint. Nothing
contained in this Agreement and no action taken by the

 

75

 

Lenders pursuant hereto shall be deemed to constitute
the Lenders a partnership, association, joint venture or other entity.

 

Section
13.23       Submission to Jurisdiction;
Waiver of Jury Trial. The Borrower and the Guarantors hereby
submit to the nonexclusive jurisdiction of the United States District Court for
the Northern District of Illinois and of any Illinois State court sitting in
the City of Chicago for purposes of all legal proceedings arising out of or
relating to this Agreement, the other Loan Documents or the transactions
contemplated hereby or thereby. The Borrower and the Guarantors irrevocably
waive, to the fullest extent permitted by law, any objection which they may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum. THE
BORROWER, THE GUARANTORS, THE ADMINISTRATIVE AGENT, AND THE LENDERS HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY.

 

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

 

Section
13.25       Confidentiality.
Each of the Administrative Agent, the Lenders, the L/C Issuer and any
participant under Section 13.11 hereof agrees to maintain the confidentiality of
the Information (as defined below), except that Information may be disclosed
(a) to its and its Affiliates’ directors, officers, employees and agents,
including accountants, legal counsel and other advisors to the extent any such
Person has a need to know such Information (it being understood that the
Persons to whom such disclosure is made will first be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, such as
the National Association of Insurance Commissioners), (c) to the extent
required by applicable laws or regulations or by any subpoena or similar legal
process, (d) to any other party hereto, (e) in connection with the exercise of
any remedies hereunder or under any other Loan Document or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to (A)
any assignee of or participant in, or any prospective assignee of or
participant in, any of its rights or obligations under this Agreement or (B)
any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to the Borrower or any of its Subsidiaries and
its obligations, (g) with the prior written consent of the Borrower, (h) to the
extent such Information (A) becomes publicly available other than as a result
of a breach of this Section or (B) becomes available to the Administrative
Agent, any Lender or the L/C Issuer on a non-confidential basis from a source
other than the Borrower or any of its Subsidiaries or any of their directors,
officers, employees or agents, including accountants, legal counsel and other
advisors, (i) to rating agencies if requested or required by such agencies in
connection with a rating relating to the Loans or Revolving Credit Commitments
herehunder, of (j) to entities which compile and publish information about the
syndicated loan market, provided

 

76

 

that only basic information about the pricing and
structure of the transaction evidenced hereby may be disclosed pursuant to this
subsection (j), or (k) to holders of any Subordinated Debt.

 

For purposes of this Section, “Information”
means all information received from the Borrower or any of its Subsidiaries
relating to the Borrower or any of its Subsidiaries or any of their respective
businesses, other than any such information that is available to the
Administrative Agent, any Lender or the L/C Issuer on a non-confidential basis
prior to disclosure by the Borrower or any of its Subsidiaries.

 

[SIGNATURE PAGES TO FOLLOW]

 

77

 

This Credit Agreement is entered into between us for
the uses and purposes hereinabove set forth as of the date first above written.

 

 

	
   

  	
  “BORROWER”

  
	
   

  	
   

  
	
   

  	
  KIMBALL HILL, INC., an
  Illinois corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
  Name:

  	
  David K. Hill

  
	
   

  	
  Title:

  	
  Chairman, Chief Executive Officer and Director

  
					

 

78

 

	
   

  	
  “GUARANTORS”

  
	
   

  	
   

  
	
   

  	
  CACTUS HILLS, LLC

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN INVESTMENTS,

  L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN OPERATIONS,

  L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES DALLAS INVESTMENTS,

  L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES DALLAS OPERATIONS,

  L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES HOUSTON INVESTMENTS,

  L.L.C.

  
	
   

  	
  KIMBALL HILL HOMES HOUSTON OPERATIONS,

  L.L.C.

  
	
   

  	
  KIMBALL HILL TEXAS INVESTMENT COMPANY,

  L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
  Name:

  	
  David K. Hill

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EAST LAKE PARK, INC.

  
	
   

  	
  KIMBALL HILL FAR EAST DETROIT,
  LLC

  
	
   

  	
  KIMBALL HILL STATEWAY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President and Treasurer

  
					

 

79

 

	
   

  	
  KH FINANCIAL HOLDING COMPANY

  
	
   

  	
  KHH TEXAS TRADING COMPANY L.P.

  
	
   

  	
  KIMBALL HILL HOMES AUSTIN, L.P.

  
	
   

  	
  KIMBALL HILL HOMES CALIFORNIA,
  INC.

  
	
   

  	
  KIMBALL HILL HOMES DALLAS, L.P.

  
	
   

  	
  KIMBALL HILL HOMES FLORIDA,
  INC.

  
	
   

  	
  KIMBALL HILL HOMES HOUSTON,
  L.P.

  
	
   

  	
  KIMBALL HILL HOMES ILLINOIS,
  LLC

  
	
   

  	
  KIMBALL HILL HOMES NEVADA, INC.

  
	
   

  	
  KIMBALL HILL HOMES OHIO, INC.

  
	
   

  	
  KIMBALL HILL HOMES OREGON, INC.

  
	
   

  	
  KIMBALL HILL HOMES REALTY
  FLORIDA, INC.

  
	
   

  	
  KIMBALL HILL HOMES SAN ANTONIO,
  L.P.

  
	
   

  	
  KIMBALL HILL HOMES TEXAS, INC.

  
	
   

  	
  KIMBALL HILL HOMES WASHINGTON,
  INC.

  
	
   

  	
  KIMBALL HILL HOMES WISCONSIN,
  INC.

  
	
   

  	
  NATIONAL CREDIT AND GUARANTY

  CORPORATION

  
	
   

  	
  RIVER OAKS REALTY, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  18TH AND PEORIA, LLC

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Suburban
  Centers, L.L.C., its manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kimball Hill, Inc., its
  manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
  Hal H. Barber

  
	
   

  	
  Title:

  	
  Senior Vice President, Finance

  
											

 

80

 

	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL SUBURBAN CENTERS,
  L.L.C.

  
	
   

  	
  KIMBALL HILL URBAN CENTERS,
  L.L.C.

  
	
   

  	
  THE GLENS AT WESTLAKE, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill, Inc., its
  manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Senior Vice President,
  Finance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL URBAN CENTERS CHICAGO

  ONE, L.L.C.

  
	
   

  	
  KIMBALL HILL URBAN CENTERS CHICAGO

  TWO, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Urban
  Centers, L.L.C., its manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  Kimball Hill, Inc., its
  manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
   

  	
  Title: 

  	
  Senior Vice President,
  Finance

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BRIDLE RIDGE LIMITED
  PARTNERSHIP

  
	
   

  	
  PARKVIEW LIMITED PARTNERSHIP

  
	
   

  	
  RIVER POINTE LIMITED
  PARTNERSHIP

  
	
   

  	
  SONATA AT MORADA RANCH LIMITED

  PARTNERSHIP

  
	
   

  	
  WINDMILL PARK LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes
  California, Inc., its general

  partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  
													

 

81

 

	
   

  	
  KIMBALL HILL BELLEVUE RANCH,
  LLC

  
	
   

  	
  KIMBALL HILL REFLECTIONS, LLC

  
	
   

  	
  KIMBALL HILL SHELDON LAKES, LLC

  
	
   

  	
  KIMBALL HILL VILLAGES, LLC

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes
  California, Inc., its manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIMBALL HILL CHADWICK FARMS LIMITED

  PARTNERSHIP

  
	
   

  	
  KIMBALL WEST FRISCO LIMITED

  PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes
  Dallas, L.P., its general

  partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  KIMBALL HILL CALUSA PALMS LIMITED

  PARTNERSHIP

  
	
   

  	
  KIMBALL HILL MARBELLA ESTATES LIMITED

  PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes
  Florida, Inc., its general

  partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  
									

 

 

82

 

	
   

  	
  INDIAN TRAILS LIMITED
  PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes
  Houston, L.P., its general

  partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIMBALL HILL TX PROPERTIES, LLC

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes
  Houston, L.P., its manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ASTOR PLACE LIMITED PARTNERSHIP

  
	
   

  	
  BOLINGBROOK LIMITED PARTNERSHIP

  
	
   

  	
  EDGEWATER LIMITED PARTNERSHIP

  
	
   

  	
  HUNTINGTON CHASE LIMITED
  PARTNERSHIP

  
	
   

  	
  LEGEND LAKES LIMITED
  PARTNERSHIP

  
	
   

  	
  THE GLEN TOWNHOMES LIMITED

  PARTNERSHIP

  
	
   

  	
  THE HAMILTON PLACE PARTNERSHIP

  
	
   

  	
  WATERFORD LIMITED PARTNERSHIP

  
	
   

  	
  WHISPERING MEADOW LIMITED
  PARTNERSHIP

  
	
   

  	
  WHITE OAK LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes
  Illinois, LLC, its general

  partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  
								

 

83

 

	
   

  	
  KH INGHAM PARK SOUTH, LLC

  
	
   

  	
  KH SRAV II, LLC

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes
  Illinois, LLC, its manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIMBALL HILL CENTENNIAL HEIGHTS

  LIMITED PARTNERSHIP

  
	
   

  	
  KIMBALL HILL HEATHERS/CAPAROLA

  LIMITED PARTNERSHIP

  
	
   

  	
  KIMBALL MOUNTAIN FIRST LIMITED

  PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes
  Nevada, Inc., its general

  partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIMBALL COVE LIMITED
  PARTNERSHIP

  
	
   

  	
  KIMBALL HILL LYNDEN PARK II LIMITED

  PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Kimball Hill Homes
  Texas, Inc., its general partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Hal H. Barber

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  
							

 

84

 

	
   

  	
  RIVER OAKS HOMES, LLP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Texas, Inc., its manager

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
   Hal H. Barber

  
	
   

  	
  Title:

  	
   Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GABLES AT HIDDENBROOK LIMITED

  	
   

  
	
   

  	
  PARTNERSHIP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Washington, Inc., its general

  	
   

  
	
   

  	
  partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
   Hal H. Barber

  
	
   

  	
  Title:

  	
   Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARK SHORE, L.L.C.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Wisconsin, Inc., its manager

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hal H. Barber

  	
   

  
	
   

  	
  Name:

  	
   Hal H. Barber

  
	
   

  	
  Title:

  	
   Vice President

  
									

 

85

 

“LENDERS”

 

 

	
   

  	
  HARRIS N.A., in its individual capacity as a

  Lender, as L/C Issuer, and as Administrative Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas A. Batterham

  	
   

  
	
   

  	
  Name:

  	
  Thomas A. Batterham

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  111 W. Monroe Street, 10th Floor West

  	
   

  
	
   

  	
  Chicago, IL 60603

  
	
   

  	
  Attention:

  	
  Karen Duffy

  
	
   

  	
  Telecopy:

  	
  (312) 461-2968

  
	
   

  	
  Telephone:

  	
  (312) 765-1140

  
							

 

86

 

	
   

  	
  BANK OF AMERICA, N.A., in its individual
  capacity as a Lender, and as Syndication Agent

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia A. Provenzano

  	
   

  
	
   

  	
  Name:

  	
  Patricia A. Provenzano

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  One Lincoln Centre, Suite 300

  	
   

  
	
   

  	
  18W140 Butterfield Rd.

  	
   

  
	
   

  	
  Oakbrook Terrace, IL 60181

  
	
   

  	
  Attention:

  	
  Patricia A. Provenzano

  
	
   

  	
  Telecopy:

  	
  (630) 627-1948

  
	
   

  	
  Telephone:

  	
  (630) 620-3954

  
						

 

87

 

	
   

  	
   

  	
   

  
	
   

  	
  KEYBANK NATIONAL 

  ASSOCIATION, as Co-Documentation Agent

  and a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lynn Drummond

  	
   

  
	
   

  	
  Name:

  	
  Lynn Drummond

  
	
   

  	
  Title:

  	
  Closing Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  8117 Preston Road

  	
   

  
	
   

  	
  Preston Commons West Tower #440

  	
   

  
	
   

  	
  Dallas, TX 75225

  
	
   

  	
  Attention:

  	
  Kevin Delozier

  
	
   

  	
  Telecopy:

  	
  (214) 414-2621

  
	
   

  	
  Telephone:

  	
  (214) 414-2585

  
							

 

88

 

	
   

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION,
  as Co-Documentation Agent

  	
   

  
	
   

  	
  and a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William A. Cropper Jr.

  	
   

  
	
   

  	
  Name:

  	
  William A. Cropper Jr.

  
	
   

  	
  Title:

  	
  Assistant Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  9601 Katy Freeway, Suite 315

  	
   

  
	
   

  	
  Houston, TX 77024

  
	
   

  	
  Attention:

  	
  Brandi Hermis

  
	
   

  	
  Telecopy:

  	
  (713) 932-8110

  
	
   

  	
  Telephone:

  	
  (713) 576-1060

  
							

 

89

 

	
   

  	
  CHARTER ONE BANK, N.A., as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jason K. Welch

  	
   

  
	
   

  	
  Name:

  	
  Jason K. Welch

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  One Grant Square - ILG402

  	
   

  
	
   

  	
  Hinsdale, IL 60521

  
	
   

  	
  Attention:

  	
  Jason Welch

  
	
   

  	
  Telecopy:

  	
  (630) 850-8340

  
	
   

  	
  Telephone:

  	
  (630) 794-8721

  
							

 

90

 

	
   

  	
  FIRST BANK, as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas R. Maxwell

  	
   

  
	
   

  	
  Name:

  	
  Thomas R. Maxwell

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  101 E. St. Charles Rd.

  	
   

  
	
   

  	
  Villa Park, IL 60181

  
	
   

  	
  Attention:

  	
  Tom Maxwell

  
	
   

  	
  Telecopy:

  	
  (630) 993-3945

  
	
   

  	
  Telephone:

  	
  (630) 993-3942

  
							

 

91

 

	
   

  	
  LaSALLE BANK, NATIONAL ASSOCIATION, as a
  Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nathan Weyer

  	
   

  
	
   

  	
  Name:

  	
  Nathan Weyer

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  5950 Sherry Lane, Suite 540

  	
   

  
	
   

  	
  Dallas, TX 75225

  
	
   

  	
  Attention:

  	
  Nathan Weyer

  
	
   

  	
  Telecopy:

  	
  (214) 360-5001

  
	
   

  	
  Telephone:

  	
  (214) 360-5004

  
							

 

92

 

	
   

  	
  FIFTH THIRD BANK, as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael J. Rodriguez

  	
   

  
	
   

  	
  Name:

  	
  Michael J. Rodriguez

  
	
   

  	
  Title:

  	
  Relationship Manager, AC

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  1701 Golf Road

  	
   

  
	
   

  	
  Tower 1, GRLM7E

  	
   

  
	
   

  	
  Rolling Meadows, IL 60008

  
	
   

  	
  Attention:

  	
  Michael Rodriguez

  
	
   

  	
  Telecopy:

  	
  (847) 354-7150

  
	
   

  	
  Telephone:

  	
  (847) 354-7096

  
							

 

93

 

	
   

  	
   

  	
   

  
	
   

  	
  ASSOCIATED BANK NATIONAL ASSOCIATION, as a
  Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Robert J. Burda

  	
   

  
	
   

  	
  Name:

  	
    Robert J. Burda

  
	
   

  	
  Title:

  	
    Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  500 Lake Cook Road, Suite 210

  	
   

  
	
   

  	
  Deerfield, IL 60015

  
	
   

  	
  Attention:

  	
  Rob Burda

  
	
   

  	
  Telecopy:

  	
  (847) 236-0996

  
	
   

  	
  Telephone:

  	
  (847) 236-4462

  
							

 

94

 

	
   

  	
  NATIONAL CITY BANK, as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Gina Fridberg

  	
   

  
	
   

  	
  Name:

  	
   Gina Fridberg

  
	
   

  	
  Title:

  	
   Assistant Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  1 North Franklin, Suite 2150

  	
   

  
	
   

  	
  Chicago, IL 60606

  
	
   

  	
  Attention:

  	
  Gina M. Fridberg

  
	
   

  	
  Telecopy:

  	
  (312) 384-4623

  
	
   

  	
  Telephone:

  	
  (312) 338-5204CICI

  
							

 

95

 

	
   

  	
  CITIBANK TEXAS, N.A., as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glen R. Bell

  	
   

  
	
   

  	
  Name:

  	
   Glen R. Bell

  
	
   

  	
  Title:

  	
   Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  2000 West Sam Houston Parkway So. #600

  	
   

  
	
   

  	
  Houston, TX 77042

  
	
   

  	
  Attention:

  	
  Glen R. Bell

  
	
   

  	
  Telecopy:

  	
  (713) 954-2053

  
	
   

  	
  Telephone:

  	
  (713) 954-9562 x103FRAN

  
							

 

96

 

	
   

  	
  FRANKLIN BANK, SSB, as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sherry K. Day

  	
   

  
	
   

  	
  Name:

  	
  Sherry K. Day

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  9800 Richmond Ave, #680

  	
   

  
	
   

  	
  Houston, TX 77042

  
	
   

  	
  Attention:

  	
  Sherry K. Day

  
	
   

  	
  Telecopy:

  	
  (713) 339-8949

  
	
   

  	
  Telephone:

  	
  (713) 339-8943

  
							

 

97

 

	
   

  	
  JPMORGAN CHASE BANK, N.A., as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas J. Reynolds

  	
   

  
	
   

  	
  Name:

  	
   Thomas J. Reynolds

  
	
   

  	
  Title:

  	
   Assistant Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  131 S. Dearborn St., 5th Floor

  	
   

  
	
   

  	
  Mail code IL1-0458

  	
   

  
	
   

  	
  Chicago, IL 60603

  
	
   

  	
  Attention:

  	
  Tom Reynolds

  
	
   

  	
  Telecopy:

  	
  (312) 325-5172

  
	
   

  	
  Telephone:

  	
  (312) 325-5039

  
							

 

98

 

	
   

  	
  OAK BROOK BANK, as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher Hutter

  	
   

  
	
   

  	
  Name:

  	
   Christopher Hutter

  
	
   

  	
  Title:

  	
   Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  1400 16th Street

  	
   

  
	
   

  	
  Oak Brook, IL 60523

  
	
   

  	
  Attention:

  	
  Christopher Hutter

  
	
   

  	
  Telecopy:

  	
  (630) 571-0256

  
	
   

  	
  Telephone:

  	
  (630) 571-1050 x338

  
							

 

99

 

	
   

  	
  BANK OF THE WEST, a California banking
  corporation, as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paula Toponce

  	
   

  
	
   

  	
   

  	
  Paula Toponce,

  
	
   

  	
   

  	
  Vice President & Documentation Supervisor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stacey Michrowski

  	
   

  
	
   

  	
   

  	
   Stacey Michrowski,

  
	
   

  	
   

  	
   Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  4041 MacArthur Blvd., Suite 100

  	
   

  
	
   

  	
  Newport Beach, CA 92660

  
	
   

  	
  Attention:

  	
  Dana O. White

  
	
   

  	
  Telecopy:

  	
  (949) 833-3275

  
	
   

  	
  Telephone:

  	
  (949) 622-6024

  
								

 

100

 

	
   

  	
  COMERICA BANK, as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Charles Weddell

  	
   

  
	
   

  	
  Name:

  	
   Charles Weddell

  
	
   

  	
  Title:

  	
   Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  500 Woodward Ave., MC 3256

  	
   

  
	
   

  	
  Detroit, MI 48226

  
	
   

  	
  Attention:

  	
  Charles Weddell

  
	
   

  	
  Telecopy:

  	
  (313) 222-9295

  
	
   

  	
  Telephone:

  	
  (313) 222-3323

  
							

 

101

 

	
   

  	
  COMPASS BANK, as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard H. Trembath

  	
   

  
	
   

  	
   

  	
  Richard H. Trembath,

  
	
   

  	
   

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  10 S. Riverside Plaza, Suite 18

  	
   

  
	
   

  	
  Chicago, IL 60606

  
	
   

  	
  Attention:

  	
  Richard H. Trembath

  
	
   

  	
  Telecopy:

  	
  (312) 474-6180

  
	
   

  	
  Telephone:

  	
  (312) 474-6171

  
							

 

102

 

	
   

  	
  HARRIS NESBITT, as Co-Lead Arranger and
  Joint Book Runner

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sumit Sengusta

  	
   

  
	
   

  	
  Name:

  	
  Sumit Sengusta

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  111 W. Monroe Street, 11th Floor West

  	
   

  
	
   

  	
  Chicago, IL 60603

  
	
   

  	
  Attention:

  	
  Karen Duffy

  
	
   

  	
  Telecopy:

  	
  (312) 461-2968

  
	
   

  	
  Telephone:

  	
  (312) 765-1140

  
							

 

103

 

	
   

  	
  BANC OF AMERICA SECURITIES, LLC, as 

  Co-Lead Arranger and Joint Book Runner

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Katherine Grapp

  	
   

  
	
   

  	
  Name:

  	
  Katherine Grapp

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Syndicated Capital Markets - REBG

  	
   

  
	
   

  	
  214 North Tryon Street, 22nd Floor

  	
   

  
	
   

  	
  NC1-027-22-01

  	
   

  
	
   

  	
  Charlotte, NC 28255

  
	
   

  	
  Attention:

  	
  Lawrence R. Grames, III

  
	
   

  	
  Telecopy:

  	
  (704) 386-0255

  
	
   

  	
  Telephone:

  	
  (704) 387-2707

  
							

 

104

 

	
  Exhibit A

  	
   

  	
  Form of Letter of Credit Request

  
	
  Exhibit B

  	
   

  	
  Form of Notice of Borrowing

  
	
  Exhibit C

  	
   

  	
  Form of Notice of Continuation/Conversion

  
	
  Exhibit D-1

  	
   

  	
  Form of Revolving Note

  
	
  Exhibit D-2

  	
   

  	
  Form of Swing Note

  
	
  Exhibit E

  	
   

  	
  Form of Borrowing Base Certificate

  
	
  Exhibit F

  	
   

  	
  Form of Compliance Certificate

  
	
  Exhibit G

  	
   

  	
  Form of Additional Guarantor Supplement

  
	
  Exhibit H

  	
   

  	
  Form of Assignment and Acceptance

  
	
  Exhibit I

  	
   

  	
  Form of Commitment and Acceptance

  
	
   

  	
   

  	
   

  
	
  Schedule 1

  	
   

  	
  Revolving Credit Commitments

  
	
  Schedule 1.2

  	
   

  	
  Pre-existing Letters of Credit

  
	
  Schedule 6.2

  	
   

  	
  Subsidiaries

  

 

105

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}]]