Document:

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS AGREEMENT (“Agreement”), dated as of
August 10, 2007 (“Agreement Date”), is made between Kimball Hill, Inc.,
an Illinois corporation having its principal place of business in Rolling
Meadows, Illinois (“Company”), and David K. Hill, an individual resident
of Illinois (“Executive”).

RECITALS

A.            For many years Executive has served the Company in
various capacities, including service as Chairman, Chief Executive Officer and
President, and as of the Agreement Date Executive is the Chairman and Chief
Executive Officer of the Company.

B.            Executive has had primary responsibility for the growth
and success of the Company since its founding and has done so without any
employment contract.

C.            During many of his years of service to the Company,
Executive’s total compensation (including his salary and bonus) has been lower
than the compensation earned by chief executive officers of other comparable
homebuilding companies, and at times Executive’s total compensation has been
lower than the compensation earned by officers of the Company serving under the
Executive.

D.            In December 2005, the Company issued $203 million in
principal amount of 101⁄2% senior subordinated notes due 2012 that subsequently
were registered with the Securities and Exchange Commission (the “Senior
Subordinated Notes”), and the Company successfully completed the
negotiation of a $500 million revolving credit facility (the “Credit
Facility”).  Subsequently, in
September 2006, the Company sold 952,380 newly-issued shares of common stock to
Equity Investments III, LLC, representing approximately 21% of the then issued
and outstanding shares of common stock of the Company, for $110 million.

E.             Executive’s stature and reputation in the homebuilding
industry and his active involvement in management of the Company as its
Chairman and Chief Executive Officer were significant factors in the Company’s
successful completion of the above-described financings and equity issuance.

F.             The Company wishes to enter into this Agreement with
Executive in order to continue to enjoy the benefits of Executive’s reputation,
management skills and abilities, experience and contacts in the homebuilding
industry.  The Company also desires to
provide Executive with compensation commensurate with his position and
responsibilities in light of the size and complexity of the Company’s business
operations, with due recognition of Executive’s many contributions to the
growth and success of the Company and appropriate consideration of providing
equity to Executive for his willingness in past years to accept compensation
that was lower than what would have been equitable at the time.

G.            This Agreement has been submitted to and approved by the
Company’s Board of Directors.

NOW, THEREFORE, in consideration of the mutual
promises contained in this Agreement, the Company and Executive agree as
follows:

ARTICLE
I

POSITION, DUTIES, COMPENSATION AND BENEFITS

1.1.                  Agreement Term.
The employment term of this Agreement (“Agreement Term”) shall be the
period beginning on October 1, 2006 (the “Employment Date”) and ending
on the fifth anniversary of the Employment Date or, if later, the date to which
the Agreement Term is extended under the following sentence.  Beginning on the fifth anniversary of the
Employment Date, and on each subsequent anniversary of the Employment Date
(unless sooner terminated) the Agreement Term shall automatically be extended
on such date by one year unless, not less than ninety days prior to such
anniversary, the Company delivers a written notice to Executive or Executive
delivers written notice to the Company (either such notice a “Nonrenewal
Notice”) that the Agreement Term shall expire on such anniversary; provided
that the Company’s Nonrenewal Notice has been specifically authorized by a resolution
duly adopted by the Board of Directors (the “Board”) of the Company.

1.2.                  Positions and Duties.

(a)                   Initial
Position.  During the first year of
the Agreement Term, ending on September 30, 2007, Executive shall be employed
by the Company and shall be elected to and serve as the Chairman and Chief
Executive Officer (“CEO”) of the Company.  Executive shall report exclusively to the
Board.

(b)                   Subsequent
Positions.   Commencing October 1,
2007 and during the balance of the Agreement Term, the Executive shall be
employed by the Company and shall be elected to and serve as the Executive
Chairman (“Executive Chairman”) and Chairman of the Executive Committee
of the Company (“Chairman of the Executive Committee”).  Executive shall report exclusively to the Board.

(c)                   Duties,
Powers and Responsibilities.  As CEO,
Executive shall have such duties, powers and responsibilities as are customary
for a chief executive officer and such other duties as may be assigned to him
from time to time by the Board.  As
Executive Chairman, Executive shall have such duties, powers and
responsibilities as are customary for a chairman of the board of directors who
is actively involved in the business of the Company and such other duties and
responsibilities as may be assigned to him from time to time by the Board.  As Chairman of the Executive Committee,
Executive shall have such duties, powers and responsibility as are customary
for a chairman of an executive committee of a board of directors.  During the Agreement Term (other than any
periods of vacation or sick leave to which the Executive is entitled),
Executive shall devote sufficient time and attention to the business and
affairs of the Company to discharge the duties assigned to him under this
Agreement.  Executive’s services shall be
performed principally at the Company’s corporate offices in Rolling Meadows,
Illinois, but also may be performed, at Executive’s discretion, from his
residence (whether principal or secondary). 

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Notwithstanding
the foregoing provisions, during the Agreement Term:  (1) Executive may serve on corporate, civic,
educational and charitable boards or committees, deliver lectures, fulfill
speaking engagements, teach at educational institutions, and manage his personal
investments and business affairs, so long as the aforesaid activities do not
materially interfere or conflict with the performance of his duties under this
Agreement; and (2) Executive may continue to remain active in real estate
ventures and companies, including without limitation Kimball Hill Development
Company and its subsidiaries and affiliates, and Executive may devote such time
and attention to such activities as is not materially inconsistent with his
past practices.

(d)                   Board
Service.  Executive currently serves
as a member of the Board, and during the Agreement Term the Company and
Executive shall take all necessary and appropriate action to continue to elect
Executive as a member of the Board, Executive Chairman and Chairman of the
Executive Committee.

1.3.                  Salary and Bonus.

(a)                   Salary.  During the Agreement Term Executive shall
earn a base salary (“Salary”) at the rate of $1,500,000 per annum.  Executive’s Salary shall be payable in
accordance with the Company’s executive payroll policy.  Such Salary shall be subject to review and increase
(but not decrease) by the Company not less frequently than annually.  In no event shall the amount of Executive’s
Salary (as may be increased from time to time) be reduced during the Agreement
Term.

(b)                   Bonus.
During the Agreement Term, the Executive shall also earn an annual bonus (“Bonus”)
for each fiscal year of the Company that shall be equal to the following: (i)
if the Company and Executive achieve target performance goals for such fiscal
year, not less than 120% of the annual amount of Salary in effect on the last
day of such fiscal year (“Target Bonus”); (ii) if the Company and
Executive achieve or exceed maximum performance goals, an amount equal to 160%
of the annual amount of Salary in effect on the last day of such fiscal year;
and (iii) if the Company and Executive exceed more than the target performance
but less than the maximum performance, an amount determined by linear
interpolation between the amounts determined under clauses (i) and (ii) of this
sentence based on the percentage of performance achieved.  Reasonable and objective target performance
goals shall be established by mutual agreement of the Board and Executive.  In addition, from time to time during the
Agreement Term, the Board in its discretion may award an additional Bonus to
Executive based upon such factors as the Board deems appropriate.

Executive’s
Bonus for each fiscal year during the Agreement Term shall be payable in cash
not later than three and one-half months following the end of such fiscal
year.  Executive’s Bonus will be
pro-rated for partial years of employment.

(c)                   Other
Benefits.  During the Agreement
Term:  (1) Executive shall be eligible to
participate in all other incentive plans or arrangements (not including annual
bonus), savings and retirement plans, welfare benefit plans (including without
limitation medical, prescription, dental, disability, salary continuance, individual life, group life,
dependent life, accidental death 

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and
travel accident insurance plans) and fringe benefit plans provided by the
Company from time to time applicable to the most senior executives of the
Company generally, in accordance with the terms of such plans; (2) Executive
shall be entitled to reimbursement of all reasonable employment-related
expenses incurred by Executive upon the Company’s receipt of accountings in
accordance with the terms of the policies applicable to the most senior
executives of the Company generally; (3) Executive shall be entitled to an
office or offices of a size and with furnishings and other appointments and to
secretarial and other assistance provided by the Company from time to time in
accordance with the policies applicable to the most senior executives of the
Company generally and consistent with the Company’s past practice with respect
to Executive; and (4) Executive shall be entitled to paid vacation provided by
the Company from time to time in accordance with the policies applicable to the
most senior executives of the Company generally, but in no event less than ten
weeks per year.

ARTICLE
II

TERMINATION OF EMPLOYMENT

2.1.                  Disability.  Executive’s employment shall terminate
automatically upon Executive’s Disability during the Agreement Term.  For purposes of this Agreement “Disability”
means that Executive is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or permanent inability to engage in substantial
gainful activity.  Executive’s Disability
shall be certified by a physician jointly selected by the Company or its
insurers and Executive or Executive’s legal representatives after Executive has
been unable to engage in any substantial gainful activity for twelve
months.  The date of termination (“Termination
Date”) by reason of Executive’s Disability shall be the date on which such
Disability is certified to by such jointly selected physician.

2.2.                  Death.  Executive’s employment shall terminate
automatically upon the Executive’s death during the Agreement Term.  The Termination Date by reason of Executive’s
death shall be the date of Executive’s death.

2.3.                  Cause.  During the Agreement Term, the Company may
terminate Executive’s employment for Cause. 
For purposes of this Agreement “Cause” means Executive’s
conviction of a felony, or conviction of a misdemeanor involving fraud,
dishonesty or moral turpitude, or Executive’s willful or intentional material
breach of this Agreement, provided, however,
that Cause shall not include any one or more of the following:  (i) bad judgment or negligence of the
Executive; (ii) any act or omission believed by the Executive in good faith to
have been in or not opposed to the interests of the Company; or (iii) any act
or omission of which the President, the Board or a majority of the members of
the Board who are not parties to such act or omission has or have had actual
knowledge.  Any termination of employment
by the Company for Cause shall be communicated to the Executive by a written
notice (“Notice of Termination”‘) which sets forth (a) the specific
termination provision in this Agreement relied upon by the Company, and (b) in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under such termination provision.

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2.4.                  Good Reason.
During the Agreement Term, Executive may terminate his employment for Good
Reason.  For purposes of this Agreement “Good
Reason” means any of the following:  (a)
any material breach of the Agreement by the Company or its successors or
assigns; or (b) the Company’s failure to take appropriate action to elect
Executive as CEO or Executive Chairman, as the case may be.

Any termination of employment by Executive for Good Reason shall be
communicated to the Company by Notice of Termination, and the Termination Date
shall be the date of delivery of the Notice of Termination unless the Notice of
Termination specifies a later Termination Date, which shall not be later than
fifteen days after delivery of the Notice of Termination.  Prior to resigning for Good Reason, Executive
shall give written notice of the facts and circumstances claimed to provide a
basis for such resignation not more than sixty days after he has actual
knowledge of such facts and circumstances, and if the Company has cured such
facts and circumstances within thirty days after receipt of such notice,
Executive shall not be entitled to resign for Good Reason.

ARTICLE
III

OBLIGATIONS OF THE COMPANY UPON TERMINATION OF EMPLOYMENT

3.1.                  If by Executive for
Good Reason, or by the Company Other Than for Cause, or upon Disability or
Death.  During the Agreement Term, if
Executive shall terminate employment for Good Reason, or if the Company shall
terminate Executive’s employment (including termination by reason of a Nonrenewal Notice) other than for Cause,
or if Executive’s employment is terminated by reason of Executive’s Disability
or death, the Company’s obligations to Executive shall be as follows:

(a)                   The Company
shall immediately pay Executive a cash amount equal to the sum of all unpaid
amounts of Salary and Bonus and all unpaid vacation previously accrued to the
benefit of Executive and any rights Executive may have under the terms of
applicable welfare and fringe benefit plans and applicable law (“Accrued
Obligations”).

(b)                   For a period
ending three years after the Termination Date, the Company shall pay Executive,
on each normal payroll date (not less frequently than monthly), an amount equal
to the sum of Executive’s Salary in effect on the Termination Date plus Target
Bonus in an amount equal to 120% of Executive’s Salary, divided by the number
of payroll periods in each respective 12-month period during such three-year
period.

Notwithstanding the foregoing, if on the Termination Date the Company
or any other entity that is aggregated with the Company under Section 414(b) or
(c) of the Internal Revenue Code of 1986, as amended (the “Code”), has
any outstanding stock that is publicly traded on an established securities
market or otherwise, then, in order to satisfy the requirements of Section 409A
of the Code, the following shall apply:

(1)  The payment to be made on
each payroll date shall be treated as a separate payment for purposes of
Section 409A.

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(2)  The aggregate amount of all
payments, if any, payable after March 15 of the year following the year that
includes the Termination Date (or, if later, the fifteenth day of the third
month after the end of the Company’s fiscal year that includes the Termination
Date) but before the date that is six months after the Termination Date
(increased by any other amounts of taxable compensation paid to the Executive
during such period that would not have been paid but for the termination,
including any taxable fringe benefits to which the Executive is entitled under
Section 3.1(c) to the extent the total amount of such fringe benefits exceeds
the limit in effect under Section 402(g) of the Code in the year of
termination, but not including any medical, disability or life insurance
benefits) shall not exceed two times the lesser of (i) the Salary on the last
day of the year immediately preceding the Termination Date, or (ii) the limit
in effect under Section 401(a)(17) of the Code during the year that includes
the Termination Date.

(3)  To the extent the payments
payable during the period described in Subsection 3.1(b)(2) would otherwise
exceed the limit of that subsection, such payments shall be reduced, in reverse
order of payment, to the extent necessary to satisfy Subsection 3.1(b)(2) and
the amount by which the payments are reduced will be paid to Executive in a lump
sum, without interest, six months after the Termination Date.  However, if Executive dies during such
period, the limits of Subsection 3.1(b)(2) shall not apply to payments to the
Executive’s Beneficiary, and the amount by which any payments to the Executive
were reduced shall be paid to the Beneficiary as soon as practical after
Executive’s death.

(c)                   For a period ending
three years after the Termination Date, the Company shall continue to provide
to the Executive and the Executive’s spouse and children welfare benefits
(including, without limitation, medical, prescription, dental, disability,
salary continuance, individual life, group life, accidental death and travel
accident insurance plans and
programs and fringe benefits), which are at least as favorable as the plans
provided from time to time by the Company applicable to the most senior
executives and their spouses and children generally and in accordance with the
terms of such plans.  Executive’s
rights under this Section 3.1(c) shall be in satisfaction of any
post-termination continuation coverage or conversion rights that Executive may
have pursuant to applicable law, including without limitation, continuation
coverage required by Section 4980B of the Code (“COBRA”).  If the medical benefits (including dental and
prescription) are provided under a self-insured medical plan, then the
Executive shall recognize as taxable income for each month during such period
an amount equal to the difference between the COBRA premium for such coverage
and the amount of premium paid by the Executive, and any applicable taