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Exhibit 10.16  

    Execution Copy  

 CREDIT AGREEMENT  

 Dated as of September 21, 2001  

 BEAZER HOMES USA, INC.,  

 The Guarantors Parties Thereto,  

 The Banks Parties Thereto,  

 BANK ONE, NA  

 As Agent,  

 and  

 COMERICA BANK,  

 GUARANTY BANK,  

 SUNTRUST BANK  

 and  

 WACHOVIA BANK, N.A.,  

 as Documentation Agents  

 and  

 AMSOUTH BANK,  

 and  

 PNC BANK, NA,  

 as Co-Agents  

 BANC ONE CAPITAL MARKETS, INC.,  

 Lead Arranger and Sole Bookrunner  

 $250,000,000 REVOLVING CREDIT FACILITY  

  

    CREDIT
AGREEMENT dated as of September 21, 2001 among BEAZER HOMES USA, INC., a Delaware corporation (the "Borrower"), BEAZER MORTGAGE CORPORATION, a Delaware
corporation, BEAZER HOMES CORP., a Tennessee corporation, BEAZER HOMES SALES ARIZONA INC., a Delaware corporation, BEAZER REALTY CORP., a Georgia corporation, BEAZER/SQUIRES
REALTY, INC., a North Carolina corporation, BEAZER HOMES HOLDINGS CORP., a Delaware corporation, BEAZER HOMES TEXAS HOLDINGS, INC., a Delaware corporation, BEAZER HOMES TEXAS, L.P., a
Delaware limited partnership, BEAZER REALTY INC., a New Jersey corporation, HOMEBUILDERS TITLE SERVICES, INC., a Delaware corporation, TEXAS LONE STAR TITLE, L.P., a Texas limited
partnership, HOMEBUILDERS TITLE SERVICES OF VIRGINIA, INC., a Virginia corporation, UNIVERSAL SOLUTIONS INSURANCE AGENCY, INC., a Delaware corporation, APRIL CORPORATION, a Colorado
corporation, and BEAZER SPE, LLC, a Georgia limited liability company (collectively, the "Original Guarantors"), the Banks that are signatories hereto and BANK ONE, NA as Agent (the "Agent") for the
Banks and as an Issuing Bank (as hereinafter defined). 

    The
parties hereto hereby agree as follows: 

 
 

ARTICLE I    
    
    DEFINITIONS AND ACCOUNTING TERMS    
  

    Section 1.01  Defined Terms.  As used in this Agreement, the following
terms have the following meanings (terms defined in the singular shall have the same meaning when used in the plural and vice versa): 

    "ABR
Loan" means any Loan when and to the extent that the interest rate therefor is determined by reference to the Alternate Base Rate. 

    "Acquisition"
means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries
(i) acquires any going concern or all or substantially all of the assets of any firm, corporation or division thereof, whether through purchase of assets, merger or otherwise or
(ii) directly or indirectly acquires (in one transaction or as
the most recent transaction in a series of transactions) at least a majority (in number of votes or by percentage of voting power) of the Common Equity of another Person. 

    "Adjusted
Land Value" means, as of any date, (i) the book value of all Land, less (ii) the sum of (a) the book value of Finished Lots that are subject to  bona fide contracts of sale with Persons
that are not Affiliates and (b) the lesser of (1) the product of (x) the number of Housing
Units with respect to which the Borrower and its Subsidiaries (including any company or other entity acquired in an Acquisition by the Borrower or a Subsidiary as of such date) entered into  bona fide contracts of sale with Persons that are not Affiliates during the six-month period ending on such date and (y) the average
book value of all Finished Lots as of such date and (2) forty percent (40%) of Consolidated Tangible Net Worth as of such date. 

    "Affected
Bank" has the meaning assigned to such term in Section 2.20(a). 

    "Affiliate"
means any Person (1) which directly or indirectly controls, or is controlled by, or is under common control with, the Borrower or a Subsidiary; (2) which
directly or indirectly beneficially owns or holds five percent (5%) or more of any class of voting stock of the Borrower or any Subsidiary; or (3) five percent (5%) or more of the voting stock
of which is directly or indirectly beneficially owned or held by the Borrower or a Subsidiary. The term "control" means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 

    "Agent"
means Bank One. 

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    "Agent's Fee Letter" means that certain fee letter dated July 27, 2001 from the Agent and BOCM to the Borrower and accepted by the Borrower on July 31, 2001. 

    "Aggregate
Commitments" means the aggregate Commitments of all the Banks, as reduced or increased from time to time pursuant to the terms of this Agreement. 

    "Agreement"
means this Credit Agreement, as amended, supplemented, or modified from time to time. 

    "Alternate
Base Rate" means a fluctuating rate per annum equal to the higher of (i) the Prime Rate, changing when and as said rate changes (without notice), or (ii) the
sum of 1/2 of 1% plus the Federal Funds Rate then in effect. 

    "Applicable
ABR Margin" means, as at any date of determination, the margin indicated in Section 2.05 as then applicable to ABR Loans and Swing Line Loans (under
Section 2.07(a)(i)). 

    "Applicable
Commitment Rate" means, as at any date of determination, the rate per annum indicated in Section 2.05 as then applicable in the determination of the commitment fee
(under Section 2.09). The Applicable Commitment Rate in the column in the table in Section 2.05 with the heading "Usage>=50%" shall apply in respect of any calendar quarter (or, in any
case in which the commitment fee under Section 2.09 is payable with respect to a portion of a calendar quarter, then for that portion of such calendar quarter) during which the average daily
unused portion of the Aggregate Commitments equals or exceeds fifty percent (50%) of the Aggregate Commitments, and the Applicable Commitment Rate in the column table in Section 2.05 with the
heading "Usage<50%" shall apply in respect of any calendar quarter (or, in any case in which the commitment fee under Section 2.09 is payable with respect to a portion of a calendar
quarter, then for that portion of such calendar quarter) during which the average daily unused portion of the Aggregate Commitments is less than fifty percent (50%) of the Aggregate Commitments. 

    "Applicable
Letter of Credit Rate" means, as at any date of determination, a rate per annum equal to the Applicable LIBOR Margin. 

    "Applicable
LIBOR Margin" means, as at any date of determination, the margin indicated in Section 2.05 as then applicable to LIBOR Loans (under Section 2.07(a)(ii)). 

    "Applicable
Margin(s)" means the Applicable ABR Margin and/or the Applicable LIBOR Margin, as the case may be. 

    "Bank
One" means Bank One, NA, having its principal office in Chicago, Illinois. 

    "Banks"
means the Banks that are signatories to this Agreement, and their respective successors and assigns. 

    "BOCM"
means Banc One Capital Markets, Inc. 

    "Borrowing"
means a borrowing consisting of Loans of the same type made, renewed or converted on the same day. 

    "Borrowing
Base" means, with respect to an Inventory Valuation Date for which it is to be determined, an amount equal to the sum of the following unencumbered assets of the Borrower
and the Guarantors: (i) the lesser of (a) one hundred percent (100%) of the Unrestricted Cash and (b) $10,000,000.00, (ii) one-hundred percent (100%) of the
Receivables, (iii) ninety percent (90%) of the book value of Housing Units Under Contract, (iv) seventy-five percent (75%) of the book value of Speculative Housing Units,
(v) seventy percent (70%) of the book value of Finished Lots (subject to the limitation set forth below), (vi) fifty percent (50%) of the book value of Lots under Development (subject to
the limitation set forth below), and (vii) the lesser of (a) twenty-five percent (25%) of the book value of Entitled Land and (b) $30,000,000.00 (subject to the
limitation set forth below). 

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Notwithstanding the foregoing, the Borrowing Base shall not include any amounts under clauses (v), (vi) and (vii) above to the extent that the sum of such amounts exceeds forty percent
(40%) of the total Borrowing Base. The term "unencumbered" means that such asset is not subject to any Lien (except for Liens permitted under Sections 6.01(1), (2) or (6)). 

    "Borrowing
Base Certificate" means a written certificate in a form acceptable to the Majority Banks setting forth the amount of the Borrowing Base with respect to the fiscal quarter,
or (if applicable under Section 2.01(d) or (e)) calendar month, most recently completed, certified as true and correct by the Chief Financial Officer of the Borrower. 

    "Business
Day" means (i) with respect to any Borrowing, payment or rate selection of LIBOR Loans, a day (other than a Saturday or Sunday) on which banks generally are open in
Chicago and New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market and
(ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago for the conduct of substantially all of their commercial lending activities. 

    "Capital
Lease" means all leases which have been or should be capitalized on the books of the lessee in accordance with GAAP. 

    "Change
of Control" means any of the following: (i) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Borrower or (except for an
Internal Reorganization) of a Significant Guarantor or Significant Subsidiary, as an entirety or substantially as an entirety to any Person or "group" (within the meaning of Section 13(d)(3) of
the Exchange Act) in one or a series of transactions; (ii) the acquisition of fifty percent (50%) or more of the aggregate voting power of all classes of Common Equity of the Borrower or
(except for an Internal Reorganization) of a Significant
Guarantor or Significant Subsidiary in one transaction or a series of related transactions; (iii) the liquidation or dissolution of the Borrower or (except for an Internal Reorganization) of a
Significant Guarantor or Significant Subsidiary; (iv) any transaction or a series of related transactions (as a result of a tender offer, merger, consolidation or otherwise but excluding an
Internal Reorganization) that results in, or that is in connection with, (a) any Person, including, a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) acquiring
"beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the aggregate voting power of all classes of
Common Equity of the Borrower, a Significant Guarantor or a Significant Subsidiary, or of any Person that possesses "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of fifty percent (50%) or more of the aggregate voting power of all classes of Common Equity of the Borrower, a Significant Guarantor or a Significant
Subsidiary, or (b) less than fifty percent (50%) (measured by the aggregate voting power of all classes) of the Common Equity of the Borrower being registered under Section 12(b) or
12(g) of the Exchange Act; (v) a majority of the Board of Directors of the Borrower, a Significant Guarantor or a Significant Subsidiary, not being comprised of persons who (a) were
members of the Board of Directors of such Borrower, Significant Guarantor or Significant Subsidiary, as of the date of this Agreement ("Original Directors"), or (b) were nominated for election
or elected to the Board of Directors of such Borrower, Significant Guarantor, or Significant Subsidiary, with the affirmative vote of at least a majority of the directors who themselves were Original
Directors or who were similarly nominated for election or elected; or (vi) with respect to any Significant Guarantor or Significant Subsidiary which is not a corporation, any loss of the right
or power to control the activities, directly, or indirectly through one or more intermediaries, or both. Nothing herein contained shall modify or otherwise affect the provisions of
Section 6.06. 

    "Code"
means the Internal Revenue Code of 1986, as amended from time to time, and the regulations and published interpretations thereof. 

    "Commitment"
has the meaning assigned to such term in Section 2.01. 

3

 

    "Common Equity" of any Person means any and all shares, rights to purchase, warrants or options (whether or not currently exercisable), participations, or other equivalents of or
interests in (however designated) the equity (which includes, but is not limited to, common stock, preferred stock and partnership and joint venture interests) of such Person (excluding any debt
securities convertible into, or exchangeable for, such equity) to the extent that the foregoing is entitled to (i) vote in the election of directors of such Person or (ii) if such Person
is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or other persons that will control the management and policies of such Person. 

    "Commonly
Controlled Entity" means an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 414(b) or 414(c) of the
Code. 

    "Consolidated
Debt" means the Debt of the Borrower and its Subsidiaries determined on a consolidated basis (but shall not include Debt of any Joint Venture or Debt of any Subsidiary
which is not a Guarantor, except to the extent that such Debt is guaranteed by the Borrower or a Guarantor). 

    "Consolidated
Subordinated Debt" means, as of any date, all Debt of the Borrower and the Guarantors (on a consolidated basis), the payment of which is, either expressly by its terms
or otherwise, subordinated to payment of the Obligations to the satisfaction of the Majority Banks. 

    "Consolidated
Tangible Assets" of the Borrower means, as of any date, the total amount of assets of the Borrower and its Subsidiaries (less applicable reserves) on a consolidated
basis at the end of the fiscal quarter immediately preceding such date (or on such date if such date is the last day of the fiscal quarter), as determined in accordance with GAAP, less
(i) Intangible Assets and (ii) appropriate adjustments on account of minority interests of other Persons holding equity Investments in Subsidiaries, in the case of each of clauses
(i) and (ii) above, as would be reflected on a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the fiscal quarter immediately preceding such date (or on
such date if such date is the last day of the fiscal quarter), prepared in accordance with GAAP. 

    "Consolidated
Tangible Net Worth" of the Borrower means, at any date, the consolidated stockholders' equity of the Borrower determined in accordance with GAAP, less Intangible Assets,
all determined as of such date. 

    "Debt"
means, without duplication, with respect to any Person (1) indebtedness or liability for borrowed money, including, without limitation, subordinated indebtedness (other
than trade accounts payable and accruals incurred in the ordinary course of business); (2) obligations evidenced by bonds, debentures, notes, or other similar instruments;
(3) obligations for the deferred purchase price of property (including, without limitation, seller financing of any Inventory) or services,  provided, however, that Debt shall not include obligations with respect to options to purchase real
property that have not been exercised; (4) obligations as lessee under Capital Leases to the extent that the same would, in accordance with GAAP, appear as liabilities in the Borrower's
consolidated balance sheet; (5) current liabilities in respect of unfunded vested benefits under Plans and incurred withdrawal liability under any Multiemployer Plan; (6) reimbursement
obligations under letters of credit (including contingent obligations with respect to letters of credit not yet drawn upon); (7) obligations under acceptance facilities; (8) all
guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to
invest in any other Person or entity, or otherwise to assure a creditor against loss, provided, however, that "Debt" shall not include guaranties of performance obligations; (9) obligations
secured by any Liens on any property of such Person, whether or not the obligations have been assumed; and (10) net liabilities under interest rate swap, exchange or cap agreements (valued as
the termination value thereof, computed in accordance with a method approved by the International Swaps and Derivatives Association and agreed to by such Person in the applicable agreement). 

4

 

    "Debt/Cap Ratio" means, as at any date of determination, the quotient obtained by dividing (a) Consolidated Debt as at such date by (b) the sum of Consolidated Debt and
Consolidated Tangible Net Worth as at such date. 

    "Default"
means any of the events specified in Section 8.01, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has
been satisfied. 

    "Dollars"
and the sign "$" mean lawful money of the United States of America. 

    "EBITDA"
means, for any period, on a consolidated basis for the Borrower and its Subsidiaries, the sum of the amounts for such period of (i) Net Income (but excluding from such
Net Income for the applicable period any income derived from any Investment in a Joint Venture referred to in Section 6.07(10) to the extent that such income exceeds the cash distributions
thereof received by the Borrower or its Subsidiaries in such period), plus (ii) charges against income for foreign, federal, state and local
taxes, plus (iii) Interest Expense, plus (iv) depreciation, plus  (v) amortization expense,
including, without limitation, amortization of goodwill and other intangible assets and amortization of deferred compensation expense,  plus (vi) extraordinary losses, minus
(vii) interest income, minus  (viii) extraordinary gains (and any unusual gains arising in or outside of the ordinary course of business not included in extraordinary
gains that have been included in
the determination of Net Income). 

    "Entitled
Land" means all Lots that are neither Lots under Development nor Finished Lots. 

    "ERISA"
means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereof. 

    "Eurocurrency
Reserve Requirement" means, for any Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is
imposed under Regulation D on "Eurocurrency liabilities" (as such term is used in Regulation D) but without benefit or credit of proration, exemptions, or offsets that might otherwise be
available from time to time under Regulation D. Without limiting the effect of the foregoing, the Eurocurrency Reserve Requirement shall reflect any other reserves required to be maintained
against (1) any category of liabilities that includes deposits by reference to which the LIBOR Interest Rate for LIBOR Loans is to be determined; or (2) any category of extension of
credit or other assets that include LIBOR Loans. 

    "Event
of Default" means any of the events specified in Section 8.01, provided that any requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied. 

    "Exchange
Act" means the Securities Exchange Act of 1934, as amended from time to time. 

    "Existing
Letters of Credit" means those Letters of Credit issued for the account of the Borrower by Bank One, PNC or SunTrust prior to the date hereof and listed on
Schedule II hereto. 

    "Extension
Request" has the meaning assigned to that term in Section 2.19(a). 

    "Facility
Letter of Credit" means (a) each Existing Letter of Credit and (b) any Letter of Credit issued by an Issuing Bank for the account of the Borrower in accordance
with Article XIII. 

    "Facility
Letter of Credit Fee" means a fee, payable with respect to each Facility Letter of Credit issued by an Issuing Bank, in an amount per annum equal to the product of
(i) the Applicable Letter of Credit Rate (determined as of the date on which the quarterly installment of such fee is due) and (ii) the face amount of such Facility Letter of Credit,
which fee shall be calculated in the manner provided in Section 13.06. 

    "Facility
Letter of Credit Obligations" means, at any date, the sum of (i) the aggregate undrawn face amount of all outstanding Facility Letters of Credit, and (ii) the
aggregate amount paid by an 

5

 

Issuing Bank on any Facility Letters of Credit to the extent (if any) not reimbursed by the Borrower or by the Banks under Section 13.04. 

    "Federal
Funds Rate" means, for each day, a fluctuating interest rate per annum equal to the weighted average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 A.M. Chicago time on such day on such transactions
received by the Agent from three Federal Funds brokers of recognized standing selected by the Agent in its sole discretion. 

    "Finished
Lots" means Lots in respect of which a building permit, from the applicable local governmental authority, has been or could be obtained;  provided, however,
that the term "Finished Lots" shall not include any Land upon which the construction
of a Housing Unit has commenced. 

    "Fitch"
means Fitch, Inc. 

    "GAAP"
means generally accepted accounting principles in the United States in effect from time to time (subject to the provisions of Section 1.02). 

    "Guarantor"
means an Original Guarantor and any Person that, pursuant to Section 5.15, guarantees the Obligations. 

    "Guaranty"
means the guaranty of the Obligations by each Guarantor under the provisions of Article IX contained herein or under a guaranty of the Obligations delivered under
Section 5.15. 

    "Housing
Unit" means a single-family dwelling, including the Land on which such dwelling is located, whether such dwelling is detached or attached (including condominiums but
excluding mobile homes), which dwelling is either under construction or completed and is (or, upon completion of construction thereof, will be) available for sale; the term "Housing Unit" includes a
Speculative Housing Unit. 

    "Housing
Unit Closing" means a closing of the sale of a Housing Unit by the Borrower or a Subsidiary (including any company or other entity acquired in an Acquisition by the Borrower
or a Subsidiary) to a bona fide purchaser for value that is not an Affiliate. 

    "Housing
Unit Under Contract" means a Housing Unit owned by the Borrower or a Subsidiary as to which the Borrower or such Subsidiary has a bona fide  contract of sale, in a form customarily employed by the
Borrower or such Subsidiary and reasonably satisfactory to the Agent, entered into not more than 15 months prior
to the date of determination with a Person who is not an Affiliate, under which contract no defaults then exist and not less than $1,000.00 toward the purchase price has been paid;  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 downpayment shall be the amount (if any) required under the rules of the relevant agency. 

    "Incur"
means to, directly or indirectly, create, incur, assume, guarantee, extend the maturity of or otherwise become liable with respect to any Debt; provided, however, that neither
the accrual of interest (whether such interest is payable in cash or kind) nor the accretion of original issue discount shall be considered an Incurrence of Debt. 

    "Intangible
Assets" means, at any time, the amount (to the extent reflected in determining consolidated stockholders equity of the Borrower and its Subsidiaries) of
(i) Investments in any Subsidiaries that are not Guarantors and (ii) all unamortized debt discount and expense, unamortized deferred charges, good will, patents, trademarks, service
marks, trade names, copyrights and all other 

6

 

items which would be treated as intangibles on a consolidated balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP. 

    "Interest
Coverage Ratio" means, for any period, the ratio of (a) EBITDA to (b) the sum (on a consolidated basis for the Borrower and its Subsidiaries) of all interest
incurred, including capitalized interest. 

    "Interest
Deficit" has the meaning assigned to that term in Section 2.08(b) hereof. 

    "Interest
Expense" means, for any period, the total interest expense of the Borrower and its Subsidiaries, whether paid directly or amortized through cost of sales (including the
interest component of Capital Leases). 

    "Interest
Period" means, with respect to any LIBOR Loan, the period commencing on the date such Loan is made, converted or renewed, and ending, as the Borrower may select pursuant to
Section 2.03, on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, except that each such Interest Period that commences on the last Business Day
of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent
calendar month; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: 

    (a) No
Interest Period may extend beyond the Termination Date or, until a Rejecting Bank is replaced as provided in Section 2.20 or paid in full, such Rejecting
Bank's Termination Date; and 

    (b) If
an Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended to the next Business Day unless such Business Day would
fall in the next calendar month, in which event such Interest Period shall end on the immediately preceding Business Day. 

    "Internal
Reorganization" means any reorganization between or among the Borrower and any Subsidiary or Subsidiaries or between or among any Subsidiary and one or more other
Subsidiaries or any combination thereof by way of liquidations, mergers, consolidations, conveyances, assignments, sales, transfers and other dispositions of all or substantially all of the assets of
a Subsidiary (whether in one transaction or in a series of transactions); provided that (a) the Borrower shall preserve and maintain its status
as a validly existing corporation and (b) all assets, liabilities, obligations and guarantees of any Subsidiary party to such reorganization will continue to be held by such Subsidiary or be
assumed by the Borrower or a Wholly-Owned Subsidiary of the Borrower. 

    "Inventory"
means all Housing Units, Lots, goods, merchandise and other personal property wherever located to be used for or incorporated into any Housing Unit. 

    "Inventory
Valuation Date" means (a) the last day of the most recent fiscal quarter of the Borrower with respect to which the Borrower is required to have delivered a Borrowing
Base Certificate pursuant to Section 5.08(6) hereof or (b) if the Borrower elects pursuant to Section 2.01(d) or is required pursuant to Section 2.01(e) to deliver a
Borrowing Base Certificate with respect to a calendar month subsequent to such most recent fiscal quarter, the last day of such subsequent calendar month. 

    "Investment"
has the meaning provided therefor in Section 6.07. The amount of any Investment shall include (a) in the case of any loan or advance, the outstanding amount
of such loan or advance and (b) in the case of any equity Investment, the amount of the "net equity investment" as determined in accordance with GAAP. 

    "Issuance
Date" means the date on which a Facility Letter of Credit is issued, amended or extended. 

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    "Issuing Bank" means Bank One, PNC, SunTrust and any other Bank that may from time to time be designated as an Issuing Bank in accordance with the provisions of Section 13.10. 

    "Joint
Venture" means any Person (other than a Subsidiary) in which the Borrower or a Subsidiary holds any stock, partnership interest, joint venture interest, limited liability
company interest or other equity interest. 

    "Land"
means land owned by the Borrower or a Subsidiary, which land is being developed or is held for future development or sale. 

    "Lending
Office" means, with respect to any Bank, the Lending Office of such Bank (or of an affiliate of such Bank) heretofore designated in writing by such Bank to the Agent or such
other office or branch of such Bank (or of an affiliate of such Bank) as that Bank may from time to time specify to the Borrower and the Agent as the office or branch at which its Loans (or Loans of a
type designated in such notice) are to be made and maintained. 

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

    "Level"
means the level of a Pricing Factor, Applicable Margin or Applicable Commitment Rate (as applicable) as designated in the Table set forth in Section 2.05. The five
Levels in such Table are identified as Levels I through V, and Level I shall constitute the lowest Level and Level V shall constitute the highest Level. 

    "LIBOR
Interest Rate" means, for each LIBOR Loan for the relevant Interest Period, the rate per annum (rounded upward, if necessary, to the nearest one-sixteenth of 1%)
determined by the Agent to be equal to the quotient of (a) the London Interbank Offered Rate for such LIBOR Loan for such Interest Period divided by (b) one minus the Eurocurrency
Reserve Requirement for such Interest Period. 

    "LIBOR
Loan" means any Loan when and to the extent that the interest rate therefor is determined by reference to the LIBOR Interest Rate. 

    "Lien"
means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority,
or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of
any jurisdiction to evidence any of the foregoing). 

    "Loan(s)"
means a loan made by a Bank pursuant to this Agreement, including (unless the context otherwise indicates) a Swing Line Loan. Each such Loan (other than a Swing Line Loan)
shall be an ABR Loan or a LIBOR Loan. 

    "Loan
Document(s)" means this Agreement, the Notes, the Reimbursement Agreements, and any and all documents delivered hereunder or pursuant hereto. 

    "London
Interbank Offered Rate" means, with respect to a LIBOR Loan for the relevant Interest Period, the applicable London interbank offered rate for deposits in U.S. dollars
appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period. 

8

  

    "Lots"
means all Land owned by the Borrower and/or a Subsidiary which is zoned by the municipality in which such real property is located for residential building and use, and with
respect to which the Borrower or such Subsidiary has obtained all necessary approvals for its subdivision for Housing Units; provided, however, that the
term "Lots" shall not include any Land upon which the construction of a Housing Unit has commenced. 

    "Lots
under Development" means Lots with respect to which construction of streets or other subdivision improvements has commenced but which are not Finished Lots. 

    "Majority
Banks" means at any time the Banks holding at least sixty-six and two-thirds percent (662/3%) of the then aggregate unpaid principal
amount of the Notes held by the Banks (including in such amount any participation held by such Bank as a result of its purchase thereof pursuant to Section 10.07) or, if no such principal
amount is then outstanding, Banks having at least sixty-six and two-thirds percent (662/3%) of the Aggregate Commitments. 

    "Merged
Banks" has the meaning assigned to that term in Section 12.03(c). 

    "Moody's"
means Moody's Investors Service, Inc. 

    "Multiemployer
Plan" means a plan described in Section 4001(a)(3) of ERISA in respect of which the Borrower, a Subsidiary or a Commonly Controlled Entity is an "employer" as
defined in Section 3(5) of ERISA. 

    "Net
Income" means, for any period, the net earnings (or loss) after taxes of the Borrower and its Subsidiaries on a consolidated basis for such period. 

    "Note(s)"
means the promissory notes described in Section 2.10 hereof. 

    "Notice
of Assignment" has the meaning assigned to that term in Section 12.03(b) hereof. 

    "Obligations"
means (a) the due and punctual payment of principal of and interest on the Loans and the Notes, (b) the due and punctual payment of the Facility Letter of
Credit Obligations, and (c) the due and punctual payment of fees, expenses, reimbursements, indemnifications and other present and future monetary obligations of the Borrower and each Guarantor
to the Banks or to any Bank, the Agent, the Issuing Bank or any indemnified party under the Loan Documents. 

    "Original
Guarantors" has the meaning assigned to that term in the preamble to this Agreement. 

    "Participant"
has the meaning assigned to that term in Section 12.02(a) hereof. 

    "PBGC"
means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. 

    "Performance
Letter of Credit" means any Letter of Credit of the Borrower or a Guarantor that is issued for the benefit of a municipality, other governmental authority, utility, water
or sewer authority, or other similar entity for the purpose of assuring such beneficiary of the Letter of Credit of the proper and timely completion of construction work. 

    "Permitted
Acquisition" means any Acquisition (other than by means of a hostile takeover, hostile tender offer or other similar hostile transaction) of a business or entity engaged
primarily in the business of home building; provided that, immediately before and after giving effect to such Acquisition, no Default or Event of Default has occurred and is continuing. 

    "Permitted
Senior Debt" means the sum of all Debt of the Borrower and its Subsidiaries on a consolidated basis, excluding (i) Secured Debt, (ii) Performance Letters of
Credit, (iii) performance bonds and (iv) Debt of any Joint Venture. 

9

 

    "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, limited liability company, unincorporated association, joint venture, governmental
authority, or other entity of whatever nature. 

    "Plan"
means any pension plan which is covered by Title IV of ERISA and in respect of which (a) the Borrower or a Subsidiary or a Commonly Controlled Entity is an "employer" as
defined in Section 3(5) of ERISA and (b) the Borrower or a Subsidiary has any material liability; provided, however, that the term "Plan"
shall not include any Multiemployer Plan. 

    "PNC"
means PNC Bank, N.A. 

    "Pricing
Factor" means either the Debt/Cap Ratio or the Senior Debt Rating. 

    "Prime
Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any
customer), changing when and as said prime rate changes. 

    "Principal
Office" means, with respect to the Agent, the Principal Office of the Agent designated as such on the signature pages hereof or such other office of the Agent as the Agent
may from time to time specify to the Borrower and the Banks as its Principal Office. 

    "Prior
Credit Agreement" means that certain Second Amended and Restated Credit Agreement dated as of December 29, 1999 among Borrower, certain of the Original Guarantors, Bank
One as agent and the other banks party thereto. 

    "Prohibited
Transaction" means any transaction set forth in Section 406 of ERISA or Section 4975 of the Code that could subject the Borrower or any Subsidiary to any
material liability. 

    "Purchaser"
has the meaning assigned to that term in Section 12.03(a) hereof. 

    "Quarterly
Payment Date" means October 1, 2001 and the first day of each January, April, July and October thereafter. 

    "Ratable
Share" means, with respect to any Bank on any date, the ratio of (a) the amount of the Commitment of such Bank to (b) the Aggregate Commitments. 

    "Receivables"
means the net proceeds payable to, but not yet received by, the Borrower or a Subsidiary following a Housing Unit Closing. 

    "Refinancing
Debt" means Debt that refunds, refinances or extends any applicable Debt ("Refinanced Debt") but only to the extent that (i) the Refinancing Debt is subordinated
to or pari passu with the Obligations to the same extent as such Refinanced Debt, if at all, (ii) the Refinancing Debt is scheduled to mature no
earlier than the earlier of (A) the current maturity date of such Refinanced Debt or (B) a date three (3) years after the Termination Date (as determined at the time such
Refinancing Debt is Incurred), (iii) such Refinancing Debt is in an aggregate amount that is equal to or less than the sum of (A) the aggregate amount then outstanding under the
Refinanced Debt, plus (B) accrued and unpaid interest on such Refinanced Debt, plus
(C) reasonable fees and expenses incurred in obtaining such Refinancing Debt, it being understood that this clause (iii) shall not preclude the Refinancing Debt from being a part of a
Debt financing that includes other or additional Debt otherwise permitted herein, (iv) such Refinancing Debt is Incurred by the same Person that initially Incurred such Refinanced Debt or by
another Person of which the Person that initially Incurred such Refinanced Debt is a Subsidiary, and (v) such Refinancing Debt is Incurred within 60 days after such Refinanced Debt is so
refunded, refinanced or extended. 

    "Regulation
D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or
official interpretation of 

10

 

said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. 

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

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

    "Reimbursement
Agreement" means, with respect to a Facility Letter of Credit, such form of application therefor and form of reimbursement agreement therefor (whether in a single or
several documents, taken together) as the applicable Issuing Bank may employ in the ordinary course of business for its own account, with the modifications thereto as may be agreed upon by such
Issuing Bank and the Borrower and as are not materially adverse (in the reasonable judgment of such Issuing Bank and the Agent) to the interests of the Banks; provided,
however, in the event of any conflict between the terms of any Reimbursement Agreement and this Agreement, the terms of this Agreement shall control. 

    "Rejecting
Bank" has the meaning assigned to such term in Section 2.19(a). 

    "Rejecting
Bank's Termination Date" has the meaning assigned to such term in Section 2.19(a). 

    "Replacement
Bank" has the meaning assigned to such term in Section 2.20. 

    "Reportable
Event" means any of the events set forth in Section 4043 of ERISA with respect to a Plan (excluding any such event with respect to which the PBGC has waived the
30-day notice requirement). 

    "S&P"
means Standard & Poor's Rating Services. 

    "Secured
Debt" means all Debt of the Borrower or any of its Subsidiaries (excluding Debt owing to the Borrower or any of its Subsidiaries) that is secured by a Lien on assets of the
Borrower or any of its Subsidiaries. 

    "Senior
Debt" means the Senior Notes or, if the Senior Notes are refinanced, the Refinancing Debt with respect thereto. 

    "Senior
Debt Rating" means (i) at any time at which Moody's, S&P and Fitch all publicly announce ratings of the Borrower's unsecured long-term debt, the second
highest of such three ratings; (ii) at any time at which Moody's and S&P publicly announce ratings of the Borrower's unsecured long-term debt but Fitch does not, the higher of such
two ratings; and (iii) at any time at which Moody's or S&P (but not both) publicly announces a rating of the Borrower's unsecured long-term debt (and regardless of whether Fitch
publicly announces a rating), the rating so publicly announced by Moody's or S&P. At any time at which neither Moody's nor S&P publicly announces ratings of the Borrower's unsecured
long-term debt, no Senior Debt Rating shall be deemed to exist. The Senior Debt Rating shall change if and when such rating(s) change, and such change in the Senior Debt Rating shall have
the effect provided for in Section 2.05 and elsewhere in this Agreement. 

    "Senior
Indentures" means either of the Indentures identified in the definition of the term "Senior Notes" and any other Indenture hereafter entered into by the Borrower pursuant to
which the Borrower Incurs any Refinancing Debt with respect to any of the Senior Notes. 

11

 

    "Senior Notes" means (i) the 85/8% Senior Notes due 2001 of the Borrower issued in the original principal amount of $200,000,000 pursuant to the Indenture dated
May 21, 2001 and (ii) the 87/8 percent Senior Notes due 2008 of the Borrower issued in the original principal amount of $100,000,000 pursuant to the Indenture dated
March 25, 1998. 

    "Significant
Guarantor" means, at any date of determination thereof, any Guarantor that (together with its Subsidiaries) accounts for five percent (5%) or more of the Consolidated
Tangible Assets as of the last day of the most recent fiscal quarter then ended and of the net revenues for the twelve-month period ending on the last day of the most recent fiscal quarter then ended,
in each case of the Borrower and its Subsidiaries taken as a whole. Such percentage shall be determined on the basis of financial reports that shall be available not later than 25 days (or, in
the case of the last fiscal quarter of the fiscal year, 35 days) following the end of such fiscal quarter. 

    "Significant
Subsidiary" means, at any date of determination thereof, any Subsidiary that (together with its Subsidiaries) accounts for five percent (5%) or more of the Consolidated
Tangible Assets as of the last day of the most recent fiscal quarter then ended and of the net revenues for the twelve-month period ending on the last day of the most recent fiscal quarter then ended,
in each case of the Borrower and its Subsidiaries taken as a whole. Such percentage shall be determined on the basis of financial reports that shall be available not later than 25 days (or, in
the case of the last fiscal quarter of the fiscal year, 35 days) following the end of such fiscal quarter. 

    "Speculative
Housing Unit" means any Housing Unit owned by the Borrower or a Subsidiary that is not a Housing Unit Under Contract. 

    "STIC"
means Security Title Insurance Company, Inc., a Vermont corporation and Wholly Owned Subsidiary of the Borrower. 

    "Subsidiary"
means, as to the Borrower or a Guarantor, in the case of a corporation, a corporation of which shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation are at the time owned, or the management of which is
otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by the Borrower or such Guarantor, as the case may be, or in the case of an entity which is not a
corporation, the activities of which are controlled directly, or indirectly through one or more intermediaries, or both, by the Borrower or such Guarantor, as the case may be. 

    "SunTrust"
means SunTrust Bank. 

    "Swing
Line Bank" means Bank One or any Purchaser to which Bank One assigns the Swing Line Commitment in accordance with Section 12.03 hereof. 

    "Swing
Line Commitment" means the commitment of the Swing Line Bank to make Swing Line Loans pursuant to Section 2.21(a) hereof. The Swing Line Commitment is in the amount of
$20,000,000. 

    "Swing
Line Loan" has the meaning assigned to such term in Section 2.21(a). 

    "Term
Loan Agreement" means that certain Term Loan Agreement dated as of December 19, 2000 among the Borrower, the Original Guarantors, Bank One as agent and the other banks
party thereto, as the same may be amended, modified or replaced and in effect from time to time. 

    "Termination
Date" means September 20, 2004, as such date may be extended from time to time pursuant to Section 2.19. 

    "Transferee"
has the meaning assigned to that term in Section 12.04. 

12

 

    "UHIC" means United Homes Insurance Corporation, a Vermont corporation and Wholly Owned Subsidiary of the Borrower. 

    "Unrestricted
Cash" of a Person means the cash of such Person that would not be identified as "restricted" on a balance sheet of such Person prepared in accordance with GAAP. 

    "Wholly
Owned Subsidiary" of any Person means (i) a Subsidiary, of which one hundred percent (100%) of the outstanding Common Equity (except for directors' qualifying shares or
certain minority interests owned by other Persons solely due to local law requirements that there be more than one stockholder, but which interest is not in excess of what is required for such
purpose) is owned directly by such Person or through one or more other Wholly Owned Subsidiaries of such Person, or (ii) any entity other than a corporation in which such Person, directly or
indirectly, owns all of the outstanding Common Equity of such entity. 

    Section 1.02  Accounting Terms.  (a) All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those applied in the preparation of the financial statements referred to in Section 4.04, and all financial data
submitted pursuant to this Agreement shall be prepared in accordance with such principles. 

    (b) Notwithstanding
anything to the contrary contained in this Agreement, in determining the Borrower's compliance with the provisions of Article VII hereof,
GAAP shall not include modifications of generally accepted accounting principles that become effective after the date hereof. 

 
 

ARTICLE II
  
    AMOUNTS AND TERMS OF THE LOANS    
  

    Section 2.01  Revolving Credit.  (a) Each Bank severally agrees, on the
terms and conditions hereinafter set forth, to make Loans (other than Swing Line Loans) to the Borrower from time to time during the period from the date of this Agreement up to but not including the
Termination Date, and to purchase undivided interests and participations in Facility Letters of Credit in accordance with Section 13.06, in an aggregate principal amount of Loans and of such
Bank's Ratable Share of the Facility Letter of Credit Obligations not to exceed at any time outstanding the amount set forth in Schedule I hereto (such Bank's obligations to make Loans (other
than Swing Line Loans) and to purchase undivided interests and participations in Facility Letters of Credit in accordance with Section 13.06 in such amounts, as reduced, increased or otherwise
modified from time to time pursuant to the terms of this Agreement, being herein referred to as such Bank's "Commitment"), subject to the limitations set forth in Section 2.01(b) and
Section 13.02. 

    (b) The
aggregate amount of Permitted Senior Debt at any one time outstanding may not exceed the Borrowing Base as of the most recent Inventory Valuation Date, and no
Loan (including a Swing Line Loan) shall be made that would have the effect of increasing the then outstanding amount of the Permitted Senior Debt to an amount exceeding such Borrowing Base, provided
that a Loan shall not be deemed to have increased the amount of the Permitted Senior Debt to the extent that the proceeds of such Loan are immediately used to repay a Swing Line Loan theretofore
included in the Permitted Senior Debt. No Loans shall be made at any time that any Swing Line Loan is outstanding, except for Loans that are used, on the day on which made, to repay in full the
outstanding principal balance of the Swing Line Loans. 

    (c) Each
Borrowing which shall not utilize the Commitment in full shall be in an amount not less than One Million Dollars ($1,000,000) for a Borrowing consisting of
LIBOR Loans and Five Hundred Thousand Dollars ($500,000) in the case of a Borrowing consisting of ABR Loans and, in either case, if in excess of the specified amount, in integral multiples of One
Hundred Thousand Dollars ($100,000).
Each Borrowing shall consist of a Loan made by each Bank in the proportion which that Bank's Commitment bears to the Aggregate Commitments. Within the limits of the Aggregate Commitments, 

13

 

the Borrower may borrow, repay pursuant to Section 2.11, and reborrow under this Section 2.01. On such terms and conditions, the Loans may be outstanding as ABR Loans or LIBOR Loans.
Each type of Loan shall be made and maintained at such Bank's Lending Office for such type of Loan. The failure of any Bank to make any requested Loan to be made by it on the date specified for such
Loan shall not relieve any other Bank of its obligation (if any) to make such Loan on such date, but no Bank shall be responsible for the failure of any other Bank to make such Loans to be made by
such other Bank. The provisions of this Section 2.01(c) shall not apply to Swing Line Loans. 

    (d) The
Borrower may elect to deliver to the Agent a Borrowing Base Certificate setting forth the Borrowing Base as of the last day of a calendar month subsequent to
the most recent fiscal quarter with respect to which a Borrowing Base Certificate was required to be delivered under Section 5.08(6) of the Agreement. 

    (e) The
Agent or the Majority Lenders may, upon notice to the Borrower from the Agent, require the Borrower to deliver a Borrowing Base Certificate determined as of the
last day of a calendar month (as designated in such notice) subsequent to the fiscal quarter with respect to which a Borrowing Base Certificate was required to be delivered under
Section 5.08(6) of the Agreement, provided that the Borrowing Base Certificate under this Section 2.01(e) shall only be required to be delivered on the later to occur of (i) the
tenth (10th) day following the Agent's notice to the Borrower under this Section 2.01(e) or (ii) the twenty-fifth (25th) day after the last day of the applicable calendar month (as
designated in such notice). 

    (f)  The
Borrower may elect to include in a Borrowing Base Certificate delivered in anticipation of a Permitted Acquisition all assets that would have been included in
the Borrowing Base had the Permitted Acquisition been consummated as of the last day of the most recent fiscal quarter or (if applicable under Section 2.01(d) or (e)) calendar month, provided,
however, that such Borrowing Base Certificate shall expressly state that it is delivered in anticipation of, and shall only be effective hereunder for purposes of Borrowings made on or after, the
consummation of such Permitted Acquisition (it being understood that, until the consummation of such Permitted Acquisition, the previously delivered Borrowing Base Certificate shall remain in effect). 

    Section 2.02  Reduction of Aggregate Commitments.  The Borrower shall have
the right, upon at least three (3) Business Days' prior notice to the Agent, to terminate in whole or reduce in part the unused portion of the Aggregate Commitments, provided that each partial
reduction shall be in the amount of at least Five Million Dollars ($5,000,000), and provided further that no reduction shall be permitted if, after giving effect thereto, and to any prepayment made
therewith, the sum of (i) the outstanding and unpaid principal amount of the Loans and (ii) the Facility Letter of Credit Obligations shall exceed the Aggregate Commitments. Each
reduction in part of the unused portion of each Bank's Commitment
shall be made in the proportion that such Bank's Commitment bears to the total amount of the Aggregate Commitments. Any Commitment, once reduced or terminated, may not be reinstated. 

    Section 2.03  Notice and Manner of Borrowing.  The Borrower shall give the
Agent notice of any Loans under this Agreement, on the Business Day of each ABR Loan, and at least three (3) Business Days before each LIBOR Loan, specifying: (1) the date of such Loan;
(2) the amount of such Loan; (3) the type of Loan (whether an ABR Loan or a LIBOR Loan); and (4) in the case of a LIBOR Loan, the duration of the Interest Period applicable
thereto. All notices given by the Borrower under this Section 2.03 shall be irrevocable and shall be given not later than 10:00 A.M. Chicago time on the day specified above for such
notice. The Agent shall notify each Bank of each such notice not later than 11:00 A.M. Chicago time on the date it receives such notice from the Borrower if such notice is received by the Agent
at or before 10:00 A.M. Chicago time. In the event such notice from the Borrower is received after 10:00 A.M. Chicago time, it shall be treated as if received on the next succeeding
Business Day, and the Agent shall notify each Bank of such notice as soon as practicable but not later than 11:00 A.M. Chicago time on the next succeeding Business Day. Not later than 

14

 

1:00 P.M. Chicago time on the date of such Loans, each Bank will make available to the Agent in immediately available funds, such Bank's Ratable Share of such Loans. After the Agent's receipt
of such funds, on the date of such Loans and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such Loans available to the Borrower in immediately
available funds by crediting the amount thereof to the Borrower's account with the Agent. The provisions of this Section 2.03 shall not apply to Swing Line Loans. 

    Section 2.04  Non-Receipt of Funds by Agent.  (a) Unless the
Agent shall have received notice from a Bank prior to the date (in the case of a LIBOR Loan), or by 12:00 noon Chicago time on the date (in the case of an ABR Loan), on which such Bank is to provide
funds to the Agent for a Loan to be made by such Bank that such Bank will not make available to the Agent such funds, the Agent may assume that such Bank has made such funds available to the Agent on
the date of such Loan in accordance with Section 2.03 and the Agent in its sole discretion may, but shall not be obligated to, in reliance upon such assumption, make available to the Borrower
on such date a corresponding amount. If and to the extent such Bank shall not have given the notice provided for above and shall not have made such funds available to the Agent, such Bank agrees to
repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at the Federal Funds Rate for three Business Days and thereafter at the Alternate Base Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid
shall constitute such Bank's Loan for purposes of this Agreement. If such Bank does not pay such corresponding amount forthwith upon Agent's demand therefor, the Agent shall promptly notify the
Borrower, and the Borrower shall immediately pay such corresponding amount to the Agent with interest thereon, for each day from the date such amount is made available to the Borrower until the date
such amount is repaid to the Agent, at the rate of interest applicable at the time to such proposed Loan. Nothing set forth in this Section shall affect the rights of the Borrower with respect to any
Bank that defaults in the performance of its obligation to make a Loan hereunder. 

    (b) Unless
the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make
such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent in its sole discretion may, but shall not be obligated to, in
reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Borrower shall not have so made such
payment in full to the Agent, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate for three Business Days and thereafter at the Alternate Base Rate. 

    (c) The
provisions of this Section 2.04 shall not apply to Swing Line Loans. 

    Section 2.05  Determination of Applicable Margins and Applicable Commitment
Rate.  (a) The Applicable Margins and the Applicable Commitment Rate shall be determined by reference to the 

15

 

Senior Debt Rating and the Debt/Cap Ratio in accordance with the following table and the provisions of this Section 2.05:  

	 
	 	 
	 	 
	 	 
	 	 
	 	Applicable Commitment Rate
	 
	 
	 	 
	 	 
	 	Applicable

LIBOR

Margin
	 	Applicable

ABR Margin
	 
	Level
	 	Senior Debt Rating
	 	Debt/Cap Ratio
	 	Usage>=50%
	 	Usage<=50%
	 
	V	 	BBB-/Baa3	 	less than 30%	 	1.25	%	-0-	 	0.225	%	0.25	%
	

IV	
 	

BB+/Ba1	
 	

Equal to or more than 30% and less than 35%	
 	

1.50	
%	

-0-	
 	

0.275	
%	

0.30	
%
	

III	
 	

BB-/Ba2	
 	

Equal to or more than 35% and less than 40%	
 	

1.625	
%	

0.125	
%	

0.30	
%	

0.375	
%
	

II	
 	

BB-/Ba3	
 	

Equal to or more than 40% and less than 55%	
 	

1.75	
 	

0.25	
 	

0.375	
%	

0.45	
%
	

I	
 	

B+/B1 & Below	
 	

55% or more	
 	

2.00	
%	

0.50	
%	

0.50	
%	

0.60	
%

    The
Applicable Margins and Applicable Commitment Rate shall be determined on the basis of the Levels of the Pricing Factors in accordance with the following provisions: 

     (i) At
any time at which the Pricing Factors are at the same Level, the Applicable Margins and Applicable Commitment Rate shall be at that Level; 

    (ii) At
any time at which the Pricing Factors are at different Levels, the Applicable Margins and the Applicable Commitment Rate shall be at the Level that corresponds
to (A) the Level of the higher of the two Pricing Factors (i.e. the lower pricing) whenever the Pricing Factors differ by one Level and (B) the Level that is one Level lower than the
higher of the two Pricing Factors whenever the Pricing Factors differ by more than one Level; 

    (iii) At
any time at which there is or is deemed to be no Senior Debt Rating, the Applicable Margins and the Applicable Commitment Rate shall be at the Level that is
one Level lower than the Level of the Debt/Cap Ratio; and 

    (iv) At
any time at which (A) Fitch does not publicly announce a rating of the Borrower's unsecured long-term debt, and (B) Moody's or S&P
(but not both) publicly announces a rating of the Borrower's unsecured long-term debt, the Applicable Margin and Applicable Commitment Rate shall be determined in accordance with
subsections (i) and (ii) above (as applicable), except that (A) the Applicable LIBOR Margin set forth in the Table above shall be increased by 0.075% and (B) the Applicable
Commitment Rate set forth in the Table shall be increased by 0.025%. 

    (b) The
Applicable Margin and the Applicable Commitment Rate shall be adjusted, from time to time, effective (as applicable) on the first Business Day after any change
in the Senior Debt Ratings that results in any change in the Applicable Margins or Applicable Commitment Rate or the fifth (5th) Business Day after the Agent's receipt of the Borrower's quarterly or
annual financial statements evidencing a change in the Debt/Cap Ratio that results in any change in the Applicable Margins or Applicable Commitment Rates, provided, however, that any change in the
Applicable LIBOR Margin shall only apply to LIBOR Loans for Interest Periods commencing after such change in the Applicable LIBOR Margin is effective. 

    (c) As
of the date hereof, by Applicable Margins and Applicable Commitment Rate are at Level II. 

16

       Section 2.06  Conversions and Renewals.  The Borrower may elect from time
to time to convert all or a part of one type of Loan into another type of Loan or to renew all or part of a Loan by giving the Agent notice at least one (1) Business Day before conversion into
an ABR Loan, and at least three (3) Business Days before the conversion into or renewal of a LIBOR Loan, specifying: (1) the renewal or conversion date; (2) the amount of the Loan
to be converted or renewed; (3) in the case of conversions, the type of Loan to be converted into; and (4) in the case of renewals of or a conversion into a LIBOR Loan, the duration of
the Interest Period applicable thereto; provided that (a) the minimum principal amount of each Loan of each Bank outstanding after a renewal or
conversion shall be One Million Dollars ($1,000,000) in the case of a LIBOR Loan, and Two Hundred Fifty Thousand Dollars ($250,000) in the case of an ABR Loan; and (b) LIBOR Loans may be
converted on a Business Day that is not the last day of the Interest Period for such Loan only if the Borrower pays on the date of conversion all amounts due pursuant to Section 2.17 hereof;
and (c) the Borrower may not renew a LIBOR Loan or convert an ABR Loan into a LIBOR Loan at any time that a Default has occurred that is continuing. Each such notice shall be accompanied by a
Borrowing Base Certificate dated as at the date of such notice. All conversions and renewals shall be made in the proportion of the Bank's respective Ratable Shares. All notices given by the Borrower
under this Section 2.06 shall be irrevocable and shall be given not later than 10:00 A.M. Chicago time on the day which is not less than the number of Business Days specified above for
such notice. The Agent shall notify each Bank of each such notice not later than 11:00 A.M. Chicago time on the date it receives such notice from the Borrower if such notice is received by the
Agent at or before 10:00 A.M. Chicago time. In the event such notice from the Borrower is received after 10:00 A.M. Chicago time, it shall be treated as if received on the next
succeeding Business Day, and the Agent shall notify each Bank of such notice as soon as practicable but not later than 11:00 A.M. Chicago time on the next succeeding Business Day.
Notwithstanding the foregoing, if the Borrower shall fail to give the Agent the notice as specified above for the renewal or conversion of a LIBOR Loan prior to the end of the Interest Period with
respect thereto, such LIBOR Loan shall automatically be converted into an ABR Loan on the last day of the Interest Period for such Loan. The provisions of this Section 2.06 shall not apply to
Swing Line Loans. 

    Section 2.07  Interest.  (a) The Borrower shall pay interest to the Agent
for the account of each Bank on the outstanding and unpaid principal amount of the Loans at the following rates: 

     (i) If
an ABR Loan or Swing Line Loan, then at a rate per annum equal to the sum of (A) the Applicable ABR Margin in effect from time to time as interest accrues
and (B) the Alternate Base Rate in effect from time to time as interest accrues; and 

    (ii) if
a LIBOR Loan, then at a rate per annum for the Interest Period applicable to such LIBOR Loan equal to the sum of (A) the Applicable LIBOR Margin in
effect on the first day of such Interest Period and (B) the LIBOR Interest Rate determined for such Interest Period. 

    (b) Any
change in the interest rate based on the Alternate Base Rate resulting from a change in the Alternate Base Rate shall be effective (without notice) as of the
opening of business on the day on which such change in the Alternate Base Rate becomes effective. Interest on each LIBOR Loan shall be calculated on the basis of a year of 360 days for the
actual number of days elapsed. Interest on each ABR Loan and Swing Line Loan shall be calculated on the basis of a year of 365 days for the actual number of days elapsed. 

    (c) Interest
on the Loans shall be paid (in an amount set forth in a statement delivered by the Agent to the Borrower, provided,
however, that the failure of the Agent to deliver such statement shall not limit or otherwise affect the obligations of the Borrower hereunder) in immediately available funds
to the Agent at its Principal Office for the account of the applicable Lending Office of each Bank as follows: 

	(1)
	For
each ABR Loan and Swing Line Loan on the first day of each calendar month commencing on the first such date after such Loan; 

17

 

	(2)
	For
each LIBOR Loan, on the last day of the Interest Period with respect thereto, except that, if such Interest Period is longer than three months, interest shall also be paid on
the last day of the third month of such Interest Period; and

	(3)
	If
not sooner paid, then on the Termination Date or such earlier date as the Loans may be due or declared due hereunder. 

    (d) Any
principal amount of any Loan not paid when due (at maturity, by acceleration, or otherwise) shall bear interest thereafter until paid in full, payable on
demand, at a rate per annum equal to the Alternate Base Rate or the applicable LIBOR Interest Rate, as the case may be, for such Loan in effect from time to time as interest accrues, plus the
Applicable Margin in effect from time to time as interest accrues, plus two percent (2%) per annum. 

    Section 2.08  Interest Rate Determination.  (a) The Agent shall determine
each London Interbank Offered Rate, as applicable. The Agent shall give prompt notice to the Borrower and the Banks of the applicable interest rate determined by the Agent pursuant to the terms of
this Agreement. 

    (b) If
the provisions of this Agreement or any Note would at any time require payment by the Borrower to a Bank of any amount of interest in excess of the maximum
amount then permitted by the law applicable to any Loan, the interest payments to such Bank shall be reduced to the extent necessary so
that such Bank shall not receive interest in excess of such maximum amount. If, as a result of the foregoing a Bank shall receive interest payments hereunder or under a Note in an amount less than the
amount otherwise provided hereunder, such deficit (hereinafter called "Interest Deficit") will cumulate and will be carried forward (without interest) until the termination of this Agreement. Interest
otherwise payable to a Bank hereunder and under a Note for any subsequent period shall be increased by the maximum amount of the Interest Deficit that may be so added without causing such Bank to
receive interest in excess of the maximum amount then permitted by the law applicable to the Loans. The amount of the Interest Deficit relating to the Loans shall be treated as a prepayment premium
(to the extent permitted by law) and paid in full at the time of any optional prepayment by the Borrower to the Banks of all the Loans at that time outstanding pursuant to Section 2.11 hereof.
The amount of the Interest Deficit relating to the Loans at the time of any complete payment of the Loans at that time outstanding (other than an optional prepayment thereof pursuant to
Section 2.11 hereof) shall be canceled and not paid. 

    Section 2.09  Fees.  (a) The Borrower shall pay to BOCM upon the execution
of this Agreement a one time, nonrefundable fee in the amount provided for in the Agent's Fee Letter. The Agent shall deliver to each Bank its applicable fee (as set forth in the invitation letter
dated August 16, 2001 from BOCM to such Banks) promptly upon the Agent's receipt thereof. 

    (b) The
Borrower agrees to pay to the Agent for the account of each Bank (subject to adjustment in the case of the Swing Line Bank as hereinafter provided) a commitment
fee on the average daily unused portion of such Bank's Commitment (in an amount set forth in a statement delivered by the Agent to the Borrower, provided,
however, that the failure of the Agent to deliver such statement shall not limit or otherwise affect the obligations of the Borrower hereunder) from the date of this Agreement
until the Termination Date at the Applicable Commitment Rate, payable in arrears on each Quarterly Payment Date during the term of such Bank's Commitment, commencing October 1, 2001, and ending
on the Termination Date or, in the case of a Rejecting Bank, on such Rejecting Bank's Termination Date. The commitment fees shall be calculated on the basis of a year of 365 days for the actual
number of days elapsed. Upon receipt of any commitment fees, the Agent will promptly thereafter cause to be distributed such payments to the Banks in the proportion that each Bank's unused Commitment
bears to the unused Aggregate Commitments (subject to adjustment in the case of the Swing Line Bank as hereinafter provided). For purposes of determining the commitment fee payable to the Swing Line
Bank, the unused portion of such Bank's Commitment shall be reduced dollar-for-dollar by the amount of any Swing Line Loans then outstanding. 

18

 

    (c) The Borrower shall pay to the Agent and BOCM such additional fees as are specified in the Agent's Fee Letter. 

    Section 2.10  Notes.  All Loans made by each Bank under this Agreement
shall be evidenced by, and repaid with interest in accordance with, a single promissory note of the Borrower in substantially the form of Exhibit A  hereto, in each case duly completed, dated the
date of this Agreement, and payable to such
Bank for the account of its applicable Lending Office, such Note to represent the obligation of the Borrower to repay the Loans made by such Bank. Each Bank is hereby authorized by the Borrower to
endorse on the schedule attached to the Note held by it the amount and type of each Loan and each renewal, conversion, and payment of principal amount received by such Bank for the account of its
applicable Lending Office on account of its Loans, which endorsement shall, in the absence of manifest error, be conclusive as to the outstanding balance of the Loans made by such Bank;  provided, however, that the failure to make such notation with respect to any Loan or renewal, conversion, or payment shall not limit or otherwise
affect the obligations of the Borrower under this Agreement or the Note held by such Bank. All Loans shall be repaid on the Termination Date. 

    Section 2.11  Prepayments.  (a) The Borrower may, upon notice to the Agent
not later than 11:00 A.M. (Chicago time) on the date of prepayment in the case of ABR Loans and at least three (3) Business Days' prior notice to the Agent in the case of LIBOR Loans,
prepay (including, without limitation, all amounts payable pursuant to the terms of Section 2.17 hereof) the Notes in whole or in part with accrued interest to the date of such prepayment on
the amount prepaid, provided that (1) each partial payment shall be in a principal amount of not less than One Million Dollars ($1,000,000) in
the case of a LIBOR Loan and Two Hundred Fifty Thousand Dollars ($250,000) in the case of an ABR Loan; and (2) LIBOR Loans may be prepaid only on the last day of the Interest Period for such
Loans; provided, however, that such prepayment of LIBOR Loans may be made on any other Business Day if the Borrower pays at the time of such prepayment
all amounts due pursuant to Section 2.17 hereof. Upon receipt of any such prepayments, the Agent will promptly thereafter cause to be distributed the applicable Ratable Share of such prepayment
to each Bank for the account of its applicable Lending Office, except that prepayments of Swing Line Loans shall be made solely to the Swing Line Bank. 

    (b) The
Borrower shall immediately upon a Change in Control prepay the Notes in full and all accrued interest to the date of such prepayment, and in the case of LIBOR
Loans all amounts due pursuant to Section 2.17 hereof. 

    Section 2.12  Method of Payment.  The Borrower shall make each payment
under this Agreement and under the Notes not later than 11:00 A.M. Chicago time on the date when due in lawful money of the United States to the Agent for the account of the applicable Lending
Office of each Bank (or, in the case of Swing Line Loans, for the account of the Swing Line Bank) in immediately available funds. The Agent will promptly thereafter cause to be distributed
(1) the applicable Ratable Share of such payments of principal and interest with respect to Loans (other than Swing Line Loans) in like funds to each Bank for the account of its applicable
Lending Office, (2) such payments of principal and interest with respect to Swing Line Loans solely to the Swing Line Bank and (3) other fees payable to any Bank to be applied in
accordance with the terms of this Agreement. If any such payment is not received by a Bank on the Business Day on which the Agent received such payment (or the following Business Day if the Agent's
receipt thereof occurs after 2:00 P.M. (Chicago time)), such Bank shall be entitled to receive from the Agent interest on such payment at the Federal Funds Rate for three Business Days and
thereafter at the Alternate Base Rate (which interest payment shall not be an obligation for the Borrower's account, including under Section 11.04 or Section 11.06). The Borrower hereby
authorizes each Bank, if and to the extent payment is not made when due under this Agreement or under the Notes, to charge from time to time against any account of the Borrower with such Bank any
amount as due. Whenever any payment to be made under this Agreement or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on 

19

 

the next succeeding Business Day, and such extension of time shall be included in the computation of the payment of interest and the commitment fee, as the case may be, except, in the case of a LIBOR
Loan, if the result of such extension would be to extend such payment into another calendar month, such payment shall be made on the immediately preceding Business Day. 

    Section 2.13  Use of Proceeds.  The proceeds of the Loans hereunder shall
be used by the Borrower for working capital and general corporate purposes of the Borrower and the Guarantors to the extent permitted in this Agreement and to repay Swing Line Loans. The Borrower will
not, directly or indirectly, use any part of such proceeds for the purpose of repaying the Senior Notes or for purchasing or carrying any margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System or to extend credit to any Person for the purpose of purchasing or carrying any such margin stock, or for any purpose which violates, or is
inconsistent with, Regulation X of such Board of Governors. 

    Section 2.14  Yield Protection.  If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any interpretation thereof, or the compliance of any Bank therewith, 

     (i) subjects
any Bank or any applicable Lending Office to any tax, duty, charge or withholding on or from payments due from the Borrower (excluding federal taxation of
the overall net income of any Bank or applicable Lending Office), or changes the basis of taxation of payments to any Bank in respect of its Loans or other amounts due it hereunder, or 

    (ii) imposes
or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Bank or any applicable Lending Office (other than reserves and assessments taken into account in determining the interest rate applicable to LIBOR Loans), or 

    (iii) imposes
any other condition the result of which is to increase the cost to any Bank or any applicable Lending Office of making, funding or maintaining loans or
reduces any amount receivable by any Bank or any applicable Lending Office in connection with loans, or requires any Bank or any applicable Lending Office to make any payment calculated by reference
to the amount of loans held or interest received by it, by an amount deemed material by such Bank, 

then,
within fifteen (15) days of demand by such Bank, the Borrower shall pay such Bank that portion of such increased expense incurred or reduction in an amount received which such Bank
reasonably determines is attributable to making, funding and maintaining its Loans and its Commitment. 

    Section 2.15  Changes in Capital Adequacy Regulations.  If a Bank
determines the amount of capital required or expected to be maintained by such Bank, any Lending Office of such Bank or any corporation controlling such Bank is increased as a result of a Change,
then, within 10 days of demand by such Bank, the Borrower shall pay such Bank the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital
which such Bank determines is attributable to this Agreement, its Loans or its obligation to make Loans hereunder (after taking into account such Bank's policies as to capital adequacy);  provided, however, that a Bank shall impose such cost upon the Borrower only if such Bank is generally imposing such cost on its other borrowers having
similar credit arrangements. "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any
other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects
the amount of capital required or expected to be maintained by any Bank or any Lending Office or any corporation controlling any Bank. "Risk-Based Capital Guidelines" means (i) the
risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by
regulatory authorities outside the United States implementing the 

20

 

July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition
rules, and any amendments to such regulations adopted prior to the date of this Agreement. 

    Section 2.16  Availability of LIBOR Loans.  If any Bank determines that
maintenance of its LIBOR Loans at the Lending Office selected by the Bank would violate any applicable law, rule, regulation, or directive, whether or not having the force of law (and it is not
reasonably possible for the Bank to designate an alternate Lending Office without being adversely affected thereby), or if the Majority Banks determine that (i) deposits of a type and maturity
appropriate to match fund LIBOR Loans are not available or (ii) the interest rate applicable to LIBOR Loans does not accurately reflect the cost of making or maintaining such LIBOR Loans, then
the Agent shall suspend the availability of LIBOR Loans and require any LIBOR Loans to be repaid. 

    Section 2.17  Funding Indemnification.  If any payment of a LIBOR Loan
occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a LIBOR Loan is not made on the date specified by the
Borrower for any reason other than default by the Banks, the Borrower will indemnify each Bank for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost
in liquidating or employing deposits required to fund or maintain the LIBOR Loan. 

    Section 2.18  Bank Statements; Survival of Indemnity.  To the extent
reasonably possible, each Bank shall designate an alternate Lending Office with respect to its LIBOR Loans to reduce any liability of the Borrower to such Bank under Sections 2.14 and 2.15 or to avoid
the unavailability of LIBOR Loans. Each Bank shall deliver a written statement of such Bank as to the amount due, if any, under Sections
2.14, 2.15 or 2.17. Such written statement shall set forth in reasonable detail the calculations upon which such Bank determined such amount and shall be final, conclusive and binding on the Borrower
in the absence of manifest error. Determination of amounts payable under such Sections in connection with a LIBOR Loan shall be calculated as though each Bank funded its LIBOR Loan through the
purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the LIBOR Rate applicable to such Loan, whether in fact that is the case or not. Unless
otherwise provided herein, the amount specified in the written statement shall be payable on demand after receipt by the Borrower of the written statement. The obligations of the Borrower under
Sections 2.14, 2.15 and 2.17 shall survive payment of the Obligations and termination of this Agreement. 

    Section 2.19  Extension of Termination Date.  (a) Not more than once in
any fiscal year of the Borrower, the Borrower may request an extension of the Termination Date to the first or second anniversary of the then scheduled Termination Date (but in no event later than the
third anniversary of the date of such request) by submitting a request for an extension to the Agent not less than 180 days prior to the then scheduled Termination Date. At the time of or prior
to the delivery of such request, the Borrower shall propose to the Agent the amount of the fees that the Borrower would agree to pay with respect to such extension if approved by the Banks. Promptly
upon (but not later than five Business Days after) the Agent's receipt and approval of the extension request and fee proposal (as so approved, the "Extension Request"), the Agent shall deliver to each
Bank a copy of, and shall request each Bank to approve, the Extension Request. Each Bank approving the Extension Request shall deliver its written approval no later than 60 days after such
Bank's receipt of the Extension Request. If the written approval of the Extension Request by the Majority Banks is received by the Agent within such 60-day period, the Termination Date
shall be extended to the first or second anniversary of the then scheduled Termination Date (as specified in the Extension Request) but only with respect to the Banks that have given such written
approval. Except to the extent that a Bank that did not give its written approval to such Extension Request ("Rejecting Bank") is replaced as provided in Section 2.20, the Loans and all
interest, fees and other amounts owed to such Rejecting Bank shall be paid in full on 

21

 

the Termination Date as determined prior to such Extension Request (the "Rejecting Bank's Termination Date"). 

    (b) Within
ten days of the Agent's notice to the Borrower that the Majority Banks have approved an Extension Request, the Borrower shall pay to the Agent for the
account of each Bank that has approved the Extension Request the applicable extension fees specified in the Extension Request. 

    (c) If
the Majority Banks approve the Extension Request, the Borrower may, upon notice to the Agent and any Rejecting Bank, and subject to the provisions of the last
sentence of this Section 2.19(c), terminate the Commitment of such Rejecting Bank (or such portion of the Commitment as is not assigned to a Replacement Bank in accordance with
Section 2.20), which termination shall occur as of a date set forth in such Borrower's notice but in no event more than thirty (30) days following such notice (subject to the provisions
of Section 2.20(b)). Upon the effective date of such termination, the Borrower shall pay to the Rejecting Bank all amounts due and owing to it hereunder or under any other Loan Document,
including, without limitation, the aggregate outstanding principal amount of the Loans owed
to such Rejecting Bank, together with accrued interest thereon through the date of such termination, amounts payable under Sections 2.14 and 2.15 with respect to such Rejecting Bank and the fees
payable to such Rejecting Bank under Section 2.09(b). Upon request by the Borrower or the Agent, the Rejecting Bank will deliver to the Borrower and the Agent a letter setting forth the amounts
payable to the Rejecting Bank as set forth above. Upon the termination of such Rejecting Bank's Commitment and payment of the amounts provided for in the immediately preceding sentence, the Borrower
shall have no further obligations to such Rejecting Bank under this Agreement and such Rejecting Bank shall cease to be a party hereto, provided,
however, that such Rejecting Bank shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.17, 11.04 and 11.06, as well as to any fees accrued for its account
hereunder not yet paid, and shall continue to be obligated under Section 10.05 with respect to obligations and liabilities accruing prior to the termination of such Rejecting Bank's Commitment.
If, as a result of the termination of the Rejecting Bank's Commitment, any payment of a LIBOR Loan occurs on a day which is not the last day of the applicable Interest Period, the Borrower shall pay
to the Agent for the benefit of the Banks (including any Rejecting Bank) any loss or cost incurred by the Banks (including any Rejecting Bank) resulting therefrom in accordance with
Section 2.17. Upon the effective date of the termination of the Rejecting Bank's Commitment, the Aggregate Commitments shall be reduced by the amount of the terminated Commitment of the
Rejecting Bank, and each other Bank shall be deemed to have irrevocably and unconditionally purchased and received (subject to the provisions of the last sentence of this Section 2.19(c)),
without recourse or warranty, from the Rejecting Bank, an undivided interest and participation in any Facility Letter of Credit then outstanding, ratably, such that each Bank (excluding the Rejecting
Bank but including any Replacement Bank that acquires an interest hereunder from such Rejecting Bank) holds a participation interest in each Facility Letter of Credit in proportion to the ratio that
such Bank's Commitment (upon the effective date of such termination of the Rejecting Bank's Commitment) bears to the Aggregate Commitments (as reduced by the termination of such Rejecting Bank's
Commitment or a part thereof). Notwithstanding the foregoing, if, upon the termination of the Commitment of such Rejecting Bank, the sum of the outstanding principal balance of the Loans and the
Facility Letter of Credit Obligations would exceed the Aggregate Commitments (as reduced), the Borrower may not terminate such Rejecting Bank's Commitment unless the Borrower, on or prior to the
effective date of such termination, prepays, in accordance with the provisions of this Agreement, outstanding Loans or causes to be canceled, released and returned to the applicable Issuing Bank
outstanding Facility Letters of Credit in sufficient amounts such that, on the effective date of such termination, the sum of the outstanding principal balance of the Loans and the Facility Letter of
Credit Obligations does not exceed the Aggregate Commitments (as reduced). 

    Section 2.20  Replacement of Certain Banks.  (a) In the event a Bank
("Affected Bank"): (i) shall have requested compensation from the Borrower under Sections 2.14 or 2.15 to recover additional costs 

22

 

incurred by such Bank that are not being incurred generally by the other Banks, (ii) shall have delivered a notice pursuant to Section 2.16 claiming that such Bank is unable to extend
LIBOR Loans to the Borrower for reasons not generally applicable to the other Banks, (iii) shall have invoked Section 11.13 or (iv) is a Rejecting Bank pursuant to
Section 2.19, then, in any such case, the Borrower or the Agent may make written demand on such Affected Bank (with a copy to the Agent in the case of a demand by the Borrower and a copy to the
Borrower in the case of a demand by the Agent) for the Affected Bank to assign, and, if a Replacement Bank (as hereinafter defined) notifies the Affected Bank of its willingness to purchase the
Affected Bank's interest and the Agent and the Borrower consent thereto in writing, then such Affected Bank shall assign pursuant to one or more duly executed assignment and
acceptance agreements in substantially and in all material respects in the form and substance of Exhibit I five (5) Business Days after
the date of such demand, to one or more financial institutions that comply with the provisions of Section 12.03(a) that the Borrower or the Agent, as the case may be, shall have engaged for
such purpose ("Replacement Bank"), all (or, to the extent permitted under Section 2.20(b), a part) of such Affected Bank's rights and obligations (from and after the date of such assignment)
under this Agreement and the other Loan Documents (including, without limitation, its Commitment and all Loans owing to it) in accordance with Section 12.03. The Agent agrees, upon the
occurrence of such events with respect to an Affected Bank and upon the written request of the Borrower, to use its reasonable efforts to obtain the commitments from one or more financial institutions
to act as a Replacement Bank. As a condition to any such assignment, the Affected Bank shall have concurrently received, in cash, all amounts due and owing to the Affected Bank hereunder or under any
other Loan Document, including, without limitation, the aggregate outstanding principal amount of the Loans owed to such Bank, together with accrued interest thereon through the date of such
assignment, amounts payable under Sections 2.14 and 2.15 with respect to such Affected Bank and the fees payable to such Affected Bank under Section 2.09(b);  provided that upon such Affected Bank's
replacement, such Affected Bank shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.14, 2.15, 2.17, 11.04 and 11.06, as well as to any fees accrued for its account hereunder and not yet paid, and shall continue to be obligated under Section 10.05 with
respect to obligations and liabilities accruing prior to the replacement of such Affected Bank. 

    (b) In
the event that the Affected Bank is a Rejecting Bank, the Borrower may elect to have a part of the Rejecting Bank's rights and obligations under this Agreement
and the other Loan Documents assigned pursuant to this Section 2.20, provided that the Borrower also elects, pursuant to Section 2.19(c),
to terminate the entire amount of the Rejecting Bank's Commitment not so assigned, which termination shall be effective on the date on which such assignment of the Rejecting Bank's rights and
obligations is consummated under this Section 2.20. 

    Section 2.21  Swing Line.  (a) The Swing Line Bank agrees, on the
terms and conditions hereinafter set forth, to make loans ("Swing Line Loans") to the Borrower from time to time during the period from the date of this Agreement, up to but not including the
Termination Date, in an aggregate principal amount not to exceed at any time outstanding the lesser of (i) the Swing Line Commitment or (ii) the amount by which the Swing Line Bank's
Commitment under Section 2.01 exceeds the outstanding principal amount of the Loans made by the Swing Line Bank pursuant to Section 2.01, subject to the limitations set forth in
Section 2.01(b). 

    (b) Each
Swing Line Loan which shall not utilize the Swing Line Commitment in full shall be in an amount not less than One Million Dollars ($1,000,000) and, if in
excess thereof, in integral multiples of One Million Dollars ($1,000,000). Within the limits of the Swing Line Commitment, the Borrower may borrow, repay and reborrow under this Section 2.21. 

    (c) The
Borrower shall give the Swing Line Bank notice of any request for a Swing Line Loan not later than 2:00 p.m. Chicago time on the Business Day of such
Swing Line Loan, specifying the amount of such requested Swing Line Loan. Each such notice shall be accompanied by a Borrowing Base 

23

 

Certificate dated as of the date of such notice (and by the notice provided for in Section 2.21(d)). All notices given by the Borrower under this Section 2.21(c) shall be irrevocable.
Upon fulfillment of the applicable conditions set forth in Article III, the Swing Line Bank will make the Swing Line Loan available to the Borrower in immediately available funds by crediting
the amount thereof to the Borrower's account with the Swing Line Bank. 

24

  

    (c) The
Borrower shall give the Swing Line Bank notice of any request for a Swing Line Loan not later than 2:00 p.m. Chicago time on the Business Day of such
Swing Line Loan, specifying the amount of such requested Swing Line Loan. Each such notice shall be accompanied by a Borrowing Base Certificate dated as of the date of such notice (and by the notice
provided for in Section 2.21(d)). All notices given by the Borrower under this Section 2.21(c) shall be irrevocable. Upon fulfillment of the applicable conditions set forth in
Article III, the Swing Line Bank will make the Swing Line Loan available to the Borrower in immediately available funds by crediting the amount thereof to the Borrower's account with the Swing
Line Bank. 

    (d) On
the first Business Day following the making of a Swing Line Loan, such Swing Line Loan shall be paid in full from the proceeds of a Loan made pursuant to
Section 2.01. Each notice given by the Borrower under Section 2.21(c) shall include, or, if it does not include, shall be deemed to include an irrevocable notice under
Section 2.03 requesting the Banks to make an ABR Loan on the next succeeding Business Day in the full amount of such Swing Line Loan. 

 
 

ARTICLE III
  
    CONDITIONS PRECEDENT    
  

    Section 3.01  Conditions Precedent to Initial Loans.  The Banks shall not
be required to make the initial Loans hereunder or to issue or participate in any Facility Letters of Credit hereunder, unless and until (a) the Borrower has paid to the Agent the applicable
fees referred to in Sections 2.09(a) and (c), (b) the Prior Credit Agreement has been terminated and all principal, interest, fees and other amounts payable thereunder have been paid in
full (which payment may be made in whole or in part from the proceeds of the initial Loans hereunder), and (c) and the Agent shall have received each of the following, in form and substance
satisfactory to the Agent: 

    (1)  Notes.  A Note payable to each Bank duly executed by the Borrower; 

    (2)  Evidence of all corporate action by the Borrower.  Certified copies of all corporate action taken by
the Borrower, including resolutions of its Board of Directors, authorizing the execution, delivery and performance of the Loan Documents to which it is a party and each other document to be delivered
pursuant to this Agreement; 

    (3)  Incumbency and signature certificate of Borrower.  A certificate of the Secretary or Assistant
Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign the Loan Documents to which it is a party and the other documents to be delivered
by the Borrower under this Agreement; 

    (4)  Articles of Incorporation of Borrower.  Copies of the articles of incorporation of the Borrower,
together with all amendments, and a certificate of good standing, all certified by the appropriate governmental officer in its jurisdiction of incorporation; 

    (5)  Opinions of counsel for Borrower.  A favorable opinion of Paul, Hastings, Janofsky &
Walker LLP, counsel for the Borrower and for the Guarantors that are Delaware or Georgia Persons, in substantially the form of Exhibit B  and as to such other matters as the Agent may
reasonably request and of the Borrower's Illinois counsel (as approved by the Agent), in substantially the form of  Exhibit C and as to such other matters as the Agent may reasonably request;
 

    (6)  Opinion of counsel for Agent.  A favorable opinion of Sidley Austin Brown & Wood, counsel for
the Agent, in substantially the form of Exhibit D hereto; 

    (7)  Evidence of all corporate, partnership or limited liability company action by Guarantors.  With
respect to each corporate Guarantor, certified (as of the date of this Agreement) copies of all corporate action taken by such Guarantor, including resolutions of its Board of Directors, 

24

 

authorizing the execution, delivery, and performance of the applicable Guaranty, and with respect to each limited partnership Guarantor and limited liability company Guarantor, partnership action or
limited liability company action (as applicable) taken by such Guarantor, including any and all necessary partnership consents or limited liability company consents (as applicable) authorizing the
execution, delivery, and performance of the applicable Guaranty; 

    (8)  Articles of Incorporation of Guarantors.  Copies of the articles of incorporation of each corporate
Guarantor, together with all amendments, and a certificate of good standing, all certified by the appropriate governmental officer in its jurisdiction of incorporation;  provided, however, that, if a
certificate of good standing is not currently available, the Guarantor shall deliver other reasonably satisfactory
evidence of its good standing and, within thirty (30) days, shall deliver a certificate of good standing; 

    (9)  Incumbency and signature certificate of Guarantors.  A certificate (dated as of the date of this
Agreement) of the Secretary or Assistant Secretary of each corporate Guarantor or the general partner of each partnership Guarantor or managing member of each limited liability company certifying the
names and true signatures of the officers of each such corporate Guarantor and the representative or officer of each partnership Guarantor or limited liability company Guarantor authorized to sign the
Guaranty; 

    (10)  Opinion of counsel for Certain Guarantors.  With respect to Beazer Homes Corp., a Tennessee
corporation, Beazer Homes Texas, L.P., a Texas limited partnership, Texas Lone Star Title, L.P., a Texas limited partnership, and April Corporation, a Colorado corporation, a favorable
opinion of counsel to each such Guarantor in the state in which it is formed or organized to do business (as approved by the Agent), in substantially the form of  Exhibit E hereto, and as to such
other matters as the Agent may reasonably request; 

    (11)  Partnership agreement.  A true and complete copy of the limited partnership agreement of each
limited partnership Guarantor, including without limitation any and all amendments and modifications thereto, and any and all filed partnership certificates; and 

    (12)  Limited Liability Company Documents.  A true and complete copy of the limited liability company
agreement or operating agreement of each limited liability company Guarantor, including without limitation any and all amendments and modifications thereto, and a certified copy of such Guarantor's
certificate of formation. 

    (13)  Other Documents.  Such other and further documents as any Bank or its counsel may have reasonably
requested. 

    Notwithstanding
the foregoing, the parties hereto acknowledge and agree that the Agent, at its election, may waive, with respect to the Original Guarantors, the requirement for
delivery of articles of incorporation (under item (8) above) and the partnership agreement and partnership certificates (under item (11) above) provided and to the extent that the Borrower delivers or
causes the applicable Original Guarantors to deliver to the Agent a certificate that such documents, as delivered pursuant to the Prior Credit Agreement, have not been modified or amended and remain
in full force and effect. 

    Section 3.02  Conditions Precedent to All Loans.  The obligation of each
Bank to make each Loan (including, in the case of the Swing Line Bank, any Swing Line Loan) shall be subject to the further conditions precedent that (except as hereinafter provided) on the date of
such Loan: 

	(1)
	The
following statements shall be true and the Agent shall have received a certificate, substantially in the form of the certificate attached hereto as  Exhibit F, signed by a duly authorized officer of
the Borrower dated the date of such Loan, stating that:

	(a)
	The
representations and warranties contained in Article IV of this Agreement, are correct on and as of the date of such Loan as though made on and as of such date except to
the 

25

 

extent
that any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty is correct as of such earlier date; 

	(b)
	No
Default or Event of Default has occurred and is continuing, or would result from such Loan; and

	(c)
	Upon
the making of the requested Loans, the aggregate outstanding amount of Permitted Senior Debt shall not exceed the Borrowing Base as of the most recent Inventory Valuation Date;
and 

	(2)
	The
Agent shall have received such other approvals, opinions, or documents as any Bank through the Agent may reasonably request; and

	(3)
	Such
other and further documents as any Bank or its counsel may have reasonably requested. All matters incident to the making of such Loan shall be reasonably satisfactory to the
Banks and their counsel. 

    Notwithstanding
the foregoing, in the case of a Loan (provided for in Section 2.21(d)) made to repay a Swing Line Loan, the satisfaction of the foregoing conditions with
respect to such Swing Line Loan shall constitute satisfaction of such conditions with respect to the Loan made on the next succeeding Business Day to repay such Swing Line Loan. 

 
 

ARTICLE IV    
    
    REPRESENTATIONS AND WARRANTIES    
  

    The Borrower and each of the Guarantors, jointly and severally, represent and warrant that: 

    Section 4.01  Incorporation, Formation, Good Standing, and Due
Qualification.  The Borrower, each Subsidiary, and each of the Guarantors is (in the case of a corporation) a corporation duly incorporated or (in the case of a
limited partnership) a limited partnership duly formed or (in the case of a limited liability company) a limited liability company duly formed, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation or formation; has the power and authority to own its assets and to transact the business in which it is now engaged or proposed to be engaged in; and is duly
qualified and in good standing under the laws of each other jurisdiction in which such qualification is required. 

    Section 4.02  Power and Authority.  The execution, delivery and
performance by the Borrower and the Guarantors of the Loan Documents to which each is a party have been duly authorized by all necessary corporate, partnership or limited liability company action, as
the case may be, and do not and will not (1) require any consent or approval of the stockholders of such corporation, partners of such partnership or members of such limited liability company
(except such consents as have been obtained as of the date hereof); (2) contravene such corporation's charter or bylaws, such partnership's partnership agreement or such limited liability
company's articles or certificate of formation or operating agreement; (3) violate, in any material respect, any provision of any law, rule, regulation (including, without limitation,
Regulations U and X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination, or award presently in effect having applicability to such
corporation, partnership or limited liability company; (4) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other material agreement, lease,
or instrument to which such corporation, partnership or limited liability company is a party or by which it or its properties may be bound or affected; (5) result in, or require, the creation
or imposition of any Lien, upon or with respect to any of the properties now owned or hereafter acquired by such corporation, partnership or limited liability company; and (6) cause such
corporation, partnership or limited liability company to be in default, in any material respect, under any such law, rule, regulation, 

26

 

order, writ, judgment, injunction, decree, determination, or award or any such indenture, agreement, lease or instrument. 

    Section 4.03  Legally Enforceable Agreement.  This Agreement is, and each
of the other Loan Documents when delivered under this Agreement will be legal, valid, and binding obligations of the Borrower or each Guarantor, as the case may be, enforceable against the Borrower or
each Guarantor, as the case may be, in accordance with their respective terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, and other similar laws
affecting creditors' rights generally. 

    Section 4.04  Financial Statements.  The consolidated balance sheet of the
Borrower and its Subsidiaries as at June 30, 2001, and the consolidated statements of operations, cash flow and changes to stockholders'
equity of the Borrower and its Subsidiaries for the period of three fiscal quarters ended June 30, 2001, are complete and correct and fairly present as at such date the financial condition of
the Borrower and its Subsidiaries and the results of their operations for the periods covered by such statements, all in accordance with GAAP consistently applied (subject to year-end
adjustments), and since June 30, 2001, there has been no material adverse change in the condition (financial or otherwise), business, or operations of the Borrower and its Subsidiaries. There
are no liabilities of the Borrower or any Subsidiary, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto, other than liabilities arising
in the ordinary course of business since June 30, 2001. No information, exhibit, or report furnished by the Borrower to any Bank in connection with the negotiation of this Agreement taken
together, contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not materially misleading. 

    Section 4.05  Labor Disputes and Acts of God.  Neither the business nor
the properties of the Borrower or any Subsidiary or any Guarantor are affected by any fire, explosion, accident, strike, lockout, or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy, or other casualty (whether or not covered by insurance), materially and adversely affecting such business or properties or the operation of the Borrower or such
Subsidiary or such Guarantor. 

    Section 4.06  Other Agreements.  Neither the Borrower nor any Significant
Subsidiary nor any Significant Guarantor is a party to any indenture, loan, or credit agreement, or to any lease or other agreement or instrument or subject to any charter, corporate or other
restriction which could have a material adverse effect on the business, properties, assets, operations, or conditions, financial or otherwise, of the Borrower or any Significant Subsidiary or any
Significant Guarantor, or the ability of the Borrower or any Significant Guarantor to carry out its obligations under the Loan Documents to which it is a party. Neither the Borrower nor any
Significant Subsidiary nor any Significant Guarantor is in default in any material respect in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained
in any agreement or instrument material to its business to which it is a party. 

    Section 4.07  Litigation.  Except as reflected in or reserved for in the
financial statements referred to in Section 4.04, there is no pending or, to the knowledge of the Borrower or any Guarantor, threatened action or proceeding against or affecting the Borrower or
any Significant Subsidiary or any Significant Guarantor before any court, governmental agency, or arbitrator, which may, in any one case or in the aggregate, materially adversely affect the financial
condition, operations, properties, or business of the Borrower or any Significant Subsidiary or any Significant Guarantor or the ability of the Borrower or any Significant Guarantor to perform its
obligation under the Loan Documents to which it is a party. 

    Section 4.08  No Defaults on Outstanding Judgments or Orders.  Except for
judgments with respect to which the liability of the Borrower, each Significant Subsidiary and each Significant Guarantor does not exceed $1,000,000 in the aggregate for all such judgments,
(a) the Borrower, each Significant 

27

 

Subsidiary and each Significant Guarantor have satisfied all judgments, and (b) neither the Borrower nor any Significant Subsidiary nor any Significant Guarantor is in default with respect to
any judgment, writ, injunction, decree, rule, or regulation of any court, arbitrator, or federal, state, municipal, or other governmental authority, commission, board, bureau, agency, or
instrumentality, domestic or foreign. 

    Section 4.09  Ownership and Liens.  The Borrower and each Subsidiary and
each Guarantor have title to, or valid leasehold interests in, all of their respective properties and assets, real and personal, including the properties and assets and leasehold interests reflected
in the financial statements referred to in Section 4.04 (other than any properties or assets disposed of in the ordinary course of business), and none of the properties and assets owned by the
Borrower or any Subsidiary or any Guarantor and none of their leasehold interests is subject to any Lien, except such as may be permitted pursuant to Section 6.01 of this Agreement. 

    Section 4.10  Subsidiaries and Ownership of Stock.  Set forth in  Exhibit G hereto is a complete and accurate list of the Subsidiaries of the Borrower, showing the jurisdiction of incorporation or formation of
each and showing the percentage of the Borrower's ownership of the outstanding stock or partnership interest of each Subsidiary. All of the outstanding capital stock of each such corporate Subsidiary
has been validly issued, is fully paid and nonassessable, and is owned by the Borrower free and clear of all Liens. The limited partnership agreement of each such limited partnership Subsidiary is in
full force and effect and has not been amended or modified, except for such amendments or modifications as are delivered to the Agent under Section 3.01(11). Each of the Guarantors is a Wholly
Owned Subsidiary of the Borrower. 

    Section 4.11  ERISA.  The Borrower and each Subsidiary and each Guarantor
are in compliance in all material respects with all applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred and is continuing with respect to any Plan; no
notice of intent to terminate a Plan has been filed, nor has any Plan been terminated; no circumstances exist which constitute grounds entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such proceedings; neither the Borrower nor any Commonly Controlled Entity has completely or partially withdrawn from a
Multiemployer Plan under circumstances that could subject the Borrower or any Subsidiary to material withdrawal liability; the Borrower and each Commonly Controlled Entity have met their minimum
funding requirements under ERISA with respect to all of their Plans and the present value of all vested benefits under each Plan does not materially exceed the fair market value of all Plan assets
allocable to such benefits, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA; and neither the Borrower nor any Commonly Controlled Entity has
incurred any material liability to the PBGC under ERISA. 

    Section 4.12  Operation of Business.  The Borrower, each Subsidiary and
each Guarantor possess all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, to conduct their respective businesses substantially as now conducted and
as presently proposed to be conducted and the Borrower and each of its Subsidiaries and each Guarantor are not in violation of any valid rights of others with respect to any of the foregoing where the
failure to possess such licenses, permits, franchises, patents, copyrights, trademarks, trade names or rights thereto or the violation of the valid rights of others with respect thereto may, in any
one case or in the aggregate, adversely affect in any material respect the financial condition, operations, properties, or business of the Borrower or any
Significant Subsidiary or any Significant Guarantor or the ability of the Borrower or any Significant Guarantor to perform its obligation under the Loan Documents to which it is a party. 

    Section 4.13  Taxes.  All income tax liabilities or income tax obligations
of the Borrower, each Subsidiary and each Guarantor have been paid or have been accrued by or reserved for by the Borrower. The Borrower constitutes the parent of an affiliated group of corporations
for purposes of filing a consolidated United States federal income tax return. 

28

 

    Section 4.14  Laws; Environment.  The Borrower, each Subsidiary and each
Guarantor have duly complied, and their businesses, operations, assets, equipment, property, leaseholds, or other facilities are in compliance, in all material respects, with the provisions of all
federal, state, and local statutes, laws, codes, and ordinances and all rules and regulations promulgated thereunder (including without limitation those relating to the environment, health and
safety). The Borrower, each Subsidiary and each Guarantor have been issued and will maintain all required federal, state, and local permits, licenses, certificates, and approvals relating to
(1) air emissions; (2) discharges to surface water or groundwater; (3) noise emissions; (4) solid or liquid waste disposal; (5) the use, generation, storage,
transportation, or disposal of toxic or hazardous substances or hazardous wastes (intended hereby and hereafter to include any and all such materials listed in any federal, state, or local law, code,
or ordinance and all rules and regulations promulgated thereunder as hazardous); or (6) to the extent that failure to maintain the same may, in any one case or in the aggregate, adversely
affect in any material respect the financial condition, operations, properties, or business of the Borrower or any Significant Subsidiary or any Significant Guarantor or the ability of the Borrower or
any Significant Guarantor to perform its obligations under the Loan Documents to which it is a party, other environmental, health or safety matters. Neither the Borrower nor any Subsidiary nor any
Guarantor has received notice of, or has actual knowledge of any violations of any federal, state, or local environmental, health, or safety laws, codes or ordinances or any rules or regulations
promulgated thereunder with respect to its businesses, operations, assets, equipment, property, leaseholds, or other facilities, which violation may, in any one case or in the aggregate, adversely
affect in any material respect the financial condition, operations, properties, or business of the Borrower or any Significant Subsidiary or any Significant Guarantor or the ability of the Borrower or
any Significant Guarantor to perform its obligations under the Loan Documents to which it is a party. Except in accordance with a valid governmental permit, license, certificate or approval, there has
been no material emission, spill, release, or discharge into or upon (1) the air; (2) soils, or any improvements located thereon; (3) surface water or groundwater; or
(4) the sewer, septic system or waste treatment, storage or disposal system servicing the premises, of any toxic or hazardous substances or hazardous wastes at or from the premises; and
accordingly the premises of the Borrower, each Subsidiary and each Guarantor have not been adversely affected, in any material respect, by any toxic or hazardous substances or wastes. There has been
no complaint, order, directive, claim, citation, or notice by any governmental authority or any person or entity with respect to violations of law or damages by reason of Borrower's or any
Subsidiary's (1) air emissions; (2) spills, releases, or discharges to soils or improvements located thereon, surface water, groundwater or the sewer, septic system or waste treatment,
storage or disposal systems servicing the premises; (3) noise emissions; (4) solid or liquid waste disposal; (5) use, generation, storage, transportation, or disposal of toxic or
hazardous substances or hazardous waste; or (6) other environmental, health or safety matters affecting the Borrower, any Subsidiary or any Guarantor or its business, operations, assets,
equipment, property, leaseholds, or other facilities. Neither the Borrower nor any Subsidiary nor any Guarantor has
any material indebtedness, obligation, or liability, absolute or contingent, matured or not matured, with respect to the storage, treatment, cleanup, or disposal of any solid wastes, hazardous wastes,
or other toxic or hazardous substances (including without limitation any such indebtedness, obligation, or liability with respect to any current regulation, law, or statute regarding such storage,
treatment, cleanup, or disposal). 

    Section 4.15  Investment Company Act.  Neither the Borrower nor any
Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 

    Section 4.16  Public Utility Holding Company Act.  Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended. 

29

 
 
 

ARTICLE V    
    
    AFFIRMATIVE COVENANTS    
  

    So long as any Note shall remain unpaid or any Bank shall have any Commitment under this Agreement, the Borrower and each Guarantor will (unless otherwise
agreed to by the Majority Banks in writing): 

    Section 5.01  Maintenance of Existence.  Preserve and maintain, and cause
each Subsidiary to preserve and maintain (except for a Subsidiary that ceases to maintain its existence solely as a result of an Internal Reorganization), its corporate, limited partnership or limited
liability company existence and good standing in the jurisdiction of its incorporation or formation and qualify and remain qualified to transact business in each jurisdiction in which such
qualification is required. 

    Section 5.02  Maintenance of Records.  Keep and cause each Subsidiary to
keep, adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Borrower and its
Subsidiaries. 

    Section 5.03  Maintenance of Properties.  Maintain, keep, and preserve,
and cause each Subsidiary to maintain, keep, and preserve, all of its properties (tangible and intangible) necessary or useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted. 

    Section 5.04  Conduct of Business.  Continue, and cause each Subsidiary to
continue (except in the case of a Subsidiary that ceases to engage in business solely as a result of an Internal Reorganization), to engage in a business of the same general type and in the same
manner as conducted by it on the date of this Agreement. 

    Section 5.05  Maintenance of Insurance.  Maintain, and cause each
Subsidiary to maintain, insurance with financially sound reputable insurance companies or associations (or, in the case of insurance for construction warranties and builder default protection for
buyers of Housing Units from the Borrower or any of its Subsidiaries, UHIC) 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. 

    Section 5.06  Compliance with Laws.  Comply, and cause each Subsidiary to
comply, in all material respects with all applicable laws, rules, regulations, and orders, such compliance to include, without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property, other than any such taxes, assessments and charges being contested by the Borrower in good faith which will not have a
material adverse effect on the financial condition of the Borrower. 

    Section 5.07  Right of Inspection.  At any reasonable time and from time
to time, permit any Bank or any agent or representative thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any
Subsidiary, and to discuss the affairs, finances, and accounts of the Borrower and any Subsidiary with any of their respective officers and directors and the Borrower's independent accountants. 

    Section 5.08  Reporting Requirements.  Furnish to the Agent for delivery
to each of the Banks: 

    (1)  Quarterly financial statements.  As soon as available and in any event within sixty (60) days
after the end of each of the first three quarters of each fiscal year of the Borrower, an unaudited condensed consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such
quarter, unaudited condensed consolidated statements of operations and cash flow of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with
the end of such quarter, and unaudited condensed consolidated statements of changes in stockholders' equity of the Borrower and its Subsidiaries for the portion of the fiscal year ended 

30

 

with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year and all prepared in
accordance with GAAP consistently applied and certified by the chief financial officer of the Borrower (subject to year-end adjustments); statements in the form of the Borrower's quarterly
10-Q report to the Securities and Exchange Commission that are consistent with the foregoing requirements shall satisfy such requirements; 

    (2)  Annual financial statements.  As soon as available and in any event within one hundred
(100) days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year, consolidated statements of
operations and cash flow of the Borrower and its Subsidiaries for such fiscal year, and consolidated statements of changes in stockholders' equity of the Borrower and its Subsidiaries for such fiscal
year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year and all prepared in accordance with GAAP
consistently applied and accompanied by an opinion thereon acceptable to the Agent by Deloitte & Touche or other independent accountants selected by the Borrower and acceptable to the Agent;
statements in the form of the Borrower's annual 10-K report to the Securities and Exchange Commission that are consistent with the foregoing requirements shall satisfy such requirements; 

    (3)  Financial projections.  On August 15, 2002 and each anniversary thereof, two-year
financial projections (including a consolidated income statement, balance sheet and statement of cash flows for the Borrower and its Subsidiaries) broken down by quarters, and as soon as available
(but not later than June 15 of each year), a mid-year update of the financial projections for the current year; 

    (4)  Variance analysis.  (a) Within sixty (60) days of the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, a quarterly variance analysis comparing actual quarterly results versus the most recently projected quarterly results for the fiscal quarter most
recently ended (including consolidated income statements of the Borrower and its Subsidiaries, an analysis of revenues, closings and operating profits of the Borrower and each Subsidiary on a state by
state basis, and such other items as are requested by any of the Banks), together with a written explanation of material variances. 

    (b) Within
one hundred (100) days after the end of each fiscal year of the Borrower, a quarterly variance analysis comparing actual quarterly results versus the
most recently projected quarterly results for the fiscal year most recently ended (including consolidated income statements of the Borrower and its Subsidiaries accompanied by an opinion thereon
acceptable to the Agent by Deloitte & Touche or other independent accountants selected by the Borrower and acceptable to the Agent, an analysis of revenues, closings and operating profits of
the Borrower and each Subsidiary on a state by state basis, and such other items as are requested by any of the Banks), together with a written explanation of material variances. 

    (5)  Management letters.  Promptly upon receipt thereof, copies of any reports submitted to the Borrower
or any Subsidiary by independent certified public accountants in connection with examination of the financial statements of the Borrower or any Subsidiary made by such accountants. 

    (6)  Borrowing Base Certificate.  Within thirty-five (35) days after the end of each
fiscal quarter, a Borrowing Base Certificate, with respect to the Inventory Valuation Date occurring on the last day of such fiscal quarter. 

31

  

    (7)  Compliance certificate.  Within sixty (60) days after the end of each of the first three
quarters, and within one hundred (100) days after the end of each fourth quarter, of each fiscal year of the Borrower, a certificate of the President or chief financial officer of the Borrower
certifying (a) the Borrower's compliance with all financial covenants including, without limitation, those set forth in Sections 6.10 and 6.11 and Article VII hereof, which certificate
shall set forth in reasonable detail the computation thereof and (b) certifying that to the best of his knowledge no Default or Event of Default has occurred and is continuing, or if a Default
or Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto; 

    (8)  Production Monitor Summary.  Upon request by the Agent, within sixty (60) days after the end
of each of the first three quarters, and within one hundred (100) days after the end of each fourth quarter, of each fiscal year of the Borrower, a certificate of the President or Chief
Operating Officer of the Borrower certifying the Inventory as at such date which lists by state of location each item of Inventory, in the following categories: (a) pre-foundation,
(b) foundation, (c) framed, (d) being finished, and (e) model homes; such summary shall include a delineation of sold or unsold items in each category; 

    (9)  Land Bank Inventory.  Within sixty (60) days after the end of each of the first three
quarters, and within one hundred (100) days after the end of each fourth quarter, of each fiscal year of the Borrower, a certificate of the President or Chief Operating Officer of the Borrower
certifying the Land as at such date, which lists by state of location all Land, delineating Finished Lots, Lots under Development, Entitled Land and estimated undeveloped Lots. 

    (10)  Accountant's report.  Simultaneously with the delivery of the annual financial statements referred
to in Section 5.08(2), a certificate of the independent public accountants who audited such statements to the effect that, in making the examination necessary for the audit of such statements,
they have obtained no knowledge of any condition or event which constitutes a Default or Event of Default, or if such accountants shall have obtained knowledge of any such condition or event,
specifying in such certificate each such condition or event of which they have knowledge and the nature and status thereof; 

    (11)  Notice of litigation.  Promptly after the commencement thereof, notice of all actions, suits, and
proceedings before any court or governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, affecting the Borrower or any Subsidiary which, if determined
adversely to the Borrower or such Subsidiary, would reasonably be expected to result in a judgment against the Borrower or such Subsidiary in excess of $1,000,000 or would reasonably be expected to
have a material adverse effect on the financial condition, properties, or operations of the Borrower or such Subsidiary; 

    (12)  Notice of Defaults and Events of Default.  As soon as possible and in any event within ten
(10) days after the occurrence of each Default or Event of Default, a written notice setting forth the details of such Default or Event of Default and the action which is proposed to be taken
by the Borrower with respect thereto; 

    (13)  ERISA reports.  As soon as possible, and in any event within thirty (30) days after the
Borrower knows or has reason to know that any circumstances exist that constitute grounds entitling the PBGC to institute proceedings to terminate a Plan subject to ERISA with respect to the Borrower
or any Commonly Controlled Entity, and promptly but in any event within two (2) Business Days of receipt by the Borrower or any Commonly Controlled Entity of notice that the PBGC intends to
terminate a Plan or appoint a trustee to administer the same, and promptly but in any event within five (5) Business Days of the receipt of notice concerning the imposition of withdrawal
liability in excess of $50,000 with respect to the Borrower or any Commonly Controlled Entity, the Borrower will deliver to each Bank a certificate of the chief financial officer of the 

32

 

Borrower setting forth all relevant details and the action which the Borrower proposes to take with respect thereto; 

    (14)  Reports to other creditors.  Promptly after the furnishing thereof, copies of any statement,
report, document, notice, certificate, and correspondence furnished to any other party pursuant to the terms of any indenture, loan, credit, or similar agreement and not otherwise required to be
furnished to the Bank pursuant to any other clause of this Section 5.08; 

    (15)  Proxy statements, etc.  Promptly after the sending or filing thereof, copies of all proxy
statements, financial statements, and reports which the Borrower or any Subsidiary sends to its stockholders, and copies of all regular, periodic, and special reports, and all registration statements
which the Borrower or any Subsidiary files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange; and 

    (16)  General information.  Such other information respecting the condition or operations, financial or
otherwise, of the Borrower or any Subsidiary as any Bank may from time to time reasonably request. 

    Section 5.09  Subsidiary Reporting Requirements.  In the event any of the
following statements are prepared with respect to any Subsidiary, then upon written request from any Bank, furnish to the Agent for delivery to each of the Banks the following with respect to any
Subsidiary: 

    (1)  Quarterly financial statements.  An unaudited balance sheet of such Subsidiary as of the end of most
recently completed fiscal quarter, statements of operations and cash flow of such Subsidiary for the period commencing at the end of the previous fiscal year and ending with the end of such quarter,
and statements of changes in stockholders' equity of such Subsidiary for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in the previous fiscal year and all prepared in accordance with GAAP consistently applied and certified by the chief financial officer
of such Subsidiary (subject to year-end adjustments); 

    (2)  Annual financial statements.  A balance sheet of such Subsidiary as of the end of such fiscal year,
statements of operations and cash flow of such Subsidiary for such fiscal year, and statements of changes in stockholders' equity of such Subsidiary for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year and all prepared in accordance with GAAP consistently applied and as to the
consolidated statements accompanied by an opinion thereon acceptable to the Agent by Deloitte & Touche or other independent accountants selected by the Borrower and acceptable to the Agent. 

    Section 5.10  Environment.  Be and remain, and cause each Subsidiary to be
and remain, in compliance with the provisions of all federal, state, and local environmental, health, and safety laws, codes and ordinances, and all rules and regulations issued thereunder; notify the
Agent promptly of any notice of a hazardous discharge or environmental complaint received from any governmental agency or any other party (and the Agent shall notify the Banks promptly following its
receipt of any such notice from the Borrower); notify the Agent promptly of any hazardous discharge from or affecting its premises (and the Agent shall notify the Banks promptly following its receipt
of any such notice from the Borrower); promptly contain and remove the same, in compliance with all applicable laws; promptly pay any fine or penalty assessed in connection therewith; permit any Bank
to inspect the premises, to conduct tests thereon, and to inspect all books, correspondence, and records pertaining thereto; and at such Bank's request, and at the Borrower's expense, provide a report
of a qualified environmental engineer, satisfactory in scope, form, and content to the Majority Banks, and such other and further assurances reasonably satisfactory to the Majority Banks that the
condition has been corrected. 

33

 

    Section 5.11  Use of Proceeds.  Use the proceeds of the Loans solely as
provided in Section 2.13 hereof. 

    Section 5.12  Ranking of Obligations.  Ensure that at all times its
Obligations under the Loan Documents shall be and constitute unconditional general obligations of the Borrower ranking at least pari passu with all its
other unsecured Debt. 

    Section 5.13  Taxes.  Pay and cause each Subsidiary to pay when due all
taxes, assessments and governmental charges and levies upon it or its income, profits or property, except those which are being
contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside. 

    Section 5.14  Wholly Owned Status.  Ensure that at all times each of the
Guarantors is a Wholly Owned Subsidiary of the Borrower. 

    Section 5.15  New Subsidiaries.  Within thirty (30) days after the
end of any fiscal quarter of the Borrower during which any Person shall have become a Subsidiary, cause such Subsidiary to execute and deliver to the Agent, for the benefit of the Banks, a Guaranty of
the Obligations in the form of Article IX and an opinion of counsel, certified copies of resolutions, articles of incorporation, incumbency certificates and other documents with respect to such
Subsidiary and its Guaranty substantially similar to the documents delivered pursuant to Section 3.01 with respect to the Guarantors, all of which shall be reasonably satisfactory to the
Majority Banks in form and substance. Neither STIC nor UHIC shall be required to deliver a Guaranty. Provided that Borrower shall make no further Investments in its Subsidiary, Seabrook Homes Company,
a Florida corporation and shall cause Seabrook Homes Corporation to be merged into Borrower or a Guarantor, or dissolved, on or before March 31, 2002, Seabrook Homes Company shall not be
required to be a Guarantor. 

 
 

ARTICLE VI
  
    NEGATIVE COVENANTS    
  

    So long as any Note shall remain unpaid or any Bank shall have any Commitment under this Agreement, the Borrower and each Guarantor will not (unless otherwise
agreed to by the Majority Banks in writing): 

    Section 6.01  Liens.  Create, incur, assume, or suffer to exist, or permit
any Subsidiary to create, incur, assume, or suffer to exist, any Lien, upon or with respect to any of its properties, now owned or hereafter acquired, except the following: 

    (1) Liens
for taxes or assessments or other government charges or levies if not yet due and payable or, if due and payable, if they are being contested in good faith by
appropriate proceedings and for which appropriate reserves are maintained; 

    (2) Liens
imposed by law, such as mechanics', materialmen's, landlords', warehousemen's, and carriers' Liens, and other similar Liens, securing obligations incurred in
the ordinary course of business which are not past due for more than ninety (90) days or which are being contested in good faith by appropriate proceedings and for which appropriate reserves
have been established; 

    (3) Liens
under workers' compensation, unemployment insurance, Social Security, or similar legislation; 

    (4) Liens,
deposits, or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), Capital Leases (permitted under
the terms of this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance, or other similar bonds, or other similar obligations arising in the ordinary course of
business; 

34

 

    (5) Judgment and other similar Liens arising in connection with any court proceeding, provided the execution or other enforcement of such Liens is effectively stayed
and the claims secured thereby are being actively contested in good faith and by appropriate proceedings; 

    (6) Easements,
rights-of-way, restrictions, and other similar encumbrances which, in the aggregate, do not materially interfere with the
occupation, use, and enjoyment by the Borrower or any Subsidiary of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property
subject thereto; 

    (7) Liens
securing Secured Debt permitted under Section 6.02. 

    Section 6.02  Secured Debt.  Create, incur, assume or suffer to exist, or
permit any Subsidiary to create, incur, assume or suffer to exist, any Secured Debt, except for Secured Debt in an aggregate amount outstanding at any one time not exceeding $50,000,000. 

    Section 6.03  Mergers, Etc.  Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereafter acquired) to any Person, or acquire all or substantially all the assets or the business of any Person, or permit any Subsidiary to do so, except
(1) for any Permitted Acquisition, (2) that any Subsidiary (other than STIC and UHIC) may merge into or transfer assets to the Borrower as a result of an Internal Reorganization or
otherwise and (3) that any Subsidiary (other than STIC and UHIC) may merge into or consolidate with or transfer assets to any other Subsidiary (other than STIC and UHIC) as a result of an
Internal Reorganization or otherwise. 

    Section 6.04  Leases.  Create, incur, assume, or suffer to exist, or
permit any Subsidiary to create, incur, assume, or suffer to exist, any obligation as lessee for the rental or hire of any real or personal
property, except (1) Capital Leases not otherwise prohibited by the terms of this Agreement; (2) leases existing on the date of this Agreement and any extension or renewals thereof;
(3) leases between the Borrower and any Subsidiary or between any Subsidiaries; (4) operating leases entered into in the ordinary course of business; and (5) any lease of property
having a value of $500,000 or less. 

    Section 6.05  Sale and Leaseback.  Sell, transfer or otherwise dispose of,
or permit any Subsidiary to sell, transfer, or otherwise dispose of, any real or personal property to any Person and thereafter directly or indirectly lease back the same or similar property, except
for the sale and leaseback of model homes. 

    Section 6.06  Sale of Assets.  Sell, lease, assign, transfer, or otherwise
dispose of, or permit any Subsidiary to sell, lease, assign, transfer, or otherwise dispose of, any of its now owned or hereafter acquired assets (including, without limitation, shares of stock and
indebtedness of subsidiaries, receivables, and leasehold interests), except: (1) Inventory disposed of in the ordinary course of business; (2) the sale or other disposition of assets no
longer used or useful in the conduct of its business; (3) the sale and leaseback of model homes, or (4) that any Subsidiary (other than STIC and UHIC) may sell, lease, assign, or
otherwise transfer its assets to the Borrower or any Wholly Owned Subsidiary (other than STIC and UHIC) in connection with an Internal Reorganization or otherwise. 

    Section 6.07  Investments.  Make, or permit any Subsidiary to make, any
loan or advance to any Person, or purchase or otherwise acquire, or permit any Subsidiary to purchase or otherwise acquire, any capital stock, assets (other than assets acquired in the ordinary course
of business), obligation, or other securities of, make any capital contribution to, or otherwise invest in or acquire any interest in any Person including, without limitation, any hostile takeover,
hostile tender offer or similar hostile transaction (collectively, "Investments"), except: (1) a direct obligation of the United States or any agency thereof with maturities of one year or less
from the date of acquisition; (2) commercial paper rated at least "A-1" by Standard & Poor's Corporation or "P-1" by Moody's Investors Service, Inc.;
(3) certificates of deposit with maturities of one year or less from the date of acquisition issued by any 

35

 

commercial bank or federal savings bank having capital and surplus in excess of $250,000,000; (4) a direct obligation of any state or municipality within the United States with maturities of
one year or less from the date of acquisition and which, at the time of such acquisition, is accorded one of the two highest debt ratings for obligations of such type by Standard & Poor's or
Moody's; (5) mutual funds investing in assets of the type described in items (1), (2), (3) or (4) above which in any case would be classified as a current asset in accordance with
GAAP which are managed by a fund manager of recognized standing in the United States and having capital and surplus of at least $100,000,000 or having at least $250,000,000 under management;
(6) stock, obligation, or securities received in settlement of debts (created in the ordinary course of business) owing to the Borrower or any Subsidiary provided such issuance is approved by
the board of directors of the issuer thereof; (7) a loan or advance from the Borrower to a Subsidiary, or from a Subsidiary to a Subsidiary, or from a Subsidiary to the Borrower (subject,
however, to the limitations set forth below in the case of Investments in STIC and UHIC); (8) any Permitted Acquisition for which the total consideration payable for such Permitted Acquisition
does not exceed, or have a value exceeding, $100,000,000; (9) an Investment in a Wholly Owned Subsidiary, which Investment is, or constitutes a part of, an Internal
Reorganization (subject, however, to the limitations set forth below in the case of Investments in STIC and UHIC); (10) Investments in STIC, UHIC and any Joint Venture (subject, however, to the
limitations set forth below); or (11) any other Investment of $5,000,000 or less (subject, however, to the limitations set forth below); provided that the aggregate amount of all Investments by
the Borrower and its Subsidiaries permitted under clauses (10) and (11) above does not at any time exceed fifteen percent (15%) of Consolidated Tangible Net Worth. 

    Section 6.08  Guaranties, Etc.  Assume, guarantee, endorse, or otherwise
be or become directly or contingently responsible or liable, or permit any Subsidiary to assume, guarantee, endorse, or otherwise be or become directly or contingently responsible or liable
(including, but not limited to, an agreement to purchase any obligation, stock, assets, goods, or services, or to supply or advance any funds, assets, goods, or services, or an agreement to maintain
or cause such Person to maintain a minimum working capital or net worth or otherwise to assure the creditors of any Person against loss), for obligations of any Person, except: (1) guaranties
by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (2) guaranties of performance obligations in the ordinary course
of business; (3) guaranties of any obligation of $500,000 or less, provided, however, that neither the Borrower nor any Subsidiary shall
guarantee an obligation of STIC or UHIC; and (4) that the Borrower or any Subsidiary or any Guarantor may, whether as a result of an Internal Reorganization or otherwise, guarantee the Debt of
any other Subsidiary (other than STIC and UHIC) or Guarantor or the Borrower permitted under this Agreement. 

    Section 6.09  Transactions With Affiliates.  Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or the rendering of any service, with any Affiliate, or permit any Subsidiary to enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of the
Borrower's or such Guarantor's or any Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Guarantor or any Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate (which exception shall include the payment of insurance premiums to UHIC for the purchase of construction warranties and builder default
protection for buyers of Housing Units from the Borrower or any of its Subsidiaries and to STIC for title insurance); provided, however, that the
following transactions shall not be prohibited by this Section 6.09: (i) transactions involving the purchase, sale or exchange of property having a value of $500,000 or less; and
(ii) transactions otherwise permitted by this Agreement. 

    Section 6.10  Land Inventory.  Permit the ratio, determined as at the end
of any fiscal quarter, of (i) the sum of the number of Finished Lots and the reasonably estimated number of Finished Lots that 

36

 

will be developed on other Land, all determined as at the end of such fiscal quarter, to (ii) the number of Housing Unit Closings for the period of four (4) full fiscal quarters ending
with such fiscal quarter, to exceed 2.5 to 1.0. 

    Section 6.11  Housing Inventory.  Permit the number of Speculative Housing
Units, as at the end of any fiscal quarter, to exceed the greater of (a) the number of Housing Unit Closings occurring during the period of twelve (12) months ending on the last day of
such fiscal quarter, multiplied by thirty percent (30%) or (b) the number of Housing Unit Closings occurring during the period of six (6) months ending on the last day of such fiscal
quarter, multiplied by seventy percent (70%). 

    Section 6.12  Senior Debt.  Prepay, repurchase or redeem in whole or in
part the principal of the Senior Debt, except for refinancings thereof from the proceeds of Refinancing Debt with respect thereto. 

    Section 6.13  Amendment or Modification of Senior Indentures.  Amend or
modify, or permit any amendment or modification of, either of the Senior Indentures (other than those provided for in clauses (i), (ii), (iii), (v) or (vi) of Section 10.01(a) of
such Senior Indentures). 

    Section 6.14  STIC and UHIC.  Permit UHIC to engage in any business other
than the issuance of construction warranties and builder default protection for buyers of Housing Units from the Borrower or any of its Subsidiaries or permit STIC to engage in any business other than
title insurance. 

    Section 6.15  Negative Pledges.  Directly or indirectly enter into any
agreement (other than this Agreement and the Senior Indentures) with any Person that prohibits or restricts or limits the ability of the Borrower or any Guarantor to create, incur, pledge or suffer to
exist any Lien upon any assets of the Borrower or any Guarantor (except that agreements creating or securing Secured Debt permitted under Section 6.02 may prohibit, restrict or limit other
Liens on those assets encumbered by the Liens securing such Secured Debt). 

 
 

ARTICLE VII
  
    FINANCIAL COVENANTS    
  

    So long as any Note shall remain unpaid or any Bank shall have any Commitment under this Agreement: 

    Section 7.01  Minimum Consolidated Tangible Net Worth.  The Borrower will
maintain at all times a Consolidated Tangible Net Worth of not less than the sum of (i) $195,000,000 (subject to adjustment of such amount as hereinafter provided), (ii) an amount equal
to fifty percent (50%) of the cumulative Net Income of the Borrower earned after March 31, 2000 (excluding any quarter in which there is a loss), and (iii) one hundred percent (100%) of
the net proceeds received after March 31, 2000 by the Borrower or any Subsidiary from the sale or issuance of any of its Common Equity. 

    Section 7.02  Leverage Ratio.  The Borrower will not permit the ratio of
Consolidated Debt to Consolidated Tangible Net Worth to exceed (a) 2.25 to 1.00 at any time that the Borrower maintains an Interest Coverage Ratio of at least 2.5 to 1.0 or (b) 2.0 to
1.0 at any other time. For purposes of this Section 7.02, Consolidated Tangible Net Worth shall exclude the Borrower's and Guarantors' Investments in Joint Ventures and in Subsidiaries that are
not Guarantors. 

    Section 7.03  Permitted Senior Debt.  The Borrower will not permit the
outstanding amount of the Permitted Senior Debt to exceed the Borrowing Base. 

    Section 7.04  Interest Coverage Ratio.  The Borrower shall maintain an
Interest Coverage Ratio of not less than 2.0 to 1.0, which ratio shall be determined as of the last day of each fiscal quarter for the four-quarter period ending on such day. 

37

 

    Section 7.05  Land Inventory.  The Borrower shall not permit the ratio of
(i) Adjusted Land Value to (ii) the sum of (a) Consolidated Tangible Net Worth plus (b) fifty percent (50%) of Consolidated Subordinated Debt to exceed 1.0 to 1.0. 

 
 

ARTICLE VIII
  
    EVENTS OF DEFAULT    
  

    Section 8.01  Events of Default.  If any of the following events shall
occur: 

    (1) The
Borrower shall fail to pay (a) the principal of any Note, or any amount of a commitment or other fee, as and when due and payable or (b) interest
on any Note or any amount of any commitment fee or other fee within five (5) Business Days after the same is due and payable; 

    (2) Any
representation or warranty made or deemed made by the Borrower or by any Guarantor in any Loan Document or which is contained in any certificate, document,
opinion, or financial or other statement furnished at any time under or in connection with this Agreement shall prove to have been
incorrect, incomplete, or misleading in any material respect on or as of the date made or deemed made; 

    (3) The
Borrower or any Guarantor shall fail to perform or observe any term, covenant, or agreement contained in Articles V, VI or VII hereof, and such failure shall
continue for a period of thirty (30) consecutive days; 

    (4) The
Borrower or any Significant Subsidiary or any Significant Guarantor shall (a) fail to pay (within the applicable cure period, if any) any amount in
respect of indebtedness for borrowed money (including without limitation indebtedness arising under the Term Loan Agreement) equal to or in excess of $5,000,000 in the aggregate (other than the Notes)
of the Borrower or such Significant Subsidiary or such Significant Guarantor, as the case may be, or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise); or (b) fail to perform or observe any term, covenant, or condition on its part to be performed or observed (within the applicable cure period, if any) under
any agreement or instrument relating to any such indebtedness, when required to be performed or observed, if the effect of such failure to perform or observe is to accelerate, or permit the
acceleration of after the giving of notice or passage of time, or both, the maturity of such indebtedness, whether or not such failure to perform or observe shall be waived by the holder of such
indebtedness, or any such indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), repurchased or redeemed prior to
the stated maturity thereof; 

    (5) The
Borrower or any Significant Subsidiary or any Significant Guarantor (a) shall generally not pay, or shall be unable to pay, or shall admit in writing its
inability to pay its debts as such debts become due; or (b) shall make an assignment for the benefit of creditors, or petition or apply to any tribunal for the appointment of a custodian,
receiver, or trustee for it or a substantial part of its assets; or (c) shall commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (d) shall have had any such petition or application filed or any such proceeding commenced against it in
which an order for relief is entered or an adjudication or appointment is made and which remains undismissed for a period of forty (40) days or more; or (e) shall take any corporate
action indicating its consent to, approval of, or acquiescence in any such petition, application, proceeding, or order for relief or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (f) shall suffer any such custodianship, receivership, or trusteeship to continue undischarged for a period of forty (40) days or more; 

38

  

    (6) One
or more judgments, decrees, or orders for the payment of money in excess of $10,000,000 in the aggregate shall be rendered against the Borrower and/or any
Subsidiary and/or any Guarantor, and such judgments, decrees, or orders shall continue unsatisfied and in effect for a period of twenty (20) consecutive days without being vacated, discharged,
satisfied, or stayed or bonded pending appeal; 

    (7) Any
Guaranty hereunder shall at any time after its execution and delivery and for any reason cease to be in full force and effect or shall be declared null and
void, or the validity or enforceability thereof shall be contested by the Guarantor or the Guarantor shall deny it has any further liability or obligation under, or shall fail to perform its
obligations under, the Guaranty (except to the extent that the foregoing occurs solely by reason of the liquidation or dissolution of a Guarantor as a result of an Internal Reorganization); 

    (8) Any
Change of Control of the Borrower or any Subsidiary or any Guarantor shall occur; 

    (9) Any
of the following events shall occur or exist with respect to the Borrower, any Subsidiary or any Commonly Controlled Entity under ERISA: any Reportable Event
shall occur; complete or partial withdrawal from any Multiemployer Plan shall take place; any Prohibited Transaction shall occur; a notice of intent to terminate a Plan shall be filed, or a Plan shall
be terminated; or circumstances shall exist which constitute grounds entitling the PBGC to institute proceedings to terminate a Plan, or the PBGC shall institute such proceedings; and in each case
above, such event or condition, together with all other events or conditions described in this Section 8.01(9), if any, could subject the Borrower or any Significant Guarantor or Significant
Subsidiary to any tax, penalty, or other liability which in the aggregate may exceed $500,000; or 

    (10) If
any federal, state, or local agency asserts a material claim against the Borrower or any Significant Guarantor or Significant Subsidiary and/or its assets,
equipment, property, leaseholds, or other facilities for damages or cleanup costs relating to a hazardous discharge or an environmental complaint;  provided, however, that such claim shall not constitute a default if, within fifteen (15) days of
the occurrence giving rise to the claim, (a) the Borrower can prove to the reasonable satisfaction of the Majority Banks that the Borrower has commenced and is diligently pursuing either:
(i) a cure or correction of the event which constitutes the basis for the claim, and continues diligently to pursue such cure or correction or (ii) proceedings for an injunction, a
restraining order or other appropriate emergent relief preventing such agency or agencies from asserting such claim, which relief is granted within thirty (30) days of the occurrence giving
rise to the claim and the injunction, order, or emergent relief is not thereafter resolved or reversed on appeal or (iii) the defense against the claim through action in a court or agency
exercising jurisdiction over the claim; and (b) in any of the foregoing events, the Borrower has posted a bond, letter of credit, or other security satisfactory in form, substance, and amount
to the Majority Banks and the agency or entity asserting the claim to secure the correction of the event which constitutes the basis for the claim in accordance with applicable laws; 

then,
and in any such event, the Agent shall at the request of, or may, with the consent of, the Majority Banks, by notice to the Borrower, (1) declare the Banks' obligation to make Loans
(including, in the case of the Swing Line Bank, Swing Line Loans) to be terminated, whereupon the same shall forthwith terminate; and (2) declare the outstanding Notes, all interest thereon,
and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest, and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided,  however, in the case of an
event described in Section 8.01(5) hereof the obligations of the Banks to make Loans (including, in the case of the
Swing Line Bank, Swing Line Loans) hereunder shall automatically terminate and the Obligations 

39

 

shall immediately become due and payable without any election or action on the part of the Agent or any Bank. 

    Section 8.02  Set Off.  Upon the occurrence and during the continuance of
any Event of Default, each Bank is hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), to set off and apply
any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Bank to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or the Bank's Note or any other Loan Document, irrespective of whether or not the Agent
or such Bank shall have made any demand under this Agreement or such Bank's Note or such other Loan Document and although such obligations may be unmatured. Each Bank agrees promptly to notify the
Borrower (with a copy to the Agent) after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Bank under this Section 8.02 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which each Bank
may have. 

 
 

ARTICLE IX
  
    GUARANTY    
  

    Section 9.01  Guaranty.  (a) Each of the Guarantors unconditionally and
irrevocably guarantees the due and punctual payment and performance of the Obligations. Each of the Guarantors further agrees that the Obligations may be increased, extended or renewed, in whole or in
part, without notice or further assent from it, and it will remain bound upon this Guaranty notwithstanding any increase, extension or renewal of any Obligation. 

    (b) Each
of the Guarantors waives presentation to, demand for payment from and protest to the Borrower or any other Guarantor of any of the Obligations, and also waives
notice of protest for nonpayment. The Obligations of the Guarantors hereunder shall not be affected by (i) the failure of the Agent or any Bank to assert any claim or demand or to enforce any
right or remedy against the Borrower or any other Guarantor under the provisions of this Agreement or any other agreement or otherwise; (ii) any extension or renewal of any provision hereof or
thereof; (iii) any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of any Loan Document or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Agent or any Bank for the Obligations or any of them; (v) the failure of the Agent or any Bank to exercise any right or
remedy against any other guarantor of the Obligations; or (vi) the release or substitution of any Guarantor. 

    (c) Each
of the Guarantors further agrees that this Guaranty constitutes a guaranty of performance and of payment when due and not just of collection, and waives any
right to require that any resort be had by the Agent or any Bank to any security held for payment of the Obligations or to any balance of any deposit, account or credit on the books of a Bank in favor
of the Borrower or any other Guarantor, or to any other Person. 

    (d) Each
of the Guarantors hereby expressly assumes all responsibilities to remain informed of the financial condition of the Borrower and each other Guarantor and any
circumstances affecting the ability of the Borrower to perform under this Agreement. Each Guarantor acknowledges that it will receive direct and indirect benefits from the Loans contemplated by this
Agreement and that the Banks required as a condition to entering into this Agreement, and in order to secure the prompt and complete payment, observance and performance of the Obligations, that each
Guarantor shall make this Guaranty. 

40

 

    (e) Each of the Guarantors' guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations, the Notes or any other
instrument evidencing any Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefor or by any other circumstance relating to the Obligations which
might otherwise constitute a defense to this Guaranty. The Agent makes no representation or warranty in respect of any such circumstances and has no duty or responsibility whatsoever to the Guarantors
in respect of the management and maintenance of the Obligations or any such collateral. 

    Section 9.02  No Impairment of Guaranty.  The Obligations of the
Guarantors hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the
foregoing, the Obligations of the Guarantors hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent or any Bank to assert any claim or demand or to enforce any
remedy under this Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of the Guarantors or would otherwise operate
as a discharge of the Guarantors as a matter of law, unless and until the Obligations are paid in full and the Commitments have been terminated. 

    Section 9.03  Continuation and Reinstatements etc.  (a) Each of the
Guarantors further agrees that its guaranty hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal or of interest on
any Obligation is rescinded or must otherwise be restored by the Agent or any Bank upon the bankruptcy or reorganization of the Borrower or a Guarantor, or otherwise. In furtherance of the provisions
of this Article IX, and not in limitation of any other right which the Agent or any Bank may have at law or in equity against the Borrower or the Guarantors by virtue hereof, upon failure of
the Borrower to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice or otherwise, each of the Guarantors hereby promises to and will, upon
receipt of written demand by the Agent on behalf of the Banks, forthwith pay or cause to be paid to the Agent on behalf of the Banks in cash an amount equal to the unpaid amount of all the
Obligations, and thereupon the Banks shall assign such Obligation, together with all security interests, if any, then held by the Agent in respect of such Obligation, to the Guarantor or Guarantors
making such payment. 

    (b) Upon
payment by any Guarantor of any sums to the Agent on behalf of the Banks hereunder, all rights of such Guarantor against the Borrower, arising as a result
thereof by way of right of subrogation or otherwise, shall in all respects be subordinate and junior in right of payment to the prior final and indefeasible payment in full of all the Obligations to
the Agent on behalf of the Banks. If any amount shall be paid to such Guarantor for the account of the Borrower, such amount shall be held in trust for the benefit of the Banks and shall forthwith be
paid to the Agent on behalf of the Banks to be credited and applied to the Obligations, whether matured or unmatured. 

    Section 9.04  Limitation on Guaranteed Amount.  Notwithstanding any other
provision of this Article IX, the amount guaranteed by any Guarantor hereunder shall be limited to the extent, if any, required so that its obligations under this Article IX shall not be
subject to avoidance under Section 548 of the Bankruptcy Code or to being set aside or annulled under any applicable state law relating to fraud on creditors. In determining the limitations, if
any, on the amount of such Guarantor's obligations hereunder pursuant to the preceding sentence, any rights of subrogation or contribution which such Guarantor may have under this Article IX or
applicable law shall be taken into account. 

41

 
 
 

ARTICLE X
  
    AGENCY PROVISIONS    
  

    Section 10.01  Authorization and Action.  Each Bank hereby irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. The duties of the Agent shall be mechanical and administrative in nature and the Agent shall not by reason of this Agreement be a trustee or fiduciary for
any Bank. The Agent shall have no duties or responsibilities except those expressly set forth herein. As to any matters not expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to act or to refrain from acting except upon the instructions of the Majority Banks or, to the extent required under
Section 11.01, all Banks (and shall be fully protected in so acting or so refraining from acting), and such instructions shall be binding upon all Banks and all holders of Notes;  provided,
however, that the Agent shall not be required to take any action which exposes the Agent to
personal liability or which is contrary to this Agreement or applicable law. The Agent shall administer the Loan in the same manner that it would administer a comparable loan held 100% for its own
account. 

    Section 10.02  Liability of Agent.  Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement in the absence of its or their own gross
negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent (1) may treat the payee of any Note as the holder thereof until the Agent receives written notice
of the assignment or transfer thereof signed by such payee and in form satisfactory to the Agent; (2) may consult with legal counsel (including counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants, or
experts; (3) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties, or representations made in or in connection with this
Agreement; (4) shall not have any duty to ascertain or to inquire as to the performance or observance of any terms, covenants, or conditions of this Agreement on the part of the Borrower (other
than the payment of principal, interest and fees due hereunder), or to inspect the property (including the books and records) of the Borrower; (5) shall not be responsible to any Bank for the
due execution, legality, validity, enforceability, genuineness, perfection, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (6) shall
incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be sent by telegram, telefax, or facsimile
transmission) reasonably believed by it to be genuine and signed or sent by the proper party or parties. 

    Section 10.03  Rights of Agent as a Bank.  With respect to its Commitment,
the Loans made by it and the Note issued to it, the Agent shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent; and
the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include the Agent in its individual capacity. The Agent, each Bank and each of their respective Affiliates may accept deposits
from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with, the Borrower, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any
Subsidiary, all as if the Agent were not the Agent and without any duty to account therefor to the other Banks. 

    Section 10.04  Independent Credit Decisions.  Each Bank acknowledges that
it has, independently and without reliance upon the Agent or any other Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any 

42

 

other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. The
Agent shall promptly provide the Banks with copies of all notices of default and other formal notices sent or received in accordance with Section 11.02 of this Agreement, any written notice
relating to changes in the Borrower's debt ratings that affect the Senior Debt Rating received from the Borrower or a ratings agency, any documents received by the Agent pursuant to
Section 5.08 (except to the extent that the Borrower has furnished the same directly to the Banks) and any other documents or notices received by the Agent with respect to this Agreement and
requested in writing by any Bank. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Agent hereunder, the Agent shall have no duty
or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Borrower or any of its Subsidiaries (or any of their
Affiliates) which may come into possession of the Agent or any of its Affiliates. 

    Section 10.05  Indemnification.  The Banks severally agree to indemnify
the Agent in its capacity as Agent and not as a Bank (to the extent not reimbursed by the Borrower), in the proportion of their Ratable Shares, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by the Agent under this Agreement, provided that no Bank shall be liable for any portion of any of the foregoing
(i) resulting from the Agent's gross negligence or willful misconduct, (ii) on account of a strictly internal or regulatory matter relating to the Agent (such as relating to legal
lending limit violation by the Agent), or (iii) in connection with a breach of an agreement made by the Agent to a Bank under this Agreement. Without limitation of the foregoing, each Bank
severally agrees to reimburse the Agent (to the extent not reimbursed by the Borrower) promptly upon demand for its Ratable Share of any reasonable out-of-pocket expenses
(including counsel fees) incurred by the Agent in connection with the preparation, administration, or enforcement of, or legal advice in respect of rights or responsibilities under, this Agreement;
provided, however, that no Bank shall be required to reimburse the Agent for any such expenses incurred (i) resulting from the Agent's gross negligence or willful misconduct, (ii) on
account of a strictly internal or regulatory matter relating to the Agent (such as relating to legal lending limit violation by the Agent), or (iii) in connection with a breach of an agreement
made by the Agent to a Bank under this Agreement. 

    Section 10.06  Successor Agent.  (a) The Agent may resign at any time by
giving at least sixty (60) days' prior written notice thereof to the Banks and the Borrower and may be removed at any time with or without cause by the Majority Banks. Upon any such resignation
or removal, the Majority Banks shall have the right to appoint a successor Agent, subject to Section 10.06(b). If no successor Agent shall have been so appointed by the Majority Banks, and
shall have accepted such appointment, within thirty (30) days after the retiring Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Agent, then the retiring
Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank or federal savings bank organized under the laws of the United States of America or of any State thereof,
subject to Section 10.06(b). Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 

    (b) The
appointment of any successor Agent that is not a Bank shall, as long as no Event of Default shall have occurred and be continuing, be subject to the prior
written approval of the Borrower, which approval shall not be unreasonably withheld. 

43

 

    Section 10.07  Sharing of Payments, Etc.  If any Bank shall obtain any
payments (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Note held by it in excess of its Ratable Share of payments on
account of the Notes obtained by all the Banks, such Bank shall purchase from the other Banks such participations in the Notes held by them as shall be necessary to cause such purchasing Bank to share
the excess payment ratably with each of the other Banks, provided, however, that if all or any portion of such excess payment is thereafter recovered
from such purchasing Bank, such purchase from each Bank shall be rescinded and each Bank shall repay to the purchasing Bank the purchase price to the extent of such recovery together with an amount
equal to such Bank's ratable share (according to the proportion of (1) the amount of such Bank's required repayment to (2) the total amount so recovered from the purchasing Bank) of any
interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Borrower agrees that any Bank so purchasing a participation from another Bank pursuant
to this Section 10.07 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as
if such Bank were the direct creditor of the Borrower in the amount of such participation. 

    Section 10.08  Withholding Tax Matters.  Each Bank which is a
Non-United States Person agrees to execute and deliver to the Agent for delivery to the Borrower, before the first scheduled payment date in each year, two duly completed copies of United
States Internal Revenue Service Forms W-8BEN or W-8ECI, or any successor forms, as appropriate, properly completed and certifying that such Bank is entitled to receive payments
under this Agreement without withholding or deduction of United States federal taxes. Each Bank which is a Non-United States Person represents and warrants to the Borrower and to the Agent
that, at the date of this Agreement, (i) its Lending Offices are entitled to receive payments of principal, interest, and fees hereunder without deduction or withholding for or on account of
any taxes
imposed by the United States or any political subdivision thereof and (ii) it is permitted to take the actions described in the preceding sentence under the laws and any applicable double
taxation treaties of the jurisdictions specified in the preceding sentence. Each Bank which is a Non-United States Person further agrees that, to the extent any form claiming complete or
partial exemption from withholding and deduction of United States federal taxes delivered under this Section 10.08 is found to be incomplete or incorrect in any material respect, such Bank
shall execute and deliver to the Agent a complete and correct replacement form. 

    Section 10.09  Documentation Agents or Co-Agents.  None of the
Banks identified in this Agreement as a "Documentation Agent" or "Co-Agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those
applicable to all Banks as such. Without limiting the foregoing, none of such Banks shall have or be deemed to have a fiduciary relationship with any Bank. Each Bank hereby makes the same
acknowledgements with respect to such Banks as it makes with respect to the Agent in Section 10.04. 

 
 

ARTICLE XI
  
    MISCELLANEOUS    
  

    Section 11.01  Amendments, Etc.  No amendment, modification, termination,
or waiver of any provision of any Loan Document to which the Borrower is a party, nor consent to any departure by the Borrower from any Loan Document to which it is a party, shall in any event be
effective unless the same shall be in writing and signed by the Majority Banks and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Banks and the Borrower,
do, or have the effect of doing, any of the following: (1) increase the Commitments of the Banks or the Swing Loan Commitment of the Swing Line Bank or subject the Banks to any additional
obligations; (2) reduce the principal of, or interest on, the Notes or any fees (other than the Agent's fees) hereunder; (3) postpone any date fixed for any payment of principal of, 

44

 

or interest on, the Notes or any fees (other than the Agent's fees) hereunder; (4) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes or the
number of Banks which shall be required for the Banks or any of them to take action hereunder (including, without limitation, any change in the number of Banks required to extend the Termination Date
under the provisions of Section 2.19); (5) release any Significant Guarantor; or (6) amend, modify or waive any provision of Article X, this Section 11.01 or
clause (i) of Section 12.01; and, provided further, that no amendment, waiver, or consent shall, unless in writing and signed by the Agent
or the Swing Line Bank (as applicable) in addition to the Banks required above to take such action, affect the rights or duties of the Agent or the Swing Line Bank (as applicable) under any of the
Loan Documents; and, provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Issuing Bank in
addition to the Banks required above to take such action, affect the rights or duties of the Issuing Bank under any of the Loan Documents. 

    Section 11.02  Notices, Etc.  All notices and other communications
provided for under this Agreement and under the other Loan Documents to which the Borrower is a party shall be in writing (including telegraphic, telex, and facsimile transmissions) and mailed or
transmitted or hand delivered, if to the Borrower, a Guarantor, a Bank or the Agent at its respective address set forth on the signature pages hereof; or, as to each party, at such other address as
shall be designated by such party in a written notice to all other parties complying as to delivery with the terms of this Section 11.02. Except as is otherwise provided in this Agreement, all
such notices and communications shall be effective when deposited in the mails or delivered to the telegraph company, or transmitted, answerback received, or hand delivered, respectively, addressed as
aforesaid, except that notices to the Agent pursuant to the provisions of Article II shall not be effective until received by the Agent or, in the case of Section 2.21, the Swing Line
Bank. 

    Section 11.03  No Waiver.  No failure or delay on the part of any Bank or
the Agent or the Issuing Bank in exercising any right, power, or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power, or remedy
preclude any other or further exercise thereof or the exercise of any other right, power, or remedy hereunder. The making of a Loan or issuance, amendment or extension of a Facility Letter of Credit
notwithstanding the existence of a Default or Event of Default shall not constitute any waiver or acquiescence of such Default or Event of Default, and the making of any Loan or issuance, amendment or
extension of a Facility Letter of Credit notwithstanding any failure or inability to satisfy the conditions precedent to such Loan or issuance, amendment or extension of a Facility Letter of Credit
shall not constitute any waiver or acquiescence with respect to such conditions precedent with respect to any subsequent Loans or subsequent issuance, amendment or extension of a Facility Letter of
Credit. The rights and remedies provided herein are cumulative, and are not exclusive of any other rights, powers, privileges, or remedies, now or hereafter existing, at law, in equity or otherwise. 

    Section 11.04  Costs, Expenses, and Taxes.  The Borrower agrees to
reimburse the Agent for any reasonable costs, internal charges and out-of-pocket expenses (including reasonable fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent) paid or incurred by the Agent in connection with the preparation, negotiation, execution, delivery, review, amendment, modification and administration of the
Loan Documents and the collection of the Loans and enforcement of the Loan Documents. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing, and recording of any of the Loan Documents and the other documents to be delivered under any such Loan Documents, and agrees to hold the Agent and
each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay in paying or failing to pay such taxes and fees. This provision shall survive
termination of this Agreement. 

    Section 11.05  Integration.  This Agreement (including the Borrower's
obligation to pay the fees as provided in Section 2.09(c) and the Fee Letter referred to therein) and the Loan Documents contain 

45

 

the entire agreement between the parties relating to the subject matter hereof and supersede all oral statements and prior writings with respect thereto. 

    Section 11.06  Indemnity.  The Borrower hereby agrees to defend,
indemnify, and hold each Bank harmless from and against all claims, damages, judgments, penalties, costs, and expenses (including attorney fees and court costs now or hereafter arising from the
aforesaid enforcement of this clause) arising directly or indirectly from the activities of the Borrower and its Subsidiaries, its predecessors in interest, or third parties with whom it has a
contractual relationship, or arising directly or indirectly from the violation of any environmental protection, health, or safety law, whether such claims are asserted by any governmental agency or
any other person. This indemnity shall survive termination of this Agreement. 

    Section 11.07  Governing Law.  This Agreement and the Notes shall be
governed by, and construed in accordance with, the internal laws (including §735ILCS 105/5-1 et seq., but otherwise without
regard to principles of conflict of law) of the State of Illinois but giving effect to federal laws applicable to national banks. 

    Section 11.08  Severability of Provisions.  Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. 

    Section 11.09  Counterparts.  This Agreement may be executed in any number
of counterparts and by the different parties to this Agreement 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. 

    Section 11.10  Headings.  Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference only and shall not constitute a part of the applicable Loan Documents for any other purpose. 

    Section 11.11  Submission to Jurisdiction.  The Borrower, each Subsidiary,
and each Guarantor hereby submits 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 which may arise hereunder or under the Notes. The Borrower, each Subsidiary, and each Guarantor irrevocably waives to the fullest extent permitted by law,
any objection which it may have 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, each Subsidiary, and each Guarantor hereby consents to process being served in any
such proceeding by the mailing of a copy thereof by registered or certified mail, postage prepaid, to its address specified in Section 11.02 hereof or in any other manner permitted by law. 

    Section 11.12  Jury Trial Waiver.  THE BORROWER, EACH SUBSIDIARY, EACH
GUARANTOR, THE AGENT, AND EACH BANK HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN
EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS. NO OFFICER OF ANY BANK OR OF THE AGENT HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION. 

    Section 11.13  Governmental Regulation.  Anything contained in this
Agreement to the contrary notwithstanding, no Bank shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 

46

 

    Section 11.14  No Fiduciary Duty.  The relationship between the Borrower
and the Banks and the Agent shall be solely that of borrower and lender. Neither the Agent nor any Bank shall have any fiduciary responsibilities to the Borrower. Neither the Agent nor any Bank
undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. 

    Section 11.15  Confidentiality.  Each Bank agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to other Banks and their respective affiliates, (ii) to legal
counsel, accountants, and other professional advisors to that Bank or to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by law,
regulation, or legal process, (v) to any Person in connection with any legal proceeding to which that Bank is a party, and (vi) permitted by Section 12.04. 

 
 

ARTICLE XII
  
    BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS    
  

    Section 12.01  Successors and Assigns.  The terms and provisions of the
Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Agent and the Banks and their respective
successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents without the consent of all Banks and (ii) any
assignment by any Bank must be made in compliance with Section 12.03. Notwithstanding clause (ii) of this Section, any Bank may at any time, without the consent of the Borrower or the
Agent, pledge all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank as security for an obligation of such pledgor or of an affiliated entity to such Federal
Reserve Bank; provided, however, that no such pledge shall release the pledgor Bank from its obligations hereunder. The Agent may treat the payee of any
Note as the owner thereof for all purposes hereof unless and until such payee complies with Section 12.03 in the case of an assignment thereof. Any assignee or transferee of a Note agrees by
acceptance thereof to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority
or consent is the holder of any Note, shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange thereof. 

    Section 12.02  Participations.  (a) Permitted
Participants; Effect. Any Bank may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to such Bank, any Note held by such Bank, any Commitment of such Bank (which may include, in the case of the Swing Line Bank, the Swing Line
Commitment) or any other interest of such Bank under the Loan Documents in an amount not less than Five Million Dollars ($5,000,000). In the event of any such sale by a Bank of participating interests
to a Participant, such Bank's obligations under the Loan Documents shall remain unchanged, such Bank shall remain solely responsible to the other parties hereto for the performance of such
obligations, such Bank shall remain the holder of any such Note for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Bank
had not sold participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under the Loan
Documents. 

    (b)  Voting rights.  Each Bank shall with respect to its Participants, if any, retain the sole right to
approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan
or Commitment (or Swing Line Commitment, if applicable) in which such Participant has an interest which forgives principal, interest or fees (other than Agent's fees) or reduces the interest rate or
fees (other than Agent's fees) payable with respect to any such Loan or Commitment (or Swing 

47

 

Line Commitment, if applicable), postpones any date fixed for any regularly scheduled payment of principal of, or interest or fees (other than Agent's fees) on, any such Loan or Commitment (or Swing
Line Commitment, if applicable) or releases any Significant Guarantor. 

    (c)  Benefit of set-off.  The Borrower agrees that each Participant shall be deemed to have
the rights of set-off provided in Sections 2.12 and 8.02 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under the Loan Documents, provided that each Bank shall retain the right of
set-off provided in Sections 2.12 and 8.02 with respect to the amount of participating interests sold to each Participant. The Banks agree to share with each Participant, and each
Participant, by exercising the right of set-off provided in Section 2.12 or 8.02, agrees to share with each Bank, any amount received pursuant to the exercise of its right of
set-off, such amounts to be shared in accordance with Section 10.07 as if each Participant were a Bank. 

    Section 12.03  Assignments.  (a) Permitted
assignments. Any Bank may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities
("Purchasers") all, or any part (but in an amount not less than Five Million Dollars ($5,000,000) of its Commitment and Loans, which may include, in the case of a Purchaser of an interest from the
Swing Line Bank, the Swing Line Commitment and Swing Line Loans), of its rights and obligations under the Loan Documents, provided, however, that, based
upon facts and circumstances existing at the time of any such assignment, such assignment does not result in an event described in Sections 2.14, 2.15, or 2.16 hereof. Such assignment shall be
substantially in the form of Exhibit H hereto or in such other form as may be agreed to by the parties thereto. The consent of the Borrower and
the Agent (which consents shall not be unreasonably withheld) shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Bank or an Affiliate thereof;  provided,
however, that if an Event of Default has occurred and is continuing or if the assignment is in connection with the physical settlement of
credit derivative transactions, the consent of the Borrower shall not be required. 

    (b)  Effect; Effective date.  Upon (i) delivery to the Agent of a notice of assignment,
substantially in the form attached as Exhibit 1 to Exhibit H hereto (a "Notice of Assignment"), together with any consents required by
Section 12.03; and (ii) payment (by either the assignor or the assignee) of a $4,000.00 fee (or, in the case of an assignment to the assignor's Affiliate or by reason of the provisions
of Section 2.19, a $2,000 fee) to the Agent for processing such assignment, such assignment shall become effective on the effective date specified in such Notice of Assignment. The Notice of
Assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement
are "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of
such assignment, such Purchaser shall for all purposes be a Bank party to this Agreement and shall have all the rights and obligations of a Bank under the Loan Documents, to the same extent as if it
were an original party hereto, and no further consent or action by the Borrower, the Banks or the Agent shall be required to release the transferor Bank with respect to the percentage of the Aggregate
Commitments and Loans (and, if applicable, Swing Line Commitments and Swing Line Loans) assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this
Section 12.03(b), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that replacement Notes are issued to such transferor Bank and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their Commitment, as adjusted pursuant to such assignment. 

    (c)  Bank Acquisitions and Mergers.  If, as a result of acquisitions or mergers by Banks (or by entities
of which a Bank or Banks are subsidiaries), a Bank or two or more Banks that are, directly or indirectly, subsidiaries of a common parent (collectively, "Merged Banks") hold a Commitment or 

48

 

Commitments in an aggregate amount exceeding the amount of the Commitment held by the Bank that is the Agent hereunder, the Bank that is the Agent may, at its election, but without any obligation to
do so, acquire from such Merged Banks a portion of their Commitments and rights and obligations hereunder in an amount necessary to reduce the aggregate amount of the Commitments of the Merged Banks,
and to increase the Commitment of the Bank that is Agent, to equal amounts. Such election shall be exercisable by notice from the Agent to the Merged Banks and shall be effected, on a date designated
in such notice, by Assignment substantially in the form of Exhibit H hereto or such other form as may be agreed to by the parties. On the date of
delivery of such Assignment the assignor shall pay to the assignee an amount equal to the principal balance of the Loans outstanding with respect to the interest so assigned. 

    Section 12.04  Dissemination of Information.  The Borrower authorizes each
Bank to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all
information in such Bank's possession concerning the creditworthiness of the Borrower, each Subsidiary, or each Guarantor, provided that such Transferee or prospective Transferee agrees to be subject
to Section 11.15 to the same effect as if it were a Bank. 

    Section 12.05  Tax Treatment.  If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Bank shall cause such Transferee, concurrently
with the effectiveness of such transfer to comply with the provisions of Section 10.08. 

 
 

ARTICLE XIII
  
    THE LETTER OF CREDIT FACILITY    
  

    Section 13.01  Facility Letters of Credit.  (a) Each Issuing Bank agrees,
on the terms and conditions set forth in this Agreement, to issue from time to time for the account of the Borrower, through such offices or branches as it and the Borrower may jointly agree, one or
more Facility Letters of Credit in accordance with this Article XIII, during the period commencing on the date hereof and ending on the sixtieth (60th) day prior to the Termination Date. 

    (b) The
Borrower shall not request, and no Issuing Bank shall issue, a Facility Letter of Credit for any purpose other than for purposes for which Loan proceeds may by
used. 

    Section 13.02  Limitations.  An Issuing Bank shall not issue, amend or
extend, at any time, any Facility Letter of Credit: 

     (i) if
the aggregate maximum amount then available for drawing under Letters of Credit issued by such Issuing Bank, after giving effect to the Facility Letter of Credit
or amendment or extension thereof requested hereunder, shall exceed any limit imposed by law or regulation upon such Issuing Bank; 

    (ii) if,
after giving effect to the issuance, amendment or extension of the Facility Letter of Credit requested hereunder, the aggregate principal amount of the
Facility Letter of Credit Obligations would exceed $60,000,000; 

    (iii) if,
after giving effect to the issuance, amendment or extension of the Facility Letter of Credit requested hereunder, Permitted Senior Debt would exceed the
Borrowing Base as of the most recent Inventory Valuation Date; 

    (iv) if,
after giving effect to the issuance, amendment or extension of the Facility Letter of Credit requested hereunder, the sum of (A) the outstanding and
unpaid principal amount of the Loans and (B) the Facility Letter of Credit Obligations would exceed the Aggregate Commitments; 

49

 

    (v) if such Issuing Bank receives written notice from the Agent at or before 11:00 A.M. (Chicago time) on the proposed Issuance Date of such Facility Letter of
Credit that one or more of the conditions precedent contained in Section 13.03 would not on such Issuance Date be satisfied, unless such conditions are thereafter satisfied or waived and
written notice of such satisfaction is given to such Issuing Bank by the Agent; 

    (vi) that
has an expiration date (taking into account any automatic renewal provisions thereof) later than thirty (30) days prior to the scheduled Termination
Date; or 

   (vii) that
is in a currency other than U.S. Dollars. 

    Section 13.03  Conditions.  The issuance, amendment or extension of any
Facility Letter of Credit is subject to the satisfaction in full of the following conditions on the Issuance Date: 

     (i) the
Borrower shall have delivered to the Issuing Bank at such times and in such manner as the Issuing Bank may reasonably prescribe a Reimbursement Agreement and
such other documents and materials as may be reasonably required pursuant to the terms thereof, and the proposed Facility Letter of Credit shall be reasonably satisfactory to such Issuing Bank in form
and content; 

    (ii) as
of the Issuance Date no order, judgment or decree of any court, arbitrator or governmental authority shall enjoin or restrain such Issuing Bank from issuing the
Facility Letter of Credit and no law, rule or regulation applicable to the Issuing Bank and no directive from any governmental authority with jurisdiction over the Issuing Bank shall prohibit such
Issuing Bank from issuing Letters of Credit generally or from issuing that Facility Letter or Credit; 

    (iii) The
following statements shall be true, and the Agent and such Issuing Bank shall have received a certificate, substantially in the form of the certificate
attached hereto as Exhibit F, signed by a duly authorized officer of the Borrower dated the Issuance Date stating that: 

	(a)
	The
representations and warranties contained in Article IV of this Agreement are correct on and as of such Issuance Date as though made on and as of such Issuance Date except
to the extent that any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty is correct as of such earlier date;

	(b)
	No
Default or Event of Default has occurred and is continuing or would result from the issuance, amendment or extension of such Facility Letter of Credit; and

	(c)
	Upon
the issuance, amendment or extension of the requested Facility Letter of Credit on such Issuance Date, the aggregate outstanding amount of Permitted Senior Debt shall not
exceed the Borrowing Base as of the most recent Inventory Valuation Date; and 

    (iv) The
Issuing Bank and the Agent shall have received such other approvals, opinions, or documents as either may reasonably request. 

    Section 13.04  Procedure for Issuance of Facility Letters of Credit.  (a)
The Borrower shall give the applicable Issuing Bank and the Agent not less than two (2) Business Days' prior written notice of any requested issuance of a Facility Letter of Credit under this
Agreement (except that, in lieu of such written notice, the Borrower may give the Issuing Bank and the Agent telephonic notice of such request if confirmed in writing by delivery to such Issuing Bank
and the Agent (i) immediately (A) of a telecopy of the written notice required hereunder which has been signed by an authorized officer of the Borrower or (B) of a telex
containing all information required to be contained in such written notice and (ii) promptly (but in no event later than the requested Issuance Date) of the written notice required
hereunder containing the original signature of an authorized officer of the Borrower). Such notice shall specify (i) the stated amount of the Facility Letter of Credit requested, which amount
shall 

50

 

be in compliance with the requirements of Section 13.02, (ii) the requested Issuance Date, which shall be a Business Day, (iii) the date on which such requested Facility Letter of
Credit is to expire, which date shall be in compliance with the requirements of Section 13.02(vi), (iv) the purpose for which such Facility Letter of Credit is to be issued, which
purpose shall be in compliance with the requirements of Section 13.01(b), and (v) the Person for whose benefit the requested Facility Letter of Credit is to be issued. At the time such
request is made, the Borrower shall also provide the Agent with a copy of the form of the Facility Letter of Credit it is requesting be issued. Such notice, to be effective, must be received by the
Issuing Bank and the Agent not later than 2:00 p.m. (Chicago time) on the last Business Day on which notice can be given under this Section 13.04(a). 

    (b) Promptly
following receipt of a request for issuance of a Facility Letter of Credit in accordance with Section 13.04(a), such Issuing Bank shall approve or
disapprove, in its reasonable discretion, the issuance of such requested Facility Letter of Credit, but the issuance of such approved Facility Letter of Credit shall continue to be subject to the
provisions of this Article XIII. 

    (c) Subject
to the terms and conditions of this Article XIII (including, without limitation, Sections 13.02 and 13.03), the applicable Issuing Bank shall, on the
Issuance Date, issue the requested Facility Letter of Credit in accordance with such Issuing Bank's usual and customary business practices unless such Issuing Bank has actually received written or
telephonic notice from the Borrower specifically revoking the request to issue such Facility Letter of Credit. The Issuing Bank shall give the Agent written notice, or telephonic notice confirmed
promptly thereafter in writing, of the issuance of a Facility Letter of Credit, and the Agent shall promptly thereafter so notify all Banks. 

    (d) No
Issuing Bank shall extend or amend any Facility Letter of Credit unless the requirements of this Section 13.04 are met as though a new Facility Letter of
Credit were being requested and issued. 

    (e) Any
Bank may, but shall not be obligated to, issue to the Borrower or any of its Subsidiaries Letters of Credit (that are not Facility Letters of Credit) for its
own account, and at its own risk. None of the provisions of this Article XIII shall apply to any Letter of Credit that is not a Facility Letter of Credit. 

    Section 13.05  Duties of Issuing Bank.  Any action taken or omitted to be
taken by an Issuing Bank under or in connection with any Facility Letter of Credit, if taken or omitted in the absence of willful misconduct or gross negligence, shall not put such Issuing Bank under
any resulting liability to any Bank or, assuming that such Issuing Bank has complied in all material respects with the procedures specified in Section 13.04, relieve any Bank of its obligations
hereunder to such Issuing Bank. In determining whether to pay under any Facility Letter of Credit, such Issuing Bank shall have no
obligation to the Banks other than to confirm that any documents required to be delivered under such Facility Letter of Credit appear to have been delivered in compliance and that they appear to
comply on their face with the requirements of such Facility Letter of Credit. 

    Section 13.06  Participation.  (a) Immediately upon the date hereof (in
the case of the Existing Letters of Credit), and immediately upon issuance after the date hereof by an Issuing Bank of any Facility Letter of Credit in accordance with Section 13.04, each Bank
shall be deemed to have irrevocably and unconditionally purchased and received from such Issuing Bank, without recourse or warranty, an undivided interest and participation ratably (in the proportion
of such Bank's Commitment to the Aggregate Commitments) in such Facility Letter of Credit (including, without limitation, all obligations of the Borrower with respect thereto other than amounts owing
to such Issuing Bank under Section 2.15). 

51

 
    (b) In the event that an Issuing Bank makes any payment under any Facility Letter of Credit and the Borrower shall not have repaid such amount to such Issuing Bank on
or before the date of such payment by such Issuing Bank, such Issuing Bank shall promptly so notify the Agent, which shall promptly so notify each Bank. Upon receipt of such notice, each Bank shall
promptly and unconditionally pay to the Agent for the account of such Issuing Bank the amount of such Bank's ratable share (in the proportion of such Bank's Commitment to the Aggregate Commitments) of
such payment in same day funds, and the Agent shall promptly pay such amount, and any other amounts received by the Agent for such Issuing Bank's account pursuant to this Section 13.06(b), to
such Issuing Bank. If the Agent so notifies such Bank prior to 11:00 A.M. (Chicago time) on any Business Day, such Bank shall make available to the Agent for the account of such Issuing Bank
such Bank's ratable share of the amount of such payment on such Business Day in same day funds. If and to the extent such Bank shall not have so made its ratable share of the amount of such payment
available to the Agent for the account of the Issuing Bank, such Bank agrees to pay to the Agent for the account of the Issuing Bank forthwith on demand such amount, together with interest thereon,
for each day from the date such payment was first due until the date such amount is paid to the Agent for the account of the Issuing Bank, at the Federal Funds Rate. The failure of any Bank to make
available to the Agent for the account of an Issuing Bank such Bank's ratable share of any such payment shall not relieve any other Bank of its obligation hereunder to make available to the Agent for
the account of such Issuing Bank its ratable share of any payment on the date such payment is to be made. 

    (c) The
payments made by the Banks to an Issuing Bank in reimbursement of amounts paid by it under a Facility Letter of Credit shall constitute, and the Borrower hereby
expressly acknowledges and agrees that such payments shall constitute, Loans hereunder (notwithstanding that the amounts thereof may not comply with the provisions of Section 2.01(c)). Such
Loans shall be ABR Loans, subject to the Borrower's rights under Article II hereof. 

    (d) Upon
the request of the Agent or any Bank, each Issuing Bank shall furnish to the requesting Agent or Bank copies of any Facility Letter of Credit or Reimbursement
Agreement to which such Issuing Bank is party. 

    (e) The
obligations of the Banks to make payments to the Agent for the account of an Issuing Bank with respect to a Facility Letter of Credit shall be irrevocable, not
subject to any qualification or exception whatsoever and shall be made in accordance with, but not subject to, the terms and conditions of this Agreement under all circumstances, including, without
limitation, the following: 

     (i) any
lack of validity or enforceability of this Agreement or any of the other Loan Documents; 

    (ii) the
existence of any claim, setoff, defense or other right which the Borrower may have at any time against a beneficiary named in a Facility Letter of Credit or
any transferee of any Facility Letter of Credit (or any Person for whom any such transferee may be acting), the Issuing Bank, the Agent, any Bank, or any other Person, whether in connection with this
Agreement, any Facility Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transactions between the Borrower or any Subsidiary and the
beneficiary named in any Facility Letter of Credit); 

    (iii) any
draft, certificate or any other document presented under the Facility Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect of any statement therein being untrue or inaccurate in any respect; 

    (iv) the
surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; 

    (v) any
failure by the Agent or an Issuing Bank to make any reports required pursuant to Section 13.08; or 

52

 

    (vi) the occurrence of any Default or Event of Default. 

    (f)  For
purposes of determining the unused portion of the Aggregate Commitments and the unused portion of a Bank's Commitment under Sections 2.02 and 2.09(b), the
Aggregate Commitments shall be deemed used to the extent of the aggregate undrawn face amount of the outstanding Facility Letters of Credit and the Bank's Commitment shall be deemed used to the extent
of such Bank's Ratable Share of the aggregate undrawn face amount of the outstanding Facility Letters of Credit. 

    Section 13.07  Compensation for Facility Letters of Credit.  (a) The
Borrower agrees to pay to the Agent, in the case of each Facility Letter of Credit, the Facility Letter of Credit Fee therefor, payable in arrears on each Quarterly Payment Date following any calendar
quarter during all or any part of which such Facility Letter of Credit was outstanding (which payment shall be a pro rata portion of the annual Facility Letter of Credit Fee for such preceding
calendar quarter) and on the Termination Date (which payment shall be in the amount of all accrued and unpaid Facility Letter of Credit Fees). Facility Letter of Credit Fees shall be calculated, on a
pro rata basis for the period to which such payment applies, for actual days on which such Facility Letter of Credit was outstanding during such period, on the basis of a 360-day year. The
Agent shall promptly remit such Facility Letter of Credit Fees, when paid, as follows: (i) to each Issuing Bank, solely for its own account, with respect to each Facility Letter of Credit
issued by such Issuing Bank, an amount per annum equal to the product of (A) 0.125% per
annum and (B) the face amount of such Facility Letter of Credit and (ii) to all Banks, ratably, the balance of such Facility Letter of Credit Fees. Facility Letters of Credit Fees shall
be payable hereunder with respect to the Existing Letters of Credit from and after the date hereof. 

    (b) An
Issuing Bank shall also have the right to receive, solely for its own account, its out-of-pocket costs of issuing and servicing Facility
Letters of Credit, as the Borrower may agree in writing. 

    Section 13.08  Issuing Bank Reporting Requirements.  Each Issuing Bank
shall, no later than the tenth day following the last day of each month, provide to the Agent a schedule of the Facility Letters of Credit issued by it showing the Issuance Date, account party,
original face amount, amount (if any) paid thereunder, expiration date and the reference number of each Facility Letter of Credit outstanding at any time during such month and the aggregate amount (if
any) payable by the Borrower to such Issuing Bank during the month pursuant to Section 2.15. Copies of such reports shall be provided promptly to each Bank by the Agent. 

    Section 13.09  Indemnification; Nature of Issuing Bank's Duties.  (a) In
addition to amounts payable as elsewhere provided in this Article XIII, the Borrower hereby agrees to protect, indemnify, pay and save the Agent, each Issuing Bank and each Bank harmless from
and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) arising from the claims of third parties against the Agent,
any Issuing Bank or any Bank as a consequence, direct or indirect, of (i) the issuance of any Facility Letter of Credit other than, in the case of an Issuing Bank, as a result of its willful
misconduct or gross negligence, or (ii) the failure of an Issuing Bank to honor a drawing under a Facility Letter of Credit as a result of any act or omission, whether rightful or wrongful, of
any government, court or other governmental agency or authority. 

    (b) As
among the Borrower, the Banks, the Agent and each Issuing Bank, the Borrower assumes all risks of the acts and omissions of, or misuse of Facility Letters of
Credit by, the respective beneficiaries of such Facility Letters of Credit. In furtherance and not in limitation of the foregoing, neither an Issuing Bank nor the Agent nor any Bank shall be
responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of the
Facility Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a Facility 

53

 

Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary
of a Facility Letter of Credit to comply fully with conditions required in order to draw upon such Facility Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex, facsimile transmission or otherwise; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing under any Facility Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of a Facility Letter of Credit of the proceeds of any drawing under such Facility Letter of Credit; or (viii) for any consequences arising from causes beyond
the control of the Agent, such Issuing Bank and the Banks including, without limitation, any act or omission, whether rightful or wrongful, of any government, court or other governmental agency or
authority. None of the above shall affect, impair, or prevent the vesting of any of such Issuing Bank's rights or powers under this Section 13.09. 

    (c) In
furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by an Issuing Bank under or in
connection with the Facility Letters of Credit or any related certificates, if taken or omitted in good faith, shall not put such Issuing Bank, the Agent or any Bank under any resulting liability to
the Borrower or relieve the Borrower of any of its obligations hereunder to any such Person, but the foregoing shall not relieve such Issuing Bank of its obligation to confirm that any documents
required to be delivered under a Facility Letter of Credit appear to have been delivered in compliance and that they appear to comply on their face with the requirements of such Facility Letter of
Credit. 

    (d) Notwithstanding
anything to the contrary contained in this Section 13.09, the Borrower shall have no obligation to indemnify an Issuing Bank under this
Section 13.09 in respect of any liability incurred by an Issuing Bank arising primarily out of the willful misconduct or gross negligence of such Issuing Bank, as determined by a court of
competent jurisdiction, or out of the wrongful dishonor by such Issuing Bank of a proper demand for payment made under the Facility Letters of Credit issued by such Issuing Bank, unless such dishonor
was made at the request of the Borrower. 

    Section 13.10  Designation or Resignation of Issuing Bank.  (a) Upon
request by the Borrower and approval by the Agent, a Bank may at any time agree to be designated as an Issuing Bank hereunder, which designation shall be set forth in a written instrument or
instruments delivered by the Borrower, the Agent and such Bank. The Agent shall promptly deliver to the other Banks a copy of such instrument or instruments. From and after such designation and unless
and until such Bank resigns as an Issuing Bank in accordance with Section 13.10(b), such Bank shall have all of the rights and obligations of an Issuing Bank hereunder. 

    (b) An
Issuing Bank shall continue to be the Issuing Bank unless and until (i) it shall have given the Borrower and the Agent notice that it has elected to
resign as Issuing Bank and (ii) unless there is, at the time of such notice, at least one other Issuing Bank, another Bank shall have agreed to be the replacement Issuing Bank and shall have
been approved in writing by the Agent and the Borrower. A resigning Issuing Bank shall continue to have the rights and obligations of the Issuing Bank hereunder solely with respect to Facility Letters
of Credit theretofore issued by it notwithstanding the designation of a replacement Issuing Bank hereunder, but upon its notice of resignation (or, if at the time of such notice, there is not at least
one other Issuing Bank, then upon such designation of a replacement Issuing Bank), the resigning Issuing Bank shall not thereafter issue any Facility Letters of Credit (unless it shall again
thereafter be designated as an Issuing Bank in accordance with the provisions of this Section 13.10). The assignment of, or grant of a participation interest in, all or any part of its
Commitment or Loans by a Bank that is also the Issuing Bank shall not constitute an assignment or transfer of any of its rights or obligations as an Issuing Bank. 

54

 

    Section 13.11  Termination of Issuing Bank's Obligation.  In the event
that the Banks' obligations to make Loans terminate or are terminated as provided in Section 8.01, each Issuing Bank's obligation to issue Facility Letters of Credit shall also terminate. 

    Section 13.12  Obligations of Issuing Bank and Other Banks.  Except to the
extent that a Bank shall have agreed to be designated as an Issuing Bank, no Bank shall have any obligation to accept or approve any request for, or to issue, amend or extend, any Letter of Credit,
and the obligations of an Issuing Bank to issue, amend or extend any Facility Letter of Credit are expressly limited by and subject to the provisions of this Article XIII. 

    Section 13.13  Issuing Bank's Rights.  All of the representations,
warranties, covenants and agreements of the Borrower to the Banks under this Agreement and of the Borrower under any other Loan Document shall inure to the benefit of each Issuing Bank (unless the
context otherwise indicates). Without limitation of the foregoing, (a) the provisions of Section 2.15 (relating to capital adequacy) shall apply with respect to each Issuing Bank and its
issuance of, or obligation to issue, Facility Letters of Credit and to each Bank's obligation to participate in Facility Letters of Credit; (b) the provisions of Section 2.18 (relating
to statements of amounts payable and the survival of obligations) shall apply to each Issuing Bank; and (c) the provisions of Section 11.04 (relating to the Borrower's payment of costs,
expenses, taxes, fees and other amounts) shall apply to such costs, expenses, taxes, fees and other amounts relating to the Facility Letters of Credit. 

    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first written. 

	 	 	BEAZER HOMES USA, INC.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	
Address for Notices
	

 	
 	

5775 Peachtree Dunwoody Road

Suite B-200

Atlanta, Georgia 30342

Attention: President

Tel: (404) 250-3420

Fax: (404) 250-3428
	

 	
 	

BEAZER MORTGAGE CORPORATION
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

BEAZER HOMES CORP.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President

55

 

	

 	
 	

BEAZER HOMES SALES ARIZONA, INC.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

BEAZER REALTY CORP.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

BEAZER/SQUIRES REALTY, INC.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

BEAZER HOMES HOLDINGS CORP.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

BEAZER HOMES TEXAS HOLDINGS, INC.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

BEAZER HOMES TEXAS, L.P.
	

 	
 	

By:	
 	

BEAZER HOMES TEXAS HOLDINGS, INC., its general partner
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

BEAZER REALTY, INC.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

HOMEBUILDERS TITLE SERVICES, INC.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President

56

 

	

 	
 	

TEXAS LONE STAR TITLE, L.P.
	

 	
 	

By:	
 	

BEAZER HOMES TEXAS HOLDINGS, INC., its general partner
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

HOMEBUILDERS TITLE SERVICES OF VIRGINIA, INC.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

UNIVERSAL SOLUTIONS INSURANCE AGENCY, INC.
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

APRIL CORPORATION
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	

BEAZER SPE, LLC
	

 	
 	

By:	
 	

BEAZER HOMES HOLDING CORP., its sole member
	

 	
 	

By:	
 	

/s/ DAVID S. WEISS   
 David S. Weiss

Executive Vice President
	

 	
 	
Address for Notices to all Guarantors
	

 	
 	

c/o Beazer Homes USA, Inc.

5775 Peachtree Dunwoody Road

Suite B-200

Atlanta, Georgia 30342

Attention: President

Tel: (404) 250-3420

Fax: (404) 250-3428

57

  

	 	 	BANK ONE, NA
	

 	
 	

By:	

/s/ MARK KRAMER   

	 	 	Name:	Mark Kramer

	 	 	Title:	Director

	

 	
 	
Addresses for Notices
	

 	
 	

Bank One, NA

1 Bank One Plaza

Mail Suite 0151

Chicago, Illinois 60670

Attn: Mr. Patt Schiewitz

Telephone: (312) 732-1148

Telecopy: (312) 732-5939

58

 

	 	 	COMERICA BANK
	

 	
 	

By:	

/s/ SCOTT M. HELMER     
 Scott M. Helmer
 Vice President
	

 	
 	
Address for Notices
	

 	
 	

Comerica Bank

500 Woodward Avenue, MC: 3256

Detroit, MI 48226

Attn: Mr. Scott M. Helmer

Telephone: (313)222-5717

Telecopy: (313)222-9295

59

 

	 	 	GUARANTY BANK
	

 	
 	

By:	

/s/ RANDALL S. REID   

	 	 	Name:	Randall S. Reid

	 	 	Title:	Vice President

	

 	
 	
Address for Notices
	

 	
 	

Guaranty Federal Bank, F.S.B.

8333 Douglas Avenue

Dallas, TX 75225

Attn: Mr. Randy Reid

Telephone: (214)360-2733

Telecopy: (214)360-1661

60

 

	 	 	SUNTRUST BANK
	

 	
 	

By:	

/s/ DONALD L. GAUDETTE     
 Donald L. Gaudette
 Director
	

 	
 	
Address for Notices
	

 	
 	

SunTrust Bank

303 Peachtree Street, N.E.

10th Fl.

Atlanta, GA 30308

Attn: Mr. Donald L. Gaudette

Telephone: (404) 658-4925

Telecopy: (404) 588-8505

61

 

	 	 	WACHOVIA BANK, N.A.
	

 	
 	

By:	

/s/ JEFFREY S. HOZA   

	 	 	Name:	Jeffrey S. Hoza

	 	 	Title:	Vice President

	

 	
 	
Address for Notices
	

 	
 	

Wachovia Bank, N.A.

106 West Maple Street

Cumming, GA 30040

Attn: Mr. Jeffrey S. Hoza

Telephone: (770) 781-6430

Telecopy: (770) 781-6461

62

 

	 	 	AMSOUTH BANK
	

 	
 	

By:	

/s/ RONNY HUDSPETH   

	 	 	Name:	Ronny Hudspeth

	 	 	Title:	Sr Vice President

	

 	
 	

By:	

  

	 	 	Name:	  

	 	 	Title	  

	

 	
 	
Address for Notices
	

 	
 	

AmSouth Bank

AmSouth/Sonat Tower

AST-10th Floor

1900 5th Avenue North

Birmingham, AL 35203

Attn: Mr. Ronny Hudspeth

Telephone: (205) 307-4227

Telecopy: (205) 801-0138

63

 

	 	 	PNC BANK, N.A.
	

 	
 	

By:	

/s/ DOUGLAS G. PAUL     
 Douglas G. Paul
 Senior Vice President
	

 	
 	
Address for Notices
	

 	
 	

PNC Bank, N.A.

Two Tower Center

Real Estate Banking Group-18th Fl.

Suite J3-JTTC-18-6

East Brunswick, New Jersey 08816

Attn: Mr. Douglas G. Paul

Telephone: (732) 220-3566

Telecopy: (732) 220-3744

64

 

	 	 	WASHINGTON MUTUAL BANK, FA
	

 	
 	

By:	

/s/ KRIS W. KLINGER   

	 	 	Name:	Kris W. Klinger

	 	 	Title:	Vice President

	

 	
 	
Address for Notices
	

 	
 	

Washington Mutual Bank, FA

5950 LaPlace Court

Suite 250

Carlsbad, CA 92008

Attn: Mr. Kris Klinger

Telephone: (760) 804-8598

Telecopy: (760) 804-8590

65

 

	 	 	COMPASS BANK
	

 	
 	

By:	

/s/ PHILIP R. WEBB   

	 	 	Name:	Philip R. Webb

	 	 	Title:	Vice President

	

 	
 	
Address for Notices
	

 	
 	

Compass Bank

10060 Skinner Lake Drive

Jacksonville, FL 32246

Attn: Mr. Philip Webb

Telephone: (904) 564-8812

Telecopy: (904) 564-8827

66

 

	 	 	KEYBANK NATIONAL ASSOCIATION
	

 	
 	

By:	

/s/ KEVIN A. DELOZIER   

	 	 	Name:	Kevin A. Delozier

	 	 	Title:	Vice President

	

 	
 	
Address for Notices
	

 	
 	

KeyBank National Association

Mail Code TX-07-14-0600

14643 Dallas Parkway, Suite 230, LB #4

Dallas, TX 75240

Attn: Mr. Kevin Delozier

Telephone: (972) 716-9307 (ext. 21)

Telecopy: (972) 716-9321

67

 

	 	 	BANKUNITED, FSB
	

 	
 	

By:	

/s/ CLAY WILSON   

	 	 	Name:	Clay Wilson

	 	 	Title:	Senior Vice President

	

 	
 	
Address for Notices
	

 	
 	

BankUnited, FSB

255 Alhambra Circle, 2nd Fl.

Coral Gables, FL 33134

Attn: Mr. Clay Wilson

Telephone: (305) 569-4250

Telecopy: (305) 569-3456

68

 

	 	 	BNP PARIBAS
	

 	
 	

By:	

/s/ DUANE P. HELKOWSKI   

	 	 	Name:	Duane P. Helkowski

	 	 	Title:	Director

	

 	
 	

By:	

/s/ STEPHANIE ROGERS   

	 	 	Name:	Stephanie Rogers

	 	 	Title:	Vice President

	

 	
 	
Address for Notices
	

 	
 	

BNP Paribas

787 Seventh Avenue

New York, NY 10019

Attn: Mr. Duane Helkowski

Telephone: (212) 841-2940

Telecopy: (212) 841-3830

69

 
 

Schedule I    
  

 
 

COMMITMENT SCHEDULE    
  

	Bank
 
	 	Commitment

	Bank One, NA	 	$	28,000,000
	Comerica Bank	 	$	28,000,000
	Guaranty Bank	 	$	28,000,000
	SunTrust Bank	 	$	28,000,000
	Wachovia Bank, N.A.	 	$	28,000,000
	AmSouth Bank	 	$	22,500,000
	PNC Bank, N.A.	 	$	22,500,000
	Washington Mutual Bank, FA	 	$	15,000,000
	KeyBank National Association	 	$	15,000,000
	Compass Bank	 	$	15,000,000
	BankUnited, FSB	 	$	10,000,000
	BNP Paribas	 	$	10,000,000
	 	 	

	Total	 	$	250,000,000

 
 

Schedule II    
  

 
 

EXISTING LETTERS OF CREDIT    
    
    (Attached)    
  

 
 

Exhibit A    
  

 
 

NOTE    
  

	$	 	 	 	,	 	 	 
	 	
	 	
	 	
	 	 

    FOR VALUE RECEIVED, the undersigned, BEAZER HOMES USA, INC., a Delaware corporation (the "Borrower") HEREBY PROMISES TO PAY to the order of
            (the "Bank") to BANK ONE, NA, as Agent, at the Agent's Office located at 1 Bank One Plaza, Chicago, IL, for the account of the applicable Lending Office of the Bank, in lawful
money
of the United States and in immediately available funds, the principal amount of            Dollars ($      ) or the aggregate unpaid principal amount of all
Loans made to the
Borrower by the Bank pursuant to the Credit Agreement and outstanding on the Termination Date, whichever is less, and to pay interest from the date of this Note, in like money, at said office for the
account of the applicable Lending Office, at the time and at a rate per annum as provided in the Credit Agreement. The Bank is hereby authorized by the Borrower to endorse on the schedule attached to
this Note held by it the amount and type of each Loan and each renewal, conversion, and payment of principal amount received by the Bank for the account of the applicable Lending Office on account of
its Loans, which endorsement shall, in the absence of manifest error, be conclusive as to the outstanding balance of the Loans made by the Bank; provided,
however, that the failure to make such notation with respect to any Loan or renewal, conversion, or payment shall not limit or otherwise affect the obligations of the Borrower
hereunder. 

    This
Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement, dated as of September 21, 2001, between the Borrower, the Guarantors,
the Bank and certain other banks parties thereto (which, as it may be amended, modified, renewed or extended from time to time, is herein called the "Credit Agreement"). Terms used herein which are
defined in the Credit Agreement shall have their defined meanings when used herein. The Credit Agreement, among other things, contains provisions for acceleration of the maturity of this Note upon the
happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity of this Note upon the terms and conditions specified in the Credit Agreement. 

    The
Borrower hereby agrees to pay all reasonable costs and expenses (including reasonable attorney's fees and expenses) paid or incurred by the holder of this Note in the collection
of any principal or interest payable under this Note or the enforcement of this Note or any other Loan Documents. 

    This
Note shall be governed by the laws of the State of Illinois. 

	 	 	BEAZER HOMES USA, INC.
	

 	
 	

By:	

  

	 	 	Name:	  

	 	 	Title:	  

 
 

SCHEDULE TO NOTE    
  

	Date Made or Paid
	 	Type of Loan
	 	Amount of Principal Paid
	 	Unpaid Principal Balance of Note
	 	Name of Person Making Notation

	  	 	 	 	 	 	 	 	 

  

 
 

Exhibit B    
  

    The
opinion of Paul, Hastings, Janofsky & Walker LLP, to be rendered pursuant to Section 3.01(5) of the Credit Agreement to which this Exhibit is attached (the "Credit
Agreement"; any capitalized term used herein and not otherwise defined herein shall have the meaning assigned to such term in the Credit Agreement) among Beazer Homes USA, Inc., the Original
Guarantors parties thereto, the banks whose names appear on the signature pages thereof and Bank One, NA, as Agent, shall be substantially to the following effect: 

    (a) The
Borrower and each of Beazer Mortgage Corporation, a Delaware corporation, Beazer Homes Corp., a Tennessee corporation, Beazer Homes Sales Arizona Inc., a
Delaware corporation, Beazer Realty Corp., a Georgia corporation, Beazer Homes Holding Corp., a Delaware corporation, Beazer Homes Texas Holdings, Inc., a Delaware corporation, Beazer Homes
Texas, L.P., a Delaware limited partnership, Homebuilders Title Services, Inc., a Delaware corporation, Texas Lone Star Title, L.P., a Texas limited partnership, Universal Solutions Insurance
Agency, Inc., a Delaware corporation, April Corporation, a Colorado corporation, and Beazer SPE, LLC, a Georgia limited liability company (collectively the "Guarantors") is a corporation duly
incorporated, or, in the case of Beazer Homes Texas, L.P., and Texas Lone Star Title, L.P., a partnership duly formed or, in the case of Beazer SPE, LLC, a Georgia limited liability company, validly
existing, and in good standing under the laws of the jurisdiction of its incorporation or formation and has all requisite power and authority, corporate or otherwise, to conduct its business, to own
its properties and to execute and deliver, and to perform all of its obligations under the Loan Documents. 

    (b) The
Loan Documents have been duly executed and delivered by Borrower and the Guarantors. The execution and delivery by the Borrower and each Guarantor of the Loan
Documents and the performance of their respective obligations thereunder have been duly authorized by all necessary corporate or other action and do not and will not (i) require any consent or
approval of its stockholders, (ii) violate any provision of any law, rule or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal
Reserve System), or, to our knowledge, any order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to it which violation would (x) impair its
ability to perform its obligations under the Loan Documents or (y) have a material adverse effect on its financial condition, properties, or operations, or on its charter or
by-laws, (iii) to our knowledge, result in a breach of or constitute a default under any indenture or lease or loan or credit agreement or any other material agreement or instrument
to which it is a party or by which it or its properties may be bound or affected, or (iv) to our knowledge, result in, or require, the creation or imposition of any Lien upon any of the
properties now owned or hereafter acquired by it. 

    (c) No
authorization, consent, approval, license, exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for the valid execution, delivery or performance by the Borrower and each Guarantor of the Loan Documents. 

    (d) Except
as have been disclosed to the Agent and the Banks in writing, there are to our knowledge no actions, suits or proceedings pending or threatened against the
Borrower or any Subsidiary or their properties before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, the probable outcome of which
would have a material adverse effect on the consolidated financial condition, properties, or operations of the Borrower and its Subsidiaries taken as a whole. 

1

 

    In
rendering the foregoing opinion with respect to Beazer Homes Corp., we have relied upon the opinion of            as to matters of Tennessee law. In rendering the foregoing
opinion with respect to Texas Lone Star Title, L.P., we have relied upon the opinion of            as to matters of Texas law. In rendering the foregoing opinion with respect to April
Corporation, we have relied upon the opinion of            as to matters of Colorado law. 

    In
rendering the foregoing opinion we express no opinion as to the effect (if any) of any laws of any jurisdiction, except those of the General Corporation Law and Revised Uniform
Limited Partnership Act of the State of Delaware, the laws of the State of Georgia, the Federal laws of the United States and, to the extent provided for in the preceding paragraph, the laws of
Tennessee. 

    We
express no opinion with respect to Beazer/Squires Realty, Inc., a North Carolina corporation, Homebuilders Title Services of Virginia, Inc., a Virginia corporation,
or Beazer Realty, Inc., a New Jersey corporation. 

2

 
 

Exhibit C    
  

    The
opinion of Illinois counsel to be rendered pursuant to Section 3.01(5) of the Credit Agreement to which this Exhibit is attached (the "Credit Agreement"; any capitalized
term used herein and not otherwise defined herein shall have the meaning assigned to such term in the Credit Agreement) among Beazer Homes USA, Inc., the Guarantors parties thereto, the banks
whose names appear on the signature page thereof and Bank One, NA, as Agent, shall be substantially to the following effect: 

    The
Loan Documents, when executed and delivered by the parties thereto, will constitute the legal, valid and binding obligations of the Borrower and each Guarantor enforceable against
it in accordance with their respective terms, except as enforcement of such terms may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium, fraudulent transfer or similar laws
affecting creditors' rights generally or by general equitable principles. 

    Counsel
is a member of the Bar of the State of Illinois. 

    In
rendering the foregoing opinion we express no opinion as to the effect (if any) of any laws of any jurisdiction, except those of the State of Illinois and the Federal laws of the
United States. 

  

 
 

Exhibit D    
  

Bank
One, NA,

as Agent

1 Bank One Plaza

Chicago, Illinois 60670 

	Re:
	Credit
Agreement dated as of September 21, 2001 (the "Credit Agreement") among Beazer Homes USA, Inc., the Guarantors parties thereto, and each of the banks ("Banks")
parties thereto 

Ladies
and Gentlemen: 

    We
have acted as your special counsel in connection with the Credit Agreement. Terms used in the Credit Agreement are used herein as defined therein. 

    We
have examined the opinions (the "Opinions") and other documents delivered by the Borrower and the Guarantors pursuant to Article III of the Credit Agreement. We have assumed
the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the due authority of
all persons executing the same. We have relied as to factual matters on the documents which we have reviewed, and as to matters of law covered by the Opinions on such Opinions. We are qualified to
practice law in the State of Illinois and we do not purport to be experts on, or to express any opinion herein concerning, the laws of any other jurisdiction. 

    Subject
to the exceptions expressed in the preceding paragraph and while we have not independently considered the matters covered by the Opinions to the extent necessary to enable us
to express the conclusions therein stated, we are of the opinion that the Opinions and other documents delivered pursuant to Article III of the Credit Agreement are substantially responsive to
the requirements of said Section. In that regard, we note that such Section does not require the Opinions to address matters
relating to Beazer/Squires Realty, Inc., a North Carolina corporation, Beazer Realty, Inc., a New Jersey corporation, or Homebuilders Title Services of Virginia, Inc., a Virginia
corporation. 

    This
opinion may be relied upon by each Bank that is a party to the Credit Agreement. 

	 	 	Very truly yours,
	

 	
 	

 	
 	

 

2

 
 

Exhibit E    
  

    The opinion of local counsel to be rendered pursuant to Section 3.01(10) of the Credit Agreement to which this Exhibit is attached ("Credit Agreement;"
any capitalized term used herein and not otherwise defined herein shall have the meaning assigned to such term in the Credit Agreement) among Beazer Homes USA, Inc., the Guarantors parties
thereto, the banks whose names appear on the signature page thereof and Bank One, NA, as Agent, shall be substantially to the following effect: 

    (a) The
Guarantor is a corporation duly incorporated validly existing, and in good standing under the laws of the jurisdiction of its incorporation, and has all
requisite power and authority, corporate or otherwise, to conduct its business, to own its properties and to execute and deliver, and to perform all of its obligations under the Loan Documents. 

    (b) The
execution and delivery by the Guarantor of the Credit Agreement and the performance of its obligations thereunder have been duly authorized by all necessary
corporate or other action and do not and will not (i) require any consent or approval of its stockholders, or (ii) violate any provision of any law, rule or regulation (including,
without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System), or, to our knowledge, any order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to it which violation would (x) impair its ability to perform its obligations under the Loan Documents (y) have a material adverse effect on its
financial condition, properties, or operations, or on its charter or by-laws. 

    (c) No
authorization, consent, approval, license, exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for the valid execution, delivery or performance by the Guarantor of the Credit Agreement. 

    (d) Except
as have been disclosed to the Agent and the Banks in writing, there are to our knowledge no actions, suits or proceedings pending or threatened against the
Guarantor or its properties before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, the probable outcome of which would have a material
adverse effect on the consolidated financial condition, properties, or operations of the Guarantor. 

    Counsel
is a member of the Bar of the State of            . 

    In
rendering the foregoing opinion we express no opinion as to the effect (if any) of any laws of any jurisdiction, except those of the State of            , and the Federal
laws of the United States. 

 
 

Exhibit F    
  

 
 

CERTIFICATE    
  

    This Certificate is delivered pursuant to the Credit Agreement dated as of September 21, 2001 among Beazer Homes USA, Inc., Bank One, NA as
Agent, the Banks party thereto and the Guarantors party thereto (the "Credit Agreement"). Capitalized terms used herein and not defined herein shall have the meanings provided therefor in the Credit
Agreement. This Certification is delivered in connection with [a notice requesting a Borrowing under Section 2.03 OR a notice
requesting issuance, amendment or extension of a Facility Letter of Credit under Section 13.04]*. 

    The
undersigned hereby certifies as follows: 

    1.  The
representations and warranties contained in Article IV of the Credit Agreement are correct on and as of the [date of such Borrowing OR
Issuance Date]* as though made on and as of such date except to the extent that any such representation or warranty is stated to relate solely to an earlier date, in which case such
representation or warranty is correct as of such earlier date. 

    2.  No
Default or Event of Default has occurred and is continuing and would result from [such Borrowing OR
the issuance, amendment or extension of such Facility Letter of Credit]*. 

    3.  Upon  [such Borrowing OR the issuance, amendment or extension of such Facility Letter of
Credit]*, the Permitted Senior Debt shall not exceed the Borrowing Base as set forth in the Borrowing Base Certificate delivered by the
Borrower to the Agent as of the most recent Inventory Valuation Date, which Borrowing Base Certificate is true and correct as of such Inventory Valuation Date. 

	Date:	 	 	 	 
	 	 	
	 	 
	 	 	 	 	
 David S. Weiss
	

 	
 	

 	
 	

Executive Vice President and

Chief Financial Officer

Beazer Homes USA, Inc.

    *Include
appropriate portion of bracketed provision 

 
 

Exhibit G    
  

 
 

Subsidiaries of Borrower    
  

	Subsidiary
 
	 	State of

Incorporation/Formation
	 	Borrower's

% Ownership
	 
	Beazer Mortgage Corporation	 	Delaware	 	100	%
	Beazer Homes Corp.	 	Tennessee	 	100	%
	Beazer Home Sales Arizona Inc.	 	Delaware	 	100	%
	Beazer Realty Corp.	 	Georgia	 	100	%
	Beazer/Squires Realty, Inc.	 	North Carolina	 	100	%
	Beazer Homes Holdings Corp.	 	Delaware	 	100	%
	Beazer Homes Texas Holdings, Inc.	 	Delaware	 	100	%
	Beazer Homes Texas, L.P.	 	Delaware	 	99	%(1)
	Beazer Realty, Inc.	 	New Jersey	 	100	%
	Homebuilders Title Services, Inc.	 	Delaware	 	100	%
	Texas Lone Star Title, L.P.	 	Texas	 	99	%(2)
	Homebuilders Title Services of Virginia, Inc.	 	Virginia	 	100	%
	Universal Solutions Insurance Agency, Inc.	 	Delaware	 	100	%
	Security Title Insurance Company, Inc.	 	Vermont	 	100	%
	United Home Insurance Corporation	 	Vermont	 	100	%
	April Corporation	 	Colorado	 	100	%
	Beazer SPE, LLC	 	Georgia	 	100	%(3)

	(1)
	The
99% interest is held by Beazer Homes Corp., and the remaining 1% is held by Beazer Homes Texas Holdings, Inc.

	(2)
	The
99% interest is held by Beazer Home Sales Arizona Inc., and the remaining 1% is held by Beazer Homes Texas Holdings, Inc.

	(3)
	The
entire 100% interest is held by Beazer Homes Holding Corp. 

  

 
 

Exhibit H    
  

 
 

ASSIGNMENT AGREEMENT    
  

    This Assignment Agreement (this "Assignment Agreement") between            (the "Assignor")
and            (the "Assignee") is dated as of
            , 200 . The parties hereto agree as follows: 

    1.  PRELIMINARY STATEMENT.  The Assignor is a party to a Credit Agreement (which, as it may be amended,
modified, renewed or extended from time to time, is herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein
and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 

    2.  ASSIGNMENT AND ASSUMPTION.  The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement such that after giving effect to such assignment the Assignee
shall have purchased pursuant to this Assignment Agreement the percentage interest specified in Item 3 of Schedule 1 of all outstanding rights and obligations under the Credit Agreement
relating to the facilities listed in Item 3 of Schedule 1 and the other Loan Documents. The Commitment (or Loans, if the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 3 of Schedule 1. 

    3.  EFFECTIVE DATE.  The effective date of this Assignment Agreement (the "Effective Date") shall be the
later of the date specified in Item 3 of Schedule 1 or two Business Days (or such shorter period agreed to by the Agent) after a Notice of Assignment substantially in the form of
Exhibit 1 attached hereto has been delivered to the Agent. Such Notice of Assignment must include any consents required to be delivered to the Agent by Section 12.03 of the Credit
Agreement (including the consent of the Agent). In no event will the Effective Date occur if the payments required to be made by the Assignee to the Assignor on the Effective Date under Sections 4 and
5 hereof are not made on the proposed Effective Date. The Assignor will notify the Assignee of the proposed Effective Date no later than the Business Day prior to the proposed Effective Date. As of
the Effective Date, (i) the Assignee shall have the rights and obligations of a Bank under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder and
(ii) the Assignor shall relinquish its rights and be
released from its corresponding obligations under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder. 

    4.  PAYMENTS, OBLIGATIONS.  On and after the Effective Date, the Assignee shall be entitled to receive
from the Agent all payments of principal, interest and fees with respect to the interest assigned hereby. The Assignee shall advance funds directly to the Agent with respect to all Loans and
reimbursement payments made on or after the Effective Date with respect to the interest assigned hereby. [In consideration for the sale and assignment of Loans hereunder, (i) the
Assignee shall pay the Assignor on the Effective Date, an amount equal to the principal amount of the portion of all ABR Loans assigned to the Assignee hereunder and (ii) with respect to each
LIBOR Loan made by the Assignor and assigned to the Assignee hereunder which is outstanding on the Effective Date, (a) on the last day of the Interest Period therefor or (b) on such
earlier date agreed to by the Assignor and the Assignee or (c) on the date on which any such LIBOR Loan either becomes due (by acceleration or otherwise) or is prepaid (the date as described in
the foregoing clauses (a), (b) or (c) being hereinafter referred to as the "Payment Date"), the Assignee shall pay the Assignor an amount equal to the principal amounts of the portion of
such LIBOR Loan assigned to the Assignee which is outstanding on the Payment Date. If the Assignor and the Assignee agree that the Payment Date for such LIBOR Loan shall be the Effective Date, they
shall agree to the interest rate applicable to the portion of such Loan assigned hereunder for the period from the Effective Date to the end of 

1

 

the existing Interest Period applicable to such LIBOR Loan (the "Agreed Interest Rate") and any interest received by the Assignee in excess of the Agreed Interest Rate shall be remitted to the
Assignor. In the event interest for the period from the Effective Date to but not including the Payment Date is not paid by the Borrower with respect to any LIBOR Loan sold by the Assignor to the
Assignee hereunder, the Assignee shall pay to the Assignor interest for such period on the portion of such LIBOR Loan sold by the Assignor to the Assignee hereunder at the applicable rate provided by
the Credit Agreement. In the event a prepayment of any LIBOR Loan which is existing on the Payment Date and assigned by the Assignor to the Assignee hereunder occurs after the Payment Date but before
the end of the Interest Period applicable to such LIBOR Loan, the Assignee shall remit to the Assignor the excess of the prepayment penalty paid with respect to the portion of such LIBOR Loan assigned
to the Assignee hereunder over the amount which would have been paid if such prepayment penalty was calculated based on the Agreed Interest Rate. The Assignee will also promptly remit to the Assignor
(i) any principal payments received from the Agent with respect to LIBOR Loans prior to the Payment Date and (ii) any amounts of interest on Loans and fees received from the Agent which
relate to the portion of the Loans assigned to the Assignee hereunder for periods prior to the Effective Date, in the case of ABR Loans, or the Payment Date, in the case of LIBOR Loans, and not
previously paid by the Assignee to the Assignor.]* In the event that either party hereto receives any payment to which the other party hereto is entitled under this Assignment Agreement,
then the party receiving such amount shall promptly remit it to the other party hereto. 

*The parties may insert alternative payment provisions in lieu of the payment terms included in this Exhibit.

    5.  FEES PAYABLE BY THE ASSIGNEE.  [To the extent applicable, the Assignee shall pay to the
Assignor a fee on each day on which a payment of interest or commitment fee is made under the Credit Agreement with respect to the amounts assigned to the Assignee hereunder (other than a payment of
interest or commitment fee for the period prior to the Effective Date or, in the case of LIBOR Loans, the Payment Date, which the Assignee is obligated to deliver to the Assignor pursuant to
Section 4 hereof). The amount of such fee shall be the difference between (i) the interest or fee, as applicable, paid with respect to the amounts assigned to the Assignee hereunder and
(ii) the interest or fee, as applicable, which would have been paid with respect to the amounts assigned to the Assignee hereunder if each interest rate was  of 1% less than
the interest rate paid by the Borrower or if the commitment fee was      of 1% less than the commitment fee paid by the Borrower, as applicable. In addition, the Assignee agrees to pay
      % of the recordation fee required to be paid to the Agent pursuant to the Credit Agreement in connection with this Assignment Agreement.]* 

*The parties may insert alternative payment provisions in lieu of the payment terms included in this Exhibit.

    6.  REPRESENTATIONS OF THE ASSIGNOR: LIMITATIONS ON THE ASSIGNOR'S LIABILITY.  The Assignor represents
and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made without recourse to the Assignor and that the Assignor makes no other representation or warranty of any kind to the
Assignee. Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectibility of any Loan Documents, including without limitation, documents granting the Assignor and the other Banks a security interest in assets of the Borrower, any
Subsidiary, or any Guarantor, (ii) any representation, warranty or statement made in or in connection with any of the Loan Documents, (iii) the financial condition or creditworthiness of
the Borrower, any Subsidiary, or any Guarantor, (iv) the performance of or compliance with any of the terms or provisions of any of the Loan Documents, (v) inspecting any of the
property, books or records of the Borrower, any Subsidiary, or any Guarantor, (vi) the validity, enforceability, perfection, priority, 

2

 

condition, value or sufficiency of any collateral securing or purporting to secure the Loans or (vii) any mistake, error of judgment, or action taken or omitted to be taken in connection with
the Loans or the Loan Documents. 

    7.  REPRESENTATIONS OF THE ASSIGNEE.  The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of such financial statements requested by the Assignee and such other documents and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (iii) appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (iv) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be performed by it as a Bank, (v) agrees that its payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets or other consideration being used to make the purchase and assumption hereunder are "plan assets" as
defined under ERISA and that its rights, benefits and interests in and under the Loan Documents will not be "plan assets" under ERISA, [and (vii) attaches the forms prescribed by
the Internal Revenue Service of the United States certifying that the Assignee is entitled to receive payments under the Loan Documents without deduction or withholding of any United States federal
income taxes]* and (viii) represents and warrants that the assignment hereunder does not and will not, as of the effective date of such assignment, result in any increased costs or
expenses, including without limitation pursuant to Section 2.14 or 2.15 of the Credit Agreement, payable by the Borrower or any Guarantor. 

*to be inserted if the Assignee is not incorporated under the laws of the United States, or a state thereof.

    8.  INDEMNITY.  The Assignee agrees to indemnify and hold the Assignor harmless against any and all
losses, costs and expenses (including, without limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee's
non-performance of the obligations assumed under this Assignment Agreement. 

    9.  SUBSEQUENT ASSIGNMENTS.  After the Effective Date, the Assignee shall have the right pursuant to
Section 12.03 of the Credit Agreement to assign the rights which are assigned to the Assignee hereunder to any entity or person, provided that (i) any such subsequent assignment does not
violate any of the terms or conditions of the Loan Documents or any law, rule, regulation, order, writ, judgment, injunction or decree and that all consents required under the terms of the Loan
Documents have been obtained and (ii) unless the prior written consent of the Assignor is obtained, the Assignee is not thereby released from its obligations to the Assignor hereunder, if any
remain unsatisfied, including, without limitation, its obligations under Sections 4, 5 and 8 hereof. 

    10.  REDUCTIONS OF AGGREGATE COMMITMENTS.  If any reduction in the Aggregate Commitments (other than
pursuant to Section 2.19(c) of the Credit Agreement) occurs between the date of this Assignment Agreement and the Effective Date, the percentage interest specified in Item 3 of
Schedule 1 shall remain the same, but the dollar amount purchased shall be recalculated based on the reduced Commitment of the Assignor. 

    11.  ENTIRE AGREEMENT.  This Assignment Agreement and the attached Notice of Assignment embody the entire
agreement and understanding between the parties hereto and supersede all prior agreements and understandings between the parties hereto relating to the subject matter hereof. 

3

 

    12.  GOVERNING LAW.  This Assignment Agreement shall be governed by and construed in accordance with, the
laws of the State of Illinois without regard to principles of conflict of laws. 

    13.  NOTICES.  Notices shall be given under this Assignment Agreement in the manner set forth in the
Credit Agreement. For the purpose hereof the addresses of the parties hereto (until notice of a change is delivered) shall be the addresses set forth in the attachment to Schedule 1. 

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

	 	 	[NAME OF ASSIGNOR]
	

	
 	

 	

 	

 
	

 	
 	

By:	

 	

 
	 	 	 	

	 	 	Title:	 
	 	 	 	 	

	

	
 	

 	

 	

 
	

 	
 	

[NAME OF ASSIGNEE]
	

	
 	

 	

 	

 
	

 	
 	

By:	

 	

 
	 	 	 	

	 	 	Title:	 
	 	 	 	 	

4

 
 

SCHEDULE 1
  
  to Assignment Agreement    
  

	1.
	Description
and Date of Credit Agreement:

	2.
	Date
of Assignment Agreement:            , 200 

	3.
	Amounts
(As of Date of Item 2 above): 

	 
	 
	 	Facility

1*
	 	Facility

2*
	 	Facility

3*
	 
	a.	Total of Commitments (Loans)** under Credit Agreement	 	$	 	 	$	 	 	$	 	 
	

b.	

Assignee's Percentage of each Facility purchased under the Assignment Agreement***	
 	
 	

 	
%	
 	

 	
%	
 	

 	
%
	

c.	

Amount of Assigned Share in each Facility purchased under the Assignment Agreement	
 	
$	

 	
 	
$	

 	
 	
$	

 	
 
	

d.	

Assignee's aggregate Commitment Amount (Loan Amount)*** Purchased Hereunder:	
 	
$	

 	
 	
$	

 	
 	
$	

 	
 
	

e.	

Proposed Effective Date:	
 	
 	

 	
 	
 	

 	
 	
 	

 	
 

Accepted
and Agreed: 

	[NAME OF ASSIGNOR]	 	[NAME OF ASSIGNEE]
	

	

 	

 	
 	

 	

 	

 
	By:	 	 	 	By:	 	 
	 	
	 	 	

	Title:	 	 	Title:	 
	 	 	
	 	 	 	

	*
	Insert
specific facility names per Credit Agreement

	**
	If
a Commitment has been terminated, insert outstanding Loans in place of Commitment

	***
	Percentage
taken to 10 decimal places 

Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT  

    Attach Assignor's Administrative Information Sheet, which must include notice address for the Assignor and the Assignee and the ABR Loan Lending Office address
and the LIBOR Loan Lending Office address for the Assignee. 

  

 
 

EXHIBIT 1    
    
    to Assignment Agreement    
    
    NOTICE    
    
    OF ASSIGNMENT    
    
        , 2001    
  

	To:	 	[NAME OF BORROWER]*	 	 
	

 	
 	

	
 	

 
	

 	
 	

	
 	

 
	

 	
 	

[NAME OF AGENT]	
 	

 
	

 	
 	

	
 	

 
	

 	
 	

	
 	

 
	

From:	
 	

[NAME OF ASSIGNOR] (the "Assignor")	
 	

 
	

 	
 	

[NAME OF ASSIGNEE] (the "Assignee")	
 	

 

    1.  We
refer to that certain Credit Agreement (the "Credit Agreement") described in Item I of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms
used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 

    2.  This
Notice of Assignment (this "Notice") is given and delivered to [the Borrower and]* the Agent pursuant to Section 12.03 of the
Credit Agreement. 

    3.  The
Assignor and the Assignee have entered into an Assignment Agreement, dated as of            , 2001 (the "Assignment"), pursuant to which, among other
things, the Assignor has sold, assigned, delegated and transferred to the Assignee, and the Assignee has purchased, accepted and assumed from the Assignor the percentage interest specified in Item 3
of Schedule 1 of all outstanding rights and obligations under the Credit Agreement relating to the facilities listed in Item 3 of Schedule 1. The Effective Date of the Assignment shall
be the later of the date specified in Item 5 of Schedule 1 or two Business Days (or such shorter period as agreed to by the Agent) after this Notice of Assignment and any consents and fees
required by Section 12.03 of the Credit Agreement have been delivered to the Agent, provided that the Effective Date shall not occur if any condition precedent agreed to by the Assignor and the
Assignee has not been satisfied. 

*To be included only if consent must be obtained from the Borrower pursuant to Section 12.03 of the Credit Agreement.

    4.  The
Assignor and the Assignee hereby give to the Borrower and the Agent notice of the assignment and delegation referred to herein. The Assignor will confer with
the Agent before the date specified in Item 5 of Schedule 1 to determine if the Assignment Agreement will become effective on such date pursuant to Section 3 hereof, and will confer with
the Agent to determine the Effective Date pursuant to Section 3 hereof if it occurs thereafter. The Assignor shall notify the Agent if the Assignment Agreement does not become effective on any
proposed Effective Date as a result of the failure to satisfy the conditions precedent agreed to by the Assignor and the Assignee. At the request of the Agent, the Assignor will give the Agent written
confirmation of the satisfaction of the conditions precedent. 

    5.  The
Assignor or the Assignee shall pay to the Agent on or before the Effective Date the processing fee of $4,000.00 required by Section 12.03 of the Credit
Agreement. 

1

 

    6.  If any Notes are outstanding on the Effective Date, the Assignor and the Assignee request and direct that the Agent prepare and cause the Borrower to execute and
deliver new Notes or, as appropriate, replacement Notes, to the Assignor and the Assignee. The Assignor and, if applicable, the Assignee each agree to deliver to the Agent the original Note received
by it from the Borrower upon its receipt of a new Note (or replacement Note) in the appropriate amount, whereupon such original Note shall be marked "canceled" and returned to the Borrower. 

    7.  The
Assignee advises the Agent that notice and payment instructions are set forth in the attachment to Schedule 1. 

    8.  The
Assignee hereby represents and warrants that none of the funds, monies, assets or other consideration being used to make the purchase pursuant to the Assignment
Agreement are "plan assets" as defined under ERISA and that its rights, benefits, and interests in and under the Loan Documents will not be "plan assets" under ERISA. 

    9.  The
Assignee authorizes the Agent to act as its agent under the Loan Documents in accordance with the terms thereof. The Assignee acknowledges that the Agent has no
duty to supply information with respect to the Borrower or the Loan Documents to the Assignee until the Assignee becomes a party to the Credit Agreement.* 

*May be eliminated if Assignee is a party to the Credit Agreement prior to the Effective Date.

	NAME OF ASSIGNOR	 	NAME OF ASSIGNEE
	

By:	
 	

  
	
 	

By:	
 	

  

	

Title:	
 	

  
	
 	

Title:	
 	

  

	

ACKNOWLEDGED [AND CONSENTED TO] BY (NAME OF AGENT]	
 	

ACKNOWLEDGED [AND CONSENTED TO] BY (NAME OF BORROWER]
	

By:	
 	

  
	
 	

By:	
 	

  

	

Title:	
 	

  
	
 	

Title:	
 	

  

[Attach
photocopy of Schedule 1 to Assignment) 

2

  

 
 

Table of Contents    
  

	 
	 	Page

	

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS
	

Section 1.01 Defined Terms	
 	

1
	Section 1.02 Accounting Terms	 	13
	

ARTICLE II

AMOUNTS AND TERMS OF THE LOANS
	

Section 2.01 Revolving Credit	
 	

13
	Section 2.02 Reduction of Aggregate Commitments	 	14
	Section 2.03 Notice and Manner of Borrowing	 	14
	Section 2.04 Non-Receipt of Funds by Agent	 	15
	Section 2.05 Determination of Applicable Margins and Applicable Commitment Rate	 	15
	Section 2.06 Conversions and Renewals	 	17
	Section 2.07 Interest	 	17
	Section 2.08 Interest Rate Determination	 	18
	Section 2.09 Fees	 	18
	Section 2.10 Notes	 	19
	Section 2.11 Prepayments	 	19
	Section 2.12 Method of Payment	 	19
	Section 2.13 Use of Proceeds	 	20
	Section 2.14 Yield Protection	 	20
	Section 2.15 Changes in Capital Adequacy Regulations	 	20
	Section 2.16 Availability of LIBOR Loans	 	21
	Section 2.17 Funding Indemnification	 	21
	Section 2.18 Bank Statements; Survival of Indemnity	 	21
	Section 2.19 Extension of Termination Date	 	21
	Section 2.20 Replacement of Certain Banks	 	22
	Section 2.21 Swing Line	 	23
	

ARTICLE III

CONDITIONS PRECEDENT
	

Section 3.01 Conditions Precedent to Initial Loans	
 	

24
	Section 3.02 Conditions Precedent to All Loans	 	25
	

ARTICLE IV

REPESENTATIONS AND WARRANTIES
	

Section 4.01 Incorporation, Formation, Good Standing, and Due Qualification	
 	

26
	Section 4.02 Power and Authority	 	26
	Section 4.03 Legally Enforceable Agreement	 	27
	Section 4.04 Financial Statements	 	27
	Section 4.05 Labor Disputes and Acts of God	 	27
	Section 4.06 Other Agreements	 	27
	Section 4.07 Litigation	 	27
	Section 4.08 No Defaults on Outstanding Judgments or Orders	 	27
	Section 4.09 Ownership and Liens	 	28
	Section 4.10 Subsidiaries and Ownership of Stock	 	28
	Section 4.11 ERISA	 	28

i

 

	Section 4.12 Operation of Business	 	28
	Section 4.13 Taxes	 	28
	Section 4.14 Laws; Environment	 	29
	Section 4.15 Investment Company Act	 	29
	Section 4.16 Public Utility Holding Company Act	 	29
	

ARTICLE V

AFFIRMATIVE COVENANTS
	

Section 5.01 Maintenance of Existence	
 	

30
	Section 5.02 Maintenance of Records	 	30
	Section 5.03 Maintenance of Properties	 	30
	Section 5.04 Conduct of Business	 	30
	Section 5.05 Maintenance of Insurance	 	30
	Section 5.06 Compliance with Laws	 	30
	Section 5.07 Right of Inspection	 	30
	Section 5.08 Reporting Requirements	 	30
	Section 5.09 Subsidiary Reporting Requirements	 	33
	Section 5.10 Environment	 	33
	Section 5.11 Use of Proceeds	 	34
	Section 5.12 Ranking of Obligations	 	34
	Section 5.13 Taxes	 	34
	Section 5.14 Wholly Owned Status	 	34
	Section 5.15 New Subsidiaries	 	34
	

ARTICLE VI

NEGANTIVE COVENANTS
	

Section 6.01 Liens	
 	

34
	Section 6.02 Secured Debt	 	35
	Section 6.03 Mergers, Etc	 	35
	Section 6.04 Leases	 	35
	Section 6.05 Sale and Leaseback	 	35
	Section 6.06 Sale of Assets	 	35
	Section 6.07 Investments	 	35
	Section 6.08 Guaranties, Etc	 	36
	Section 6.09 Transactions With Affiliates	 	36
	Section 6.10 Land Inventory	 	36
	Section 6.11 Housing Inventory	 	37
	Section 6.12 Senior Debt	 	37
	Section 6.13 Amendment or Modification of Senior Indentures	 	37
	Section 6.14 STIC and UHIC	 	37
	Section 6.15 Negative Pledges	 	37
	

ARTICLE VII

FINANCIAL COVENANTS
	

Section 7.01 Minimum Consolidated Tangible Net Worth	
 	

37
	Section 7.02 Leverage Ratio.	 	37
	Section 7.03 Permitted Senior Debt	 	37
	Section 7.04 Interest Coverage Ratio	 	37
	Section 7.05 Land Inventory	 	38

ii

 

	

ARTICLE VIII

EVENTS OF DEFAULT
	

Section 8.01 Events of Default	
 	

38
	Section 8.02 Set Off	 	40
	

ARTICLE IX

GUARANTY
	

Section 9.01 Guaranty	
 	

40
	Section 9.02 No Impairment of Guaranty	 	41
	Section 9.03 Continuation and Reinstatements etc	 	41
	Section 9.04 Limitation on Guaranteed Amount	 	51
	

ARTICLE X

AGENCY PROVISIONS
	

Section 10.01 Authorization and Action	
 	

42
	Section 10.02 Liability of Agent	 	42
	Section 10.03 Rights of Agent as a Bank	 	42
	Section 10.04 Independent Credit Decisions	 	42
	Section 10.05 Indemnification	 	43
	Section 10.06 Successor Agent	 	43
	Section 10.07 Sharing of Payments, Etc	 	44
	Section 10.08 Withholding Tax Matters	 	44
	Section 10.09 Documentation Agent and Co-Agents	 	44
	

ARTICLE XI

MISCELLANEOUS
	

Section 11.01 Amendments, Etc	
 	

44
	Section 11.02 Notices, Etc	 	45
	Section 11.03 No Waiver	 	45
	Section 11.04 Costs, Expenses, and Taxes	 	45
	Section 11.05 Integration	 	45
	Section 11.06 Indemnity	 	46
	Section 11.07 Governing Law	 	46
	Section 11.08 Severability of Provisions	 	46
	Section 11.09 Counterparts	 	46
	Section 11.10 Headings	 	46
	Section 11.11 Submission to Jurisdiction	 	46
	Section 11.12 Jury Trial Waiver	 	46
	Section 11.13 Governmental Regulation	 	46
	Section 11.14 No Fiduciary Duty	 	47
	Section 11.15 Confidentiality	 	57
	

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
	

Section 12.01 Successors and Assigns	
 	

47
	Section 12.02 Participations	 	47
	Section 12.03 Assignments	 	48
	Section 12.04 Dissemination of Information	 	49
	Section 12.05 Tax Treatment	 	49

iii

 

	

ARTICLE XIII

THE LETTER OF CREDIT FACILITY
	

Section 13.01 Facility Letters of Credit	
 	

49
	Section 13.02 Limitations	 	49
	Section 13.03 Conditions	 	50
	Section 13.04 Procedure for Issuance of Facility Letters of Credit	 	50
	Section 13.05 Duties of Issuing Bank	 	51
	Section 13.06 Participation	 	51
	Section 13.07 Compensation for Facility Letters of Credit.	 	53
	Section 13.08 Issuing Bank Reporting Requirements	 	53
	Section 13.09 Indemnification; Nature of Issuing Bank's Duties	 	53
	Section 13.10 Designation or Resignation of Issuing Bank	 	54
	Section 13.11 Termination of Issuing Bank's Obligation	 	55
	Section 13.12 Obligations of Issuing Bank and Other Banks	 	55
	Section 13.13 Issuing Bank's Rights	 	55

 
 

LIST OF SCHEDULES AND EXHIBITS    
  

	Schedule
 
	 	Description
	 	Reference

	Schedule I	 	Commitments	 	2.01
	

Schedule II	
 	

Existing Letters of Credit	
 	

Definition

	Exhibit
 
	 	Description
	 	Reference
	 
	Exhibit A	 	Form of Note	 	2.10	 
	

Exhibit B	
 	

Summary of Opinion of Counsel for Borrower and Certain Guarantors	
 	

3.01	
(5)
	

Exhibit C	
 	

Summary of Opinion of Illinois Counsel for Borrower	
 	

3.01	
(5)
	

Exhibit D	
 	

Summary of Opinion of Counsel for Agent	
 	

3.01	
(6)
	

Exhibit E	
 	

Summary of Opinion of Local Counsel for Certain Guarantors	
 	

3.01	
(10)
	

Exhibit F	
 	

Form of Certificate for Borrowings and Facility Letters of Credit	
 	

3.02	
 
	

Exhibit G	
 	

List of Subsidiaries of Borrower	
 	

4.10	
 
	

Exhibit H	
 	

Assignment Agreement	
 	

12.03	
(b)

iv

QuickLinks

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

ARTICLE II AMOUNTS AND TERMS OF THE LOANS

ARTICLE III CONDITIONS PRECEDENT

ARTICLE IV REPRESENTATIONS AND WARRANTIES

ARTICLE V AFFIRMATIVE COVENANTS

ARTICLE VI NEGATIVE COVENANTS

ARTICLE VII FINANCIAL COVENANTS

ARTICLE VIII EVENTS OF DEFAULT

ARTICLE IX GUARANTY

ARTICLE X AGENCY PROVISIONS

ARTICLE XI MISCELLANEOUS

ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

ARTICLE XIII THE LETTER OF CREDIT FACILITY

Schedule I

COMMITMENT SCHEDULE

Schedule II

EXISTING LETTERS OF CREDIT (Attached)

Exhibit A

NOTE

SCHEDULE TO NOTE

Exhibit B

Exhibit C

Exhibit D

Exhibit E

Exhibit F

CERTIFICATE

Exhibit G

Subsidiaries of Borrower

Exhibit H

ASSIGNMENT AGREEMENT

SCHEDULE 1 to Assignment Agreement

EXHIBIT 1 to Assignment Agreement NOTICE OF ASSIGNMENT , 2001

Table of Contents

LIST OF SCHEDULES AND EXHIBITSPrepared by MERRILL CORPORATION

QuickLinks
 -- Click here to rapidly navigate through this document

EXHIBIT 10.1  

SUBORDINATED BRIDGE NOTE  

 PURCHASE AGREEMENT  

 DATED AS OF NOVEMBER 26, 2001  

 BY AND BETWEEN  

 CTN MEDIA GROUP, INC.  

 AND  

 U-C HOLDINGS, L.L.C.

   Table of Contents  

	 
	 	 
	 	 
	 	Page

	ARTICLE I	 	 	 	 	 	 
	DEFINITIONS
	

ARTICLE II	
 	

 	
 	

 	
 	

 
	CLOSING
	 	 	2.01	 	Authorization of Notes	 	7
	 	 	2.02	 	Purchase and Sale of Initial Note	 	7
	 	 	2.03	 	Initial Closing	 	8
	 	 	2.04	 	Purchase of Additional Notes	 	8
	 	 	2.05	 	Subsequent Closings	 	8
	 	 	2.06	 	Conversion Rights	 	8
	 	 	2.07	 	Security Interest	 	9
	

ARTICLE III	
 	

 	
 	

 	
 	

 
	PURCHASER'S REPRESENTATIONS
	 	 	3.01	 	Investment Intention	 	9
	 	 	3.02	 	Corporate Existence	 	10
	 	 	3.03	 	Corporate Power; Authorization; Enforceable Obligations	 	10
	 	 	3.04	 	Confidentiality	 	10
	ARTICLE IV	 	 	 	 	 	 
	COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS
	 	 	4.01	 	Capitalization	 	10
	 	 	4.02	 	Authorization and Issuance of the Notes	 	11
	 	 	4.03	 	Corporate Existence; Compliance with Law	 	11
	 	 	4.04	 	Subsidiaries	 	12
	 	 	4.05	 	Corporate Power; Authorization; Enforceable Obligations	 	12
	 	 	4.06	 	Financial Statements	 	12
	 	 	4.07	 	Ownership of Property	 	13
	 	 	4.08	 	Material Contracts; Indebtedness	 	13
	 	 	4.09	 	Environmental Protection	 	13
	 	 	4.10	 	Labor Matters	 	14
	 	 	4.11	 	Securities Laws	 	15
	 	 	4.12	 	Taxes	 	15
	 	 	4.13	 	No Litigation	 	16
	 	 	4.14	 	Brokers	 	16
	 	 	4.15	 	Management and Labor Agreements	 	16
	 	 	4.16	 	Patents, Trademarks, Copyrights and Licenses	 	16
	 	 	4.17	 	No Material Adverse Effect	 	17
	 	 	4.18	 	ERISA	 	17
	 	 	4.19	 	Registration Rights	 	19
	 	 	4.20	 	Required Filings	 	19
	 	 	4.21	 	Full Disclosure	 	19
	 	 	4.22	 	Use of Proceeds	 	19
	 	 	4.23	 	Insurance	 	19

i

 

	 	 	4.24	 	Affiliated Transactions	 	19
	 	 	4.25	 	Special Finance Committee	 	19
	

ARTICLE V	
 	

 	
 	

 	
 	

 
	EVENTS OF NONCOMPLIANCE
	 	 	5.01	 	Definition	 	20
	 	 	5.02	 	Consequences of Events of Noncompliance	 	21
	

ARTICLE VI	
 	

 	
 	

 	
 	

 
	CONDITIONS PRECEDENT TO CLOSING
	 	 	6.01	 	Conditions Precedent	 	21
	

ARTICLE VII	
 	

 	
 	

 	
 	

 
	SECURITIES LAWS MATTERS
	 	 	7.01	 	General Provisions	 	23
	 	 	7.02	 	Information Requests	 	23
	

ARTICLE VIII	
 	

 	
 	

 	
 	

 
	EXPENSES
	

ARTICLE IX	
 	

 	
 	

 	
 	

 
	LIMITATION ON CLAIMS OF THE PURCHASER
	 	 	9.01	 	Limitation	 	23
	

ARTICLE X	
 	

 	
 	

 	
 	

 
	MISCELLANEOUS
	 	 	10.01	 	Notices	 	24
	 	 	10.02	 	Binding Effect; Benefits	 	25
	 	 	10.03	 	Amendment	 	25
	 	 	10.04	 	Successors and Assigns; Assignability	 	25
	 	 	10.05	 	Remedies	 	25
	 	 	10.06	 	Section and Other Headings	 	26
	 	 	10.07	 	Severability	 	26
	 	 	10.08	 	Entire Agreement	 	26
	 	 	10.09	 	Counterparts	 	26
	 	 	10.10	 	Publicity	 	26
	 	 	10.11	 	Governing Law	 	26
	 	 	10.12	 	No Setoffs, etc	 	26
	 	 	10.13	 	No Strict Construction	 	27

ii

 
SCHEDULES AND EXHIBITS  

	Schedule 4.01	 	Capitalization
	Schedule 4.03	 	Foreign Qualification
	Schedule 4.04	 	Subsidiaries
	Schedule 4.06	 	Financial Statements; Other Obligations
	Schedule 4.07	 	Ownership of Property
	Schedule 4.08	 	Material Contracts
	Schedule 4.10	 	Labor Matters
	Schedule 4.12	 	Taxes
	Schedule 4.13	 	Litigation
	Schedule 4.15	 	Management and Labor Agreements
	Schedule 4.19	 	Registration Rights
	Schedule 4.23	 	Insurance
	Schedule 4.24	 	Affiliated Transactions
	

Exhibit A	
 	

Form of Note
	Exhibit B	 	Subordinated Security Agreement
	Exhibit C	 	Capitalization Chart

iii

 
 

SUBORDINATED BRIDGE NOTE
  PURCHASE AGREEMENT    
  

    THIS SUBORDINATED BRIDGE NOTE PURCHASE AGREEMENT (the "Agreement"), is dated as of November 26, 2001, by
and between CTN Media Group, Inc., a Delaware corporation having an office at 3350 Peachtree Road, Suite 1500, Atlanta, Georgia 30326 (the "Company"),
and U-C Holdings, L.L.C., a Delaware limited liability company (the "Purchaser"). 

    WHEREAS,
the Company has agreed to issue and sell to Purchaser, and Purchaser has agreed to purchase from the Company, upon the terms and conditions hereinafter provided, subordinated
bridge notes in the form attached hereto as Exhibit A (the "Notes"). 

    WHEREAS,
the Company has agreed to grant to Purchaser a lien on the assets of the Company as collateral security for the obligations of the Company under this Agreement and the Notes
upon the terms and conditions set forth in a Subordinated Security Agreement in the form attached hereto as Exhibit B. 

    NOW,
THEREFORE, in consideration of the premises and the covenants hereinafter contained, it is agreed as follows: 

ARTICLE
1 

 
  DEFINITIONS    
  

    "Affiliate" of any particular Person means any other Person controlling, controlled by or under common control
with such particular Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting
securities or otherwise. 

    "Affiliated Group" shall mean an affiliated group as defined in Section 1504 of the IRC (or any analogous combined, consolidated or
unitary group defined under state, local or foreign income tax law) of which Company is or has been a member. 

    "Annual Report" shall mean the annual report of the Company on Form 10-KSB for the fiscal year ended December 31, 2000, which has been
filed with the SEC. 

    "Board" shall mean the board of directors of the Company. 

    "Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in
the State of Illinois or the State of Georgia. 

    "Capitalization Chart" shall have the meaning set forth in Section 4.01. 

    "Certificate of Incorporation" shall mean the Amended and Restated Certificate of Incorporation of the Company filed on May 9, 2001
with the Secretary of State of the State of Delaware, and as the same may be further amended, modified or restated from time to time. 

    "Charges" shall mean (A) all federal, state, county, city, municipal, local, foreign or other governmental (including, without
limitation, PBGC taxes at the time due and payable, levies, assessments, charges, liens, claims or encumbrances upon or relating to (i) the Company's employees, payroll, income or gross receipts, (ii)
the Company's ownership or use of any of its assets, or (iii) any other aspect of the Company's business, or (B) any liability of the Company for the payment of any amounts of the type described in
clause (A) arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included (or required to be included) in any tax return relating thereto). 

    "Closing" shall mean each of the Initial Closing and each Subsequent Closing, and "Closing
Date" shall mean each of the Initial Closing Date and each Subsequent Closing Date. 

    "COBRA" shall have the meaning set forth in Section 4.18(l) hereof. 

    "Commitment Termination Date" shall have the meaning given to it in Section 2.04
hereof. 

    "Common Stock" shall mean the common stock of the Company, par value $.005 per share. 

 

    "Company" shall mean CTN Media Group, Inc., a Delaware corporation having an office at 3350 Peachtree Road, Suite 1500, Atlanta,
Georgia 30326. 

    "Controlled Group" shall mean all members of a controlled group of corporations and all members of a controlled group of trades or
businesses (whether or not incorporated) under common control which, together with the Company, are treated as a single employer under Section 414 of the IRC or Section 4001 of ERISA. 

    "Environmental Laws" shall mean all federal, state and local laws, statutes, ordinances and regulations, now or hereafter in effect,
and in each case as amended or supplemented from time to time, and any judicial or administrative interpretation thereof, including, without limitation, any applicable judicial or administrative
order, consent decree or judgment, relative to the applicable Real Estate, relating to the regulation and protection of human health, safety, the environment and natural resources (including, without
limitation, ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include but are not limited to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. / / 9601 et seq.) ("CERCLA"); the
Hazardous Material Transportation Act, as amended (49 U.S.C. / / 1801 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. / / 136 et seq. ); the
Resource Conservation and Recovery Act, as amended (42 U.S.C. / /6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as amended (15 U.
S.C. / / 2601 et seq.); the Clean Air Act, as amended (42 U. S.C. / / 740 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. / / 1251 et seq.); the
Occupational Safety and Health Act, as amended (29 U.S.C. / / 651 et sec.) ("OSHA"); and the Safe Drinking Water Act, as amended (42 U.S.C.
/ / 300f et seq.), and any and all regulations promulgated thereunder, and all analogous state and local counterparts or equivalents and any transfer of ownership notification or approval
statutes. 

    "Environmental Liabilities and Costs" shall mean all liabilities, obligations, responsibilities, remedial actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses (including, without limitation, all fees, disbursements and expenses of counsel, experts and consultants and costs of
investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim, suit, action or demand by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law (including, without limitation, any thereof arising under any Environmental Law, permit, order or agreement with any
Governmental Authority) and which relate to any health or safety condition regulated under any Environmental Law or in connection with any other environmental matter or Spill or the presence of a
hazardous substance or threatened Spill of any Hazardous Substance. 

    "ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to
time and any regulations promulgated thereunder. 

    "ERISA Affiliate" shall mean, with respect to the Company, any trade or business (whether or not incorporated) under common control
with the Company and which, together with the Company, are treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the IRC, excluding the Purchaser and each other Person
which would not be an ERISA Affiliate if the Purchaser did not own any issued and outstanding shares of Stock of the Company. 

    "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated thereunder. 

    "Evaluation Material" shall have the meaning set forth in Section 3.04. 

    "Event of Noncompliance" shall have the meaning set forth in Section 5.01. 

    "Facility" shall have the meaning set forth in Section 4.09. 

    "Financials" shall mean the financial statements referred to in Section 4.07 hereof. 

2

 

    "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. 

    "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, and any agency,
department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 

    "Guaranteed Indebtedness" shall mean, as to any Person, any obligation of such Person guaranteeing any Indebtedness, lease, dividend,
or other obligation ("primary obligations") of any other Person (the "primary obligor") in any manner
including, without limitation, any obligation or arrangement of such Person (a) to purchase or repurchase any such primary obligation, (b) to advance or supply funds (i)
for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation, or (d) to indemnify the owner of such primary obligation against loss in respect thereof. 

    "Hazardous Substance" shall have the meaning set forth in Section 4.09(a)
hereof. 

    "Indebtedness" of any Person shall mean (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of
property or services (including, without limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers acceptances, whether or not matured, but not
including obligations to trade creditors incurred in the ordinary course of business), (ii) all obligations evidenced by notes, bonds, debentures or similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such property), (iv) all capital lease obligations required to be capitalized in accordance with GAAP, (v) all Guaranteed
Indebtedness, (vi) all Indebtedness referred to in clause (i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness and (vii) all liabilities under Title IV of ERISA. 

    "Independent Third Parties" shall mean third party investors who are not Affiliates of the Purchaser, the Company or any of the WSP
Parties. 

    "Initial Closing" and "Initial Closing Date" shall have the meaning set forth in  Section 2.03. 

    "Initial Note" shall have the meaning set forth in Section 2.02. 

    "Initial Principal Amount" shall have the meaning set forth in Section 2.02. 

    "IRC" shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto. 

    "IRS" shall mean the Internal Revenue Service, or any successor thereto. 

    "LaSalle Credit Agreement" shall mean the Amended and Restated Credit Agreement, dated as of August 14, 2001, by and between the
Company and LaSalle Bank National Association, as amended, restated and modified from time to time. 

    "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority, or other security agreement or preferential arrangement of any kind or nature whatsoever (including without limitation, any title retention
agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing 

3

 

statement perfecting a security interest as to assets owned by the relevant Person under the Uniform Commercial Code or comparable law of any jurisdiction). 

    "Material Adverse Effect" shall mean material adverse effect on the business, assets, operations, prospects or financial or other
condition of the Company. 

    "Material Contracts" shall mean (i) all of the Company's contracts, agreements, leases or other instruments to which the Company is a
party or by which the Company or its properties are bound, which in the Company's good faith judgment are required to be disclosed as exhibits to the Company's annual report on Form 10-KSB, (ii) all
of the Company's and its Subsidiaries' loan agreements, bank lines of credit agreements, indentures, mortgages, deeds of trust, pledge and security agreements, factoring agreements, conditional sales
contracts, letters of credit or other debt instruments, (iii) all material operating or capital leases for equipment to which the Company is a party, (iv) all non-competition and similar agreements
other than as contained in employment agreements to which the Company is a party, (v) all contracts for the employment of any officer or employee, (vi) all consulting agreements, (vii) any guarantees
by the Company, (viii) all distributor and sales agency agreements, (ix) all other material contracts not made in the ordinary course of business, and (x) all material contracts relating to the
operation of the Company or, the production of or programming for the Company or related to the technology utilized by the Company. 

    "Multiemployer Plan" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA, and to which Company or any ERISA
Affiliate is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. 

    "New Financing" means the consummation by the Company of a new round of equity or subordinated debt financing approved by the Special
Finance Committee with Independent Third Parties by the Commitment Termination Date. 

    "New Securities" shall have the meaning set forth in Section 2.06. 

    "Notes" shall have the meaning set forth in the Recitals. 

    "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor thereto. 

    "Pension Plan" shall mean all "employee benefit plans", as defined in Section 3(3) of ERISA, and any other employee benefit
arrangements or payroll practices, including, without limitation, severance pay, sick leave, vacation pay, salary continuation for disability, consulting or other compensation agreements, retirement,
deferred compensation, bonus, stock purchase, hospitalization, medical insurance, life insurance and scholarship programs (the "Plans") maintained by
the Company or to which the Company contributed, contributes or is obligated to contribute thereunder, and (ii) all "employee pension plans", as defined in Section 3(2) of ERISA, maintained by the
Company or any of its ERISA Affiliates to which the Company or any of its ERISA Affiliates contributed, contributes or is obligated to contribute thereunder. 

    "Permitted Indebtedness" shall mean any debt incurred by the Company under the LaSalle Credit Agreement or permitted to be incurred by
the Company under Section 10.7 of the LaSalle Credit Agreement. 

    "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof). 

    "Preferred Stock" shall mean the Series A Convertible Preferred Stock and the Series B Convertible Preferred Stock of the Company, par
value $.001 per share. 

4

 

    "Purchaser" shall mean U-C Holdings, L.L.C., a Delaware limited liability company. 

    "Registration Rights Agreement" shall mean the Registration Rights Agreement between the Company and the Purchaser, dated as of April
25, 1997, as such agreement may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. 

    "SEC" shall mean the U.S. Securities and Exchange Commission, or any successor thereto. 

    "Securities Act" shall mean the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder. 

    "Special Finance Committee" means the special finance committee of the Company, the members of which are independent from the
Purchaser. 

    "Spill" shall have the meaning set forth in Section 4.09. 

    "Stock" shall mean all shares, options, warrants, general or limited partnership interests, limited liability company membership
interest, participations or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including,
without limitation, common stock, preferred stock, or any other equity security (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange
Act). 

    "Subordinated Security Agreement" shall mean the Subordinated Security Agreement by and between Company and Purchaser, dated as of the
date hereof, in the form attached hereto as Exhibit B, as amended, restated and modified from time to time. 

    "Subordination Agreement" shall mean the Subordination and Intercreditor Agreement by and between Company, Purchaser and LaSalle Bank
National Association, dated as of the date hereof, as amended, restated and modified from time to time. 

    "Subsequent Closing" or "Subsequent Closing Date" shall refer to any closing pursuant
to Section 2.02 hereof that takes place after the Initial Closing. 

    "Subsidiary" shall mean, with respect to any Person, (a) any corporation of which an aggregate of more than 50% of the outstanding
Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any contingency)
is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, and (b) any partnership or other entity in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. 

    "Transaction Documents" shall mean this Agreement, the Notes issued pursuant hereto, the Subordinated Security Agreement, the
Subordination Agreement and all other agreements or documents contemplated herein. 

    "WSP Parties" shall mean Willis Stein & Partners, L.P., Willis Stein & Partners II, L.P. and Willis Stein & Partners Dutch, L.P. 

    References
to this "Agreement" shall mean this Subordinated Bridge Note Purchase Agreement, including all amendments, modifications and
supplements and any exhibits or schedule to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative. 

    Any
accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given such term in accordance with GAAP, and all
financial computations hereunder shall be computed, unless otherwise specifically provided herein, in accordance 

5

 

with GAAP, consistently applied. That certain terms or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. The words
"herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement, as a whole, including the exhibits and schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or clause contained in this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. 

ARTICLE
2 

CLOSING  

    2.1 Authorization of Notes. At or prior to the Initial Closing, the Company shall have duly authorized the issuance and
sale to the Purchaser of the Notes, in form and substance as set forth in Exhibit A attached hereto, to be purchased at the Initial Closing or any
Subsequent Closing. 

    2.2 Purchase and Sale of Initial Note. Subject to the terms and conditions set forth in this Agreement, at the Initial
Closing, the Purchaser shall purchase from the Company, and the Company shall sell to the Purchaser, a Note in the aggregate principal amount of $1,500,000 (the "Initial
Principal Amount"), for a purchase price equal to $1,500,000 (the "Initial Note"). 

    2.3 Initial Closing. The closing of the purchase and sale of the Initial Note (the "Initial
Closing") shall take place at the offices of Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois on November 26, 2001, or at such other place or on such other date as
may be mutually agreeable to the Company and the Purchaser (the "Initial Closing Date"). On the Initial Closing Date, the Company shall deliver to the
Purchaser an instrument evidencing the Initial Note to be purchased by the Purchaser, executed by the Company and issued in the name of the Purchaser, upon payment of the Initial Principal Amount by
payment of cash by wire transfer of immediately available funds to the Company. 

    2.4 Purchase of Additional Notes. Subject to the terms and conditions set forth in this Agreement and in this  Section 2.04, from time to time after the Initial Closing and
until the earlier of (a) three months following the Initial Closing Date (the
"Commitment Termination Date"), and (b) the consummation of a New Financing, the Purchaser shall purchase from the Company additional Notes at any
Subsequent Closing up to an aggregate principal amount of $1,500,000 and an aggregate purchase price of $1,500,000 (the "Additional Notes"); provided
that, the Purchaser shall only be obligated to purchase such Additional Notes if (i) the Purchaser shall have received a request in writing from the Special Finance Committee (which notice may be
waived by the parties to this Agreement) specifying (A) a proposed date for the Subsequent Closing, (B) the proposed principal amount of each Additional Note to be purchased and (C) such other
information as the Purchaser may request, (ii) the Purchaser and the WSP Parties shall have consented in writing to the purchase of such Additional Notes as described in the written request from the
Special Finance Committee and (iii) the conditions precedent set forth in this Agreement have been satisfied or waived as provided herein. 

    2.5 Subsequent Closings. The closing of the purchase and sale of each Additional Note (each, a
"Subsequent Closing") shall take place at the offices of Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois on the date proposed by the
Company for the Subsequent Closing, or at such other place or on such other date as may be mutually agreeable to the Company and the Purchaser (each, a "Subsequent Closing
Date"). On each Subsequent Closing Date, the Company shall deliver to the Purchaser an instrument evidencing the Additional Note to be purchased by the Purchaser, executed by
the Company and issued in the name of the Purchaser, against delivery by the Purchaser of the purchase price therefor by payment of cash by wire transfer of immediately available funds to the Company. 

6

 

    2.6 Conversion Rights. 

    (a) In
connection with each New Financing, the Company and the Special Finance Committee shall deliver a written notice to each holder of a Note no less than 15 days
prior to the proposed closing date of such New Financing (the "New Financing Closing Date") setting forth such proposed New Financing Closing Date, the
terms of such New Financing and such other information as the Purchaser may request. All or any portion of the principal amount of any Notes outstanding at the time of a New Financing (including all
accrued but unpaid interest thereon) shall be convertible at the election of the holders of a majority of the aggregate principal amount of such Notes, upon written notice of such election to the
Company (including the principal amount to be converted in connection with such New Financing) no less than five (5) days prior to any proposed New Financing Closing Date, into the same securities
(the "New Securities") offered in such New Financing at the same price at which such New Securities will be issued and sold in such New Financing, and
subject to the same restrictions to which such New Securities are subject (including, without limitation, to the provisions of any subordination agreements governing such New Securities), to
Independent Third Parties, on terms no less favorable to the holders of the Notes. 

	 
	 	 
	 	 

	 	 	For example, with respect to each Note to be converted (or any portion thereof), the holder of such Note shall receive New Securities with a value of $1 (which value shall equal the sale price of such New Securities at
the time of the New Financing) in exchange for each $1 of principal amount and/or accrued interest.	 	 

    (b) If
all or any portion of the principal amount of the Notes (including all accrued but unpaid interest thereon) has not been converted on or prior to the Commitment
Termination Date, the interest rate on any such outstanding Notes (including all accrued but unpaid interest thereon) shall increase immediately to 18% (or, if less, the highest rate permitted by
law). With respect to any such Notes, any increase of the interest rate resulting from the operation of this subparagraph shall continue until the earlier to occur of the conversion of such Notes in
accordance with Section 2.06(a) above or payment of the full amount of principal and accrued interest on such Notes. 

    2.7 Security Interest. Subject to the terms and conditions of this Agreement and the Subordination Agreement, on or
prior to the Initial Closing Date, the Company shall grant to Purchaser a lien on its assets pursuant to and as described in the Subordinated Security Agreement attached hereto as  Exhibit B. 

ARTICLE
3 

PURCHASER'S REPRESENTATIONS  

    As of each Closing, the Purchaser makes the following representations and warranties to the Company, each and all of which shall survive the execution and
delivery of this Agreement and each Closing hereunder: 

    3.1 Investment Intention. The Purchaser hereby represents that it is an "accredited investor" (as defined in Rule 501
under Regulation D of the Securities Act), and that it is acquiring the Notes purchased hereunder or acquired pursuant hereto for its own account with the present intention of holding such securities
for purposes of investment, and that it has no intention of selling such securities in a public distribution in violation of the federal securities laws or any applicable state securities laws;
provided that nothing contained herein shall prevent the Purchaser and subsequent holders of Notes from transferring such securities in compliance with the provisions of  Article VII hereof. 

7

 

    3.2 Corporate Existence. The Purchaser is a limited liability company duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation. 

    3.3 Corporate Power; Authorization; Enforceable Obligations. The execution, delivery and performance by the Purchaser of
the Transaction Documents to be executed by it: (i) are within Purchaser's power, as applicable; (ii) have been duly authorized by all necessary action, as applicable; (iii) are not in contravention
of any provision of the Purchaser's governing documents, as applicable; and (iv) will not violate any law or regulation, or any order or decree of any court or governmental instrumentality binding on
the Purchaser. The Purchaser has full power and authority to perform its obligations under the Transaction Documents. The Transaction Documents to which the Purchaser is a party have each been duly
executed and delivered by Purchaser and constitute the legal, valid and binding obligations of the Purchaser, enforceable against it in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles
of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 

    3.4 Confidentiality. The Purchaser acknowledges that the Company has made available to it certain information concerning
the business, financial condition, operations, assets and liabilities of the Company solely for the purpose of evaluating a possible transaction between the Company and the Purchaser. The Purchaser
agrees to use commercially reasonable efforts to keep confidential, except to the extent required by applicable law, regulation, order or legal process, any such information (whether prepared by the
Company, its advisors or otherwise and irrespective of the form of communication
provided) which has been furnished to the Purchaser by or on behalf of the Company (collectively referred to as the "Evaluation Material") (it being
understood that the Purchaser shall in no event be responsible for any employee or former employee of the Company failing to maintain the confidentiality of the Evaluation Material). The term
"Evaluation Material" does not include information which (i) is or becomes generally available to the public other than as a result of a disclosure by the Purchaser, (ii) was within the Purchaser's
possession prior to its being furnished by or on behalf of the Company, (iii) becomes available to the Purchaser on a non-confidential basis from a source other than the Company or (iv) was
independently developed by the Purchaser. 

ARTICLE
4 

COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS  

    As of each Closing, the Company makes the following representations, warranties and covenants to the Purchaser, each and all of which shall survive the
execution and delivery of this Agreement and the Closing: 

    4.1 Capitalization. 

    (a) The
"Capitalization Chart" attached hereto as Exhibit C sets forth a
true and complete description of all authorized, issued and outstanding shares of the Company by including a description of (i) the number of shares of each class of Stock of the Company issued and
outstanding and (ii) the number and class of all outstanding warrants, options and other securities convertible into, or exchangeable for, shares of Common Stock or other securities of the Company. 

    (b) All
issued and outstanding Stock of the Company listed on the Capitalization Chart is duly authorized, validly issued, fully paid and non-assessable.  Schedule 4.01 hereto or the Annual Report contains
a complete and correct list of all stockholders of the Company owning, to the knowledge of the
Company, more than 5% of the outstanding Stock of the Company and the number of shares or warrants owned by each. Except as set forth in  Schedule 4.01 or the Annual Report (i) there is no existing
option, warrant, call, commitment or other agreement to which the Company is a party
requiring, and there are no convertible securities of the Company outstanding 

8

 

which upon conversion would require, the issuance of any additional shares of Stock of the Company or other securities convertible into shares of equity securities of the Company, (ii) there are no
agreements or obligations (contingent or otherwise) requiring the Company to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to
acquire its
capital stock, and (iii) there are no agreements to which the Company is a party or, to the knowledge of the Company, to which any stockholder or warrant holder of the Company is a party, with respect
to the voting or transfer of the Stock of the Company. Except as set forth in Schedule 4.01 or the Annual Report, there are no stockholders' preemptive
rights or rights of first refusal or other similar rights with respect to the issuance of the Notes by the Company. True and correct copies of the Certificate of Incorporation and by-laws of the
Company, as in effect on the date hereof, have been delivered to the Purchaser. 

    4.2 Authorization and Issuance of the Notes. The issuance of the Notes at such Closing has been duly authorized by all
necessary corporate action on the part of the Company and, upon delivery to the Purchaser of the Notes, the Notes will have been validly issued and free and clear of all pledges, liens, encumbrances
and preemptive rights. 

    4.3 Corporate Existence; Compliance with Law. The Company (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware; (ii) except as indicated in Schedule 4.03, is duly qualified as a foreign corporation and
in good standing under the laws of Alabama, Arizona, California, Delaware, Georgia, Illinois, Massachusetts, New York, and Vermont and each jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification (except for jurisdictions in which such failure to so qualify or to be in good standing would not have a Material Adverse Effect); (iii) has the
requisite corporate power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its
business as now being conducted in all material respects; (iv) has, or has applied for, all material licenses, permits, consents or approvals from or by, and has made all material filings with, and
has given all material notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (v) is in compliance with its Certificate of
Incorporation and by-laws in all material respects; and (vi) is in compliance with all applicable provisions of applicable laws, including, but not limited to, the Securities Act and the Exchange Act,
except for such non-compliance which would not have a Material Adverse Effect. The Company has timely filed all reports with the SEC required by the Securities Act and Exchange Act and a Rule 144
exemption is available to qualified holders of Stock of the Company. 

    4.4 Subsidiaries. Except for those entities listed on the Schedule 4.04,
there currently exist no Subsidiaries of the Company and the Company has no equity interest in any other Person. 

    4.5 Corporate Power; Authorization; Enforceable Obligations. The execution, delivery, and performance by the Company of
this Agreement, the other Transaction Documents to which it is a party and all instruments and documents to be delivered by the Company, the issuance and sale of the Notes, and the consummation of the
other transactions contemplated by any of the foregoing: (i) are within the Company's corporate power and authority; (ii) have been duly authorized by all necessary or proper corporate action; (iii)
are not in contravention of any provision of the Company's Certificate of Incorporation or by-laws; (iv) will not violate any law or regulation, or any order or decree of any court or governmental
instrumentality; (v) will not conflict with or result in the breach or termination of, constitute a default under or accelerate any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which the Company is a party or by which the Company or any of their property is bound; (vi) will not result in the creation or imposition of any Lien upon the
capital stock or any of the property of the Company and (vii) do not require the consent or approval
of, or any filing with, any Governmental Authority or any other Person (except to the extent previously obtained or made). The execution, delivery and performance of this Agreement and the
transactions contemplated herein do not require approval or consent of the stockholders or other holders of Stock 

9

 

of the Company or the approval or authorization of any Governmental Authority, The Nasdaq Stock Market (except for the listing of additional shares pursuant to NASD Rule 4310(c)(17) regarding notice
of issuance of additional securities issuable upon conversion of the Notes), any other securities exchange or any other Person. Each of this Agreement and the other Transaction Documents, shall have
been duly executed and delivered by the Company and each shall then constitute a legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability,
to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 

    4.6 Financial Statements. 

    (a) The
audited financial statements of the Company dated as of December 31, 2000 (the "Financials") have been prepared
in accordance with the books and records of the Company, present fairly the financial condition of the Company as of the respective dates indicated therein and the results of operations for the
respective periods indicated therein, and have been prepared in accordance with GAAP applied on a consistent basis. 

    (b) Except
as set forth in Schedule 4.06 or the Annual Report, the Company has no material obligations, contingent or
otherwise, including, without limitation, liabilities for Charges, long-term leases or long-term commitments which are not reflected in the Financials, other than those incurred since December 31,
2000 in the ordinary course of business (none of which is a liability resulting from breach of contract, breach of warranty, tort, infringement, or any claim or lawsuit). 

    (c) Except
as set forth in Schedule 4.06, no dividends or other distributions have been declared, paid or made upon any
Stock of the Company, nor has any Stock of the Company been redeemed, retired, purchased or otherwise acquired for value by the Company since December 31, 2000. 

    4.7 Ownership of Property. 

    (a) The
Company does not own any real estate. Except as set forth in Schedule 4.07 or the Annual Report, the
Company owns, has a valid leasehold interest in, or has a valid license to use, all material
assets, properties and rights, whether tangible or intangible, necessary for the conduct of its business as presently conducted and as presently proposed to be conducted. 

    (b) All
real property leased by the Company is set forth in Schedule 4.07 or the Annual Report. Each of such
leases is valid and enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)) and is in full force and effect. Except as set forth in Schedule 4.07 or the Annual
Report, the Company is not in default of its obligations under any material lease or has it delivered or received any notice of default under any such lease, nor to the knowledge of the Company has
any event occurred which, with the giving of notice, the passage of time or both, would constitute a default under any such lease. 

    4.8 Material Contracts; Indebtedness. Each of the Material Contracts is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)), and the Company has no 

10

 

knowledge that any Material Contract is not a valid and binding agreement against the other parties thereto. Except as set forth in Schedule 4.08 or the
Annual Report, the Company is not in material default or breach (whether with or without the passage of time, the giving of notice or both) or in receipt of any claims of default or breach in either
case that could reasonably be expected to have a Material Adverse Effect, nor to the Company's knowledge is any third party in default or breach, under or with respect to any Material Contract. Except
as set forth in Schedule 4.08 or the Annual Report, the Company has no Indebtedness except for indebtedness under the LaSalle Credit Agreement
and except for Permitted Indebtedness. 

    4.9 Environmental Protection. 

    (a) To
the Company's actual knowledge without independent investigation, all real property owned, leased or otherwise operated by the Company and each Subsidiary (a
"Facility") is free of contamination from any substance, waste or material (i) currently identified to be toxic or hazardous pursuant to, or which may
result in liability under, any Environmental Law or (ii) within the definition of a substance which is toxic or hazardous under any Environmental Law, including, without limitation, any asbestos, PCB,
radioactive substance, methane, volatile hydrocarbons, industrial solvents, oil or petroleum or chemical liquids or solids, liquid or gaseous products, or any other material or substance which has in
the past or could at any time in the future cause or constitute a health, safety, or environmental hazard to any Person or property or result in any Environmental Liabilities and Costs
("Hazardous Substance") of more than $25,000 or which, in either case, could have a Material Adverse Effect. Nor has the Company caused or suffered to
occur any release, Spill, migration, leakage, discharge, spillage, uncontrolled loss, seepage, or filtration of Hazard Substances at or from the Facility (a
"Spill") which could result in Environmental Liabilities and Costs in excess of $25,000. 

    (b) The
Company and each Subsidiary has generated, treated, stored and disposed of any Hazardous Substances in full compliance with applicable Environmental Laws,
except for such non-compliances which would not have a Material Adverse Effect. 

    (c) The
Company and each Subsidiary has obtained, or has applied for, and is in full compliance with and in good standing under all permit required under Environmental
Laws (except for such failures which would not have a Material Adverse Effect). The Company does not have any knowledge of any proceedings to substantially modify or to revoke any such permit. 

    (d) There
are no investigations, proceedings or litigation pending or, to the Company's knowledge, threatened, affecting or against the Company or the Facilities
relating to Environmental Laws or Hazardous Substances. 

    (e) Since
December 31, 1999, the Company has not received any communication or notice (including, without limitation, requests for information) indicating the potential
of Environmental Liabilities and Costs against the Company. 

    4.10 Labor Matters. 

    (a) There
are no strikes or other labor disputes against the Company pending or to the Company's knowledge threatened. Hours worked by and payment made to employees of
the Company have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters. All payments due from the Company on account of employee health and
welfare insurance have been paid or accrued as a liability on the books of the Company. There is no organizing activity involving the Company pending or, to the Company's knowledge, threatened by any
labor union or group of employees that individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. There are no representation proceedings pending or, to the
Company's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of the Company has made a 

11

 

pending demand for recognition. Except as set forth in Schedule 4.10, there are no complaints or charges against the Company pending or, to the
Company's knowledge, threatened to be filed with any
federal, state, local or foreign court, governmental agency or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by the
Company of any individual. 

    (b) The
Company is not, and during the five years preceding the date hereof was not, a party to any labor or collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of the Company. 

    4.11 Securities Laws. In reliance on the representations of the Purchaser contained in  Section 3.01, the offer, issuance, sale and delivery of the Notes, as provided in
this Agreement, are exempt from the registration requirements
of the Securities Act and all applicable state securities laws, and are otherwise in compliance with such laws. Neither the Company nor any Person acting on its behalf has taken or will take any
action (including, without limitation, any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of the Notes under the
Securities Act and the rules and regulations of the SEC thereunder) which might subject the offering, issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act.
No information contained in the documents filed with the SEC contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein not
misleading in light of the circumstances under which made. 

    4.12 Taxes. Except as otherwise disclosed in Schedule 4.12, all
federal, state, local and foreign tax returns, reports and statements required to be filed by the Company and each Affiliated Group have been timely filed with the appropriate Governmental Authority
except where the failure to file such report or statement would not have a Material Adverse Effect and all such returns, reports and statements are true, correct and complete in all material respects.
Except as otherwise disclosed in Schedule 4.12, all Charges and other impositions due and payable for the periods covered by such returns,
reports and statements have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof or any such fine, penalty, interest or late
charge has been paid. Except as otherwise disclosed in Schedule 4.12, proper and accurate amounts have been withheld by the Company from its
employees, independent contractors, or other third parties for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal,
state, local and foreign law and such withholdings have been timely paid to the respective governmental agencies. The Company has not executed or filed with the IRS or any other Governmental Authority
any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. Except as otherwise disclosed in  Schedule 4.12, no tax audits
or other administrative or judicial proceedings are pending or threatened with regard to any Charges for which the
Company may be liable and which would reasonably be expected to have a Material Adverse Effect and no assessment of Charges is proposed against the Company. The Company has not filed a consent
pursuant to IRC Section 341(f) or agreed to have IRC Section 341(f)(2) apply to any dispositions of subsection (f) assets (as such term is defined in IRC Section 341(f)(4)). None of the property owned
by the Company is property which such the Company is required to treat as being owned by any other Person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, and in effect immediately prior to the enactment of the Tax Reform Act of 1986 or is "tax-exempt" use property, within the meaning of IRC Section 168(h). The Company has not agreed or has
been requested to make any adjustment under IRC Section 481(a) by reason of a change in accounting method or otherwise. The Company has no obligation under any written tax sharing agreement. The
Company is not a party to or bound by any tax allocation or tax sharing agreement and has no current or potential contractual obligation to
indemnify any other person with respect to any Charges. The Company has not made any payments, and is not and will not become obligated (under any contract entered into on or before the Initial 

12

 

Closing Date) to make any payments, that will be non-deductible under Section 280G of the IRC (or any corresponding provision of state, local or foreign income tax law). The Company will not be
required (A) as a result of a change in method of accounting for a taxable period ending on or prior to the Initial Closing Date, to include any adjustment in taxable income for any taxable period (or
portion thereof) ending after the Initial Closing Date or (B) as a result of any deferred intercompany gain described in Treasury Regulation Sections 1. 1502-13 of former Treasury Regulations Section
1. 1502-14 or any excess loss account described in Treasury Regulation Section 1. 1502-19 (or any corresponding or similar provision or administrative rule of federal, state, local or foreign income
tax law), to include any item of income in taxable income for any taxable period (or portion thereof) ending after the Initial Closing Date, in each case, which would reasonably be expected to have a
Material Adverse Effect. The Company has not been a member of an Affiliated Group other than one of which the Company was the common parent, or filed or been included in a combined, consolidated or
unitary income tax return, other than one filed by the Company. 

    4.13 No Litigation. Except as set forth in Schedule 4.13, no
action, claim or proceeding is now pending or, to the knowledge of the Company, threatened against the Company (or to the Company's knowledge, pending or threatened against or affecting any of the
officers, directors or employees of the Company with respect to its business or proposed business activities), or pending or threatened by the Company against any third party, at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any federal, state, or local government or of any agency or subdivision thereof, or before any arbitrator or panel of
arbitrators. 

    4.14 Brokers. No broker or finder acting on behalf of the Company brought about the consummation of the transactions
contemplated pursuant to this Agreement and the Company has no obligation to any Person in respect of any finder's or brokerage fees (or any similar obligation) in connection with the transactions
contemplated by this Agreement. The Company is solely responsible for the payment of all such finder's or brokerage fees. 

    4.15 Management and Labor Agreements. Except as set forth in  Schedule 4.15 or the Annual Report, there are no management agreements covering officers of the Company.

    4.16 Patents, Trademarks, Copyrights and Licenses. The Company owns all licenses, patents, patent applications,
copyrights, service marks, trademarks and registrations and applications for registration thereof, and trade names necessary to continue to conduct its business as heretofore conducted by it and now
being conducted by it. To the Company's knowledge, the Company conducts its businesses without infringement or claim of infringement of any license, patent, copyright, service mark, trademark, trade
name, trade secret or other intellectual property right of others and the Company has received no notices claiming any such infringement. To the Company's knowledge, there is no
infringement by others of any license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property right of the Company. 

    4.17 No Material Adverse Effect. Except as set forth in  Schedule 4.17, to the Company's knowledge, no event has occurred since December 31, 2000 which has had or could
be reasonably expected to have a
Material Adverse Effect; provided, however, the Purchaser acknowledges that it has been advised that the Company has operated at a loss and has had negative cash flow since October 31, 1998. 

    4.18 ERISA. 

    (a) During
the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement, (i) no steps have been taken to terminate any Pension
Plan and (ii) no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence by the Company of any material 

13

 

liability, fine or penalty, other than the obligations of the Company to fund the benefits provided under the Pension Plan. 

    (b) All
contributions (if any) have been made to any Multiemployer Plan that are required to be made by the Company or any other member of the Controlled Group under
the terms of the plan or of any collective bargaining agreement or by applicable law; neither the Company nor any member of the Controlled Group has withdrawn or partially withdrawn from any
Multiemployer Plan, incurred any withdrawal liability with respect to any such plan or received notice of any claim or demand for withdrawal liability or partial withdrawal liability from any such
plan, and no condition has occurred which, if continued, might result in a withdrawal or partial withdrawal from any such plan; and neither the Company nor any member of the Controlled Group has
received any notice that any Multiemployer Pension Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax,
that any such plan is or has been funded at a rate less than that required under Section 412 of the IRC, that any such plan is or may be terminated, or that any such plan is or may become insolvent. 

    (c) The
Pension Plans and the trusts maintained pursuant thereto are exempt from federal income taxation under Section 501 of the IRC, and nothing has occurred with
respect to the operation of the Pension Plans which could cause the loss of such qualification or exemption or the imposition of any liability, penalty, or tax under ERISA or the IRC. 

    (d) All
contributions required by law or pursuant to the terms of the Plans (without regard to any waivers granted under Section 412 of the IRC) to any funds or trusts
established thereunder or in connection therewith have been made by the due date thereof (including any valid extension) and no accumulated funding deficiencies exist in any of the Pension Plans
subject to Section 412 of the IRC. 

    (e) There
is no "amount of unfunded benefit liabilities" as defined in Section 4001 (a) (18) of ERISA in any of the respective Pension Plans, which are subject to Title
IV of ERISA. Each of the respective Pension Plans are fully funded in accordance with the actuarial assumptions used by the PBGC to determine the level of funding required in the event of the
termination of the Pension Plan and all benefit liabilities do not exceed the assets of such Pension Plans. 

    (f)  There
have been no "reportable events" as that term is defined in Section 404 of ERISA and the regulations thereunder with respect to the Pension Plans subject to
Title IV of ERISA which would require the giving of notice, or any event requiring disclosure under Sections 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA. 

    (g) There
is no material violation of ERISA with respect to the filing of applicable reports, documents, and notice, regarding the Plans with the Secretary of Labor and
the Secretary of the Treasury or the furnishing of such documents to the participants or beneficiaries of the Plans. 

    (h) To
the knowledge of the Company, there are no pending actions, claims or lawsuits which have been asserted or instituted against the Plans, the assets of any of the
trusts under such Plans or the plan sponsor or the plan administrator, or against any fiduciary of the Plans with respect to the operation of such Plans (other than routine benefit claims), nor does
the Company have knowledge of facts which could form the basis for any such claim or lawsuit. 

    (i)  All
amendments and actions required to bring the Plans into conformity in all material respects with all of the applicable provisions of ERISA and other applicable
laws have been made or taken except to the extent that such amendments or actions are not required by law, regulation or order pronounced by the IRS, to be made or taken until a date after the
applicable Closing Date. 

14

 

    (j)  The Plans have been maintained, in all material respects, in accordance with their terms and with all provisions of ERISA (including rules and regulations
thereunder) and other applicable Federal and state law, and the Company or "party in interest" or "disqualified person" with respect to the Plans has engaged in a "prohibited transaction" within the
meaning of Section 4975 of the IRC or Section 406 of ERISA. 

    (k) Neither
the Company nor any ERISA Affiliate has terminated any Pension Plan subject to Title IV, or incurred any outstanding liability under Section 4062 of ERISA
to the PBGC, or to a trustee appointed under Section 4042 of ERISA. 

    (l)  Neither
the Company nor any ERISA Affiliate maintains retiree life and retiree health insurance plans which are Welfare Plans and which provide for continuing
benefits or coverage for any participant or any beneficiary of a participant except as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"). The Company and each ERISA Affiliate which maintains a Welfare Plan has complied with the notice and continuation requirements of COBRA and
the regulations thereunder in all material respects. 

    (m) Neither
the Company nor any ERISA Affiliate has contributed or been obligated to contribute to a Multiemployer Plan as of the applicable Closing. 

    (n) Neither
the Company nor any ERISA Affiliate has withdrawn in a complete or partial withdrawal from any Multiemployer Plan prior to the applicable Closing Date, nor
has any of them incurred any liability due to the termination or reorganization of a Multiemployer Plan. 

    4.19 Registration Rights. Except as listed in Schedule 4.19 and
except pursuant to the Registration Rights Agreement or as set forth in the Annual Report, the Company is not obligated to register any of its securities pursuant to the Securities Act. 

    4.20 Required Filings. As of the date hereof, the Company has made all required filings under the Securities Act and
Exchange Act and all information contained in such filings are true and correct in all material respects and do not contain any untrue information or omit to state a material fact necessary to make
any statements contained in such filings not misleading in light of the circumstances under which they were made. 

    4.21 Full Disclosure. No information contained in this Agreement, any other Transaction Document, the Financials or any
written statement furnished by or on behalf of the Company pursuant to the terms of this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the circumstances under which they were made. 

    4.22 Use of Proceeds. The Company shall use the proceeds from the purchase of the Notes for its working capital and
other general corporate purposes, including debt service requirements. 

    4.23 Insurance. Schedule 4.23 lists and briefly describes each insurance policy maintained by or on behalf of the
Company with respect to its properties, assets and business, together with a claims history for the past five years. All of such insurance policies are in full force and effect, and the Company is not
and has never been in default with respect to its obligations under any such insurance policies and the Company has never been denied insurance coverage. The insurance coverage of the Company is
customary for corporations of similar size engaged in similar lines of business. The Company does not have any self-insurance or co-insurance programs. 

    4.24 Affiliated Transactions. Except for commitments and transactions with the Purchaser and the WSP Parties and as
disclosed for the Company's public filings or on Schedule 4.24, no officer, director, employee, stockholder, or Affiliate of the Company or any
individual related by marriage or adoption to any such individual or any entity in which any such Person owns any beneficial interest is a party to any agreement, Material Contract, commitment or
transaction with the Company or which is pertaining 

15

 

to the business of the Company or has any interest in any property, real or personal or mixed, tangible or intangible, used in or pertaining to the business of the Company. 

    4.25 Special Finance Committee. None of the members of the Special Finance Committee is an Affiliate of the Purchaser. 

ARTICLE
5 

EVENTS OF NONCOMPLIANCE  

    5.1 Definition. An "Event of Noncompliance" shall have occurred if: 

    (a) the
Company fails to pay when due the full amount of principal and accrued interest thereon on the Notes, whether or not such payment is legally permissible or is
prohibited by any agreement to which the Company is subject; 

    (b) the
Company breaches or otherwise fails to perform or observe any other material covenant or agreement set forth herein; 

    (c) any
representation or warranty contained in this Agreement or required to be furnished to any holder of Notes pursuant to this Agreement, or any information
contained in writing required to be furnished by the Company or any Subsidiary to any holder of Notes, is false or misleading in any material respect on the date made or furnished; 

    (d) the
Company or any material Subsidiary makes an assignment for the benefit of creditors; or an order, judgment or decree is entered adjudicating the Company or any
material Subsidiary bankrupt or insolvent, or any order for relief with respect to the Company or any material Subsidiary is entered under the Federal Bankruptcy Code; or the Company or any material
Subsidiary petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company or any material Subsidiary or of any substantial part of the assets
of the Company or any material Subsidiary, or commences any proceeding (other than a proceeding for the voluntary liquidation and dissolution of a Subsidiary) relating to the Company or any material
Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any
such proceeding is commenced, against the Company or any material Subsidiary and either (i) the Company or any such Subsidiary by any act indicates its approval thereof, consent thereto or
acquiescence therein or (ii) such petition, application or proceeding is not dismissed within 60 days; 

    (e) a
judgment in excess of $150,000 is rendered against the Company or any material Subsidiary and, within 60 days after entry thereof, such judgment is not discharged
or execution thereof stayed pending appeal, or within 60 days after the expiration of any such stay, such judgment is not discharged; 

    (f)  other
than with respect to the debt obligations of the Company under the LaSalle Credit Agreement, the Company or any material Subsidiary defaults in the
performance of any obligation or agreement if the effect of such default is to cause an amount exceeding $50,000 to become due prior to its stated maturity or to permit the holder or holders of any
obligation to cause an amount exceeding $50,000 to become due prior to its stated maturity; or 

    (g) the
occurrence of a default, which has not been cured, under the terms of the Preferred Stock (other than under Section 8A(i) or (vii) of the Certificate of
Designations governing the terms of the Preferred Stock). 

    5.2 Consequences of Events of Noncompliance. 

    (a) Immediately
upon the occurrence of an Event of Noncompliance, and for 90 days thereafter that such Event of Noncompliance is continuing, the interest rate on the
Notes shall 

16

 

increase immediately to 18% (or, if less, the highest rate permitted by law). Any increase of the interest rate resulting from the operation of this subparagraph shall terminate as of the close of
business on the date on which no Event of Noncompliance exists and the interest rate shall return to 12%, subject to subsequent increases pursuant to  Section 2.06(b) or this Section 5.02(a). 

    (b) If
any Event of Noncompliance exists, each holder of Notes shall also have any other rights which such holder is entitled to under any contract or agreement at any
time and any other rights which such holder may have pursuant to applicable law. 

ARTICLE
6 

CONDITIONS PRECEDENT TO CLOSING  

    6.1 Conditions Precedent. The obligation of the Purchaser to purchase Notes at the Initial Closing and each Subsequent
Closing pursuant to Article II hereof is subject to the condition that the Purchaser shall have received and the following shall have been
delivered to the Purchaser on each of the Initial Closing Date and each Subsequent Closing Date in form and substance satisfactory to the Purchaser, and the following actions occurred on or before
such Closing Date, unless waived in writing by the Purchaser: 

    (a) Resolutions
of the Board, certified by the Secretary or Assistant Secretary of the Company, to be duly adopted and in full force and effect on the Closing Date,
authorizing (i) the issuance and sale of the Notes to the Purchaser as provided in the Transaction Documents, (ii) each of the Transaction Documents, (iii) the consummation of each of the remaining
transactions contemplated in this Agreement and (iv) officers to execute and deliver this Agreement and each other Transaction Document to which it is a party. 

    (b) Minutes
of the meetings of the Special Finance Committee held on November 16, 2001 and November 26, 2001, certified by the Secretary or Assistant Secretary of the
Company, to be duly adopted and in full force and effect on the Closing Date, approving and authorizing (i) the issuance and sale of the Notes to the Purchaser on the terms set forth in the
Transaction Documents, and (ii) the consummation of each of the remaining transactions contemplated in this Agreement. 

    (c) A
copy of governmental certificate, dated the most recent practicable date prior to the Closing Date, with telegram updates where available, showing that the
Company is organized and in good standing in the State of Delaware and is qualified as a foreign corporation and in good standing in all other jurisdictions in which it is qualified to transact
business. 

    (d) A
copy of the organizational charter and bylaws and all amendments thereto of the Company, certified as of a recent date by the Secretary of State of the State of
Delaware. 

    (e) Certificates
of the Secretary or an Assistant Secretary of the Company, dated the Closing Date, as to the incumbency and signatures of the officers of the Company
executing this Agreement, the Notes, each other Transaction Document to which it is a party and any other certificate or other document to be delivered pursuant hereto or thereto, together with
evidence of the incumbency of such Secretary or Assistant Secretary. 

    (f)  A
copy of all third party consents and approvals (including, without limitation, the consent of LaSalle Bank National Association, which consent shall include a
waiver of the provisions of the LaSalle Credit Agreement prohibiting transactions with affiliates, approval of the terms of the Notes issued hereunder and/or waiver of the mandatory repayment
provisions with respect to the proceeds received by the Company in connection with the sale of the Notes hereunder) that are necessary for the consummation of the transactions contemplated hereby or
that are required in order to prevent a breach of or default under, a termination or modification of, or acceleration of the terms of, any contract, agreement or document required to be listed on 

17

 

the attached Schedule 4.08 or in the Annual Report, in each case on terms and conditions reasonably satisfactory to the Purchaser. 

    (g) A
copy of all governmental and regulatory consents and approvals that are necessary for the consummation of the transactions contemplated hereby, in each case on
terms and conditions satisfactory to the Purchaser. 

    (h) No
suit, action or other proceeding shall be pending before any court or governmental regulatory body or authority in which it is sought to restrain or prohibit the
transactions contemplated hereby, or that could have a Material Adverse Effect, and no injunction, judgment, order, decree or ruling with respect thereto shall be in effect. 

    (i)  Other
than as set forth on the Schedules hereto, since December 31, 2000, there shall have been no material adverse change or material adverse development in the
business, financial condition, business prospects, operating results, assets, operations or customer, supplier or employee relations of the Company. 

    (j)  The
Company shall have sold to the Purchaser the Note to be purchased at the Initial Closing or any Subsequent Closing, as applicable, which Note shall be subject
to the Subordination Agreement approved by LaSalle Bank National Association. 

    (k) The
representations and warranties contained in Article IV hereof shall be true and correct at and as of each
Closing as though then made, except to the extent of changes caused by the transactions expressly contemplated herein, and the Company shall have performed in all material respects all of the
covenants required to be performed by it hereunder prior to the Closing. 

    (l)  There
shall not exist any Event of Noncompliance. 

    (m) The
Company shall have made all filings under all applicable federal and state securities laws necessary to consummate the issuance of the Notes pursuant to this
Agreement. 

    (n) The
Purchaser and the WSP Parties shall have consented to the purchase of each Note. 

    (o) On
the Initial Closing Date, the Company shall have executed and delivered to Purchaser the Subordinated Security Agreement and the Subordination Agreement. 

    (p) The
Purchaser shall have received a certificate of an officer of the Company, in form and substance reasonably satisfactory, stating that the conditions specified
in Sections 6.01(a)-(o), inclusive, and Section 6.01(q) have been fully satisfied. 

    (q) Purchaser
shall have received such other documents as the Purchaser may reasonably request or that are customary to this kind of transaction. 

ARTICLE
7 

SECURITIES LAWS MATTERS  

    7.1 General Provisions. The Notes are transferable only pursuant to (a) public offerings registered under the Securities
Act, (b) Rule 144 or Rule 144A of the Exchange Act (or any similar rule or rules then in force) if such rule is available and (c) subject to compliance with applicable security laws, any other legally
available means of transfer. 

    7.2 Information Requests. Upon the request of the Purchaser, the Company shall promptly supply to the Purchaser or its
prospective transferees all information regarding the Company required to be delivered in connection with a transfer hereof. 

18

 

ARTICLE 8 

EXPENSES  

    The Company shall pay all reasonable out-of-pocket expenses of (i) the Purchaser in connection with the preparation, review or negotiation of the Transaction
Documents and the transactions contemplated thereby, including cost incurred in connection with the Closing, (ii) the Purchaser in connection with stamp and other taxes which may be payable in respect
of the execution and delivery of this Agreement, the issuance and delivery of the Notes and (iii) the Purchaser or its managing member in connection with (A) any amendment, modification or waiver, or
consent with respect to, any of the Transaction Documents, and (B) any attempt by the Purchaser or its managing member to enforce any of its rights against the Company or any other Person under or
pursuant to of any of the Transaction Documents (including the reasonable fees and expenses of all of its counsel and consultants retained in connection with the Transaction Documents and the
transactions contemplated thereby). 

ARTICLE
9 

LIMITATION ON CLAIMS OF THE PURCHASER  

    9.1 Limitation. 

    (a) The
Purchaser shall not bring any action or claim against the Company for damages for a breach of any representation or warranty covenant contained herein by the
Company until such damages exceed $100,000 at which time the Purchaser may bring an action for all claims. 

    (b) The
Company shall not bring any action or claims against the Purchaser for damages for a breach of any representation, warranty or covenant contained herein by the
Purchaser until such damages exceed $100,000, at which time the Company may bring an action for all claims. 

19

 
ARTICLE 10 

MISCELLANEOUS  

    10.1 Notices. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by another, or whenever any of the parties desires to give or serve upon another any such communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and either shall be delivered in person with receipt acknowledged or by
registered or certified mail, return receipt requested, postage prepaid, or by telecopy and confirmed by telecopy answerback addressed as follows: 

    If
to the Purchaser: 

U-C
Holdings, L.L.C.

227 W. Monroe Street, Suite 4300

Chicago, Illinois 60606

Attn: Avy H. Stein

          Daniel M. Gill

Telecopy No.: (312) 422-2424 

    with
a copy to: 

Kirkland
& Ellis

200 E. Randolph Street

Chicago, Illinois 60601

Attn: Margaret A. Gibson, Esq.

Telecopy No.: (312) 861-2200 

    If
to the Company: 

CTN
Media Group, Inc.

3350 Peachtree Road

Suite 1500

Atlanta, Georgia 30326

Attn: Neil H. Dickson

Telecopy No.: (404) 256-9168

    with
a copy to: 

Morris,
Manning & Martin, L.L.P.

1600 Atlanta Financial Center

3343 Peachtree Road, N.E.

Atlanta, Georgia 30326

Attn: Lauren Z. Burnham, Esq.

Telecopy No.: (404) 365-9532 

or
at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice.
Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt
acknowledged, telecopied and confirmed by telecopy answerback, or three (3) Business Days after the same shall have been deposited with the United States mail. 

    10.2 Binding Effect; Benefits. Except as otherwise provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties to this Agreement and their respective successors and 

20

 

permitted assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or
assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. 

    10.3 Amendment. No amendment or waiver of any provision of this Agreement or any other Transaction Document nor consent
to any departure by the Company therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Company and the Purchaser, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which
given. No action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such
action, of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to exercise the same at any subsequent time or times hereunder. 

    10.4 Successors and Assigns; Assignability. Neither this Agreement nor any right, remedy, obligation or liability
arising hereunder or by reason hereof shall be assignable by the Company without the prior written consent of the Purchaser. All covenants contained herein shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns (including any subsequent holder of any of the Notes). 

    10.5 Remedies. The Purchaser, in addition to being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a
breach of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. In any action or proceeding brought to
enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to any
other available remedy. 

    10.6 Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement. 

    10.7 Severability. In the event that any one or more of the provisions contained in this Agreement shall be determined
to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision or provisions in every other respect and the remaining provisions
of this Agreement shall not be in any way impaired. 

    10.8 Entire Agreement. This Agreement and the agreements and documents referred to herein contain the entire agreement
and understanding between the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, relating to such subject matter in any
way. 

    10.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and the same instrument. 

    10.10
Publicity. Neither the Purchaser nor the Company shall issue any press release or make any public disclosure regarding the
transactions contemplated hereby unless such press release or public disclosure is approved by the other party in advance. Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the SEC or other regulatory bodies, make such statements with respect to the transactions contemplated hereby as each may be advised by 

21

 

counsel is legally necessary or advisable, and may make such disclosure as it is advised by its counsel is required by law. 

    10.11
Governing Law. This Agreement shall be governed by, construed and enforced in accordance with, the laws of the Delaware without
regard to the principles thereof relating to conflict of laws. Service of process on the parties in any action arising out of or relating to this Agreement shall be effective if mailed to the parties
in accordance with Section 10.01 hereof. The parties hereto waive all right to trial by jury in any action or proceeding to enforce or defend any
rights under this Agreement. 

    10.12
No Setoffs, etc. All payments hereunder and under the Notes shall be made by the Company without setoff, offset, deduction or
counterclaim, free and clear of all taxes, levies, imports, duties, fees and charges, and without any withholding, restriction or conditions imposed by any governmental authority. If the Company shall
be required by any law to deduct, setoff or withhold any amount from or in respect of any payment to the Purchaser hereunder or under the Notes, then the amount so payable to the Purchaser shall be
increased as may be necessary so that, after making all required deductions, setoffs and withholdings, the Purchaser shall receive an amount equal to the sum it would have received had no such
deductions, setoffs or withholding been made. 

    10.13
No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied against any party. 

*
* * * * 

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    IN WITNESS WHEREOF, each of the Company and the Purchaser has executed this Agreement as of the day and year first above written. 

	 	 	CTN MEDIA GROUP, INC.
	

 	
 	

By:	
 	

/s/ NEIL H. DICKSON   
 Neil H. Dickson

Its: Chief Operating Officer
	

 	
 	
U-C HOLDINGS, L.L.C.
	

 	
 	

By:	
 	

WILLIS STEIN & PARTNERS, L.P.
	 	 	Its:	 	Managing Member
	

 	
 	

 	
 	

By:	
 	

Willis Stein & Partners, L.L.C.
	 	 	 	 	Its:	 	General Partner
	

 	
 	

 	
 	

By:	
 	

/s/ DANIEL M. GILL   
 Daniel M. Gill

Its: Managing Director

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SUBORDINATED BRIDGE NOTE PURCHASE AGREEMENT

DEFINITIONS

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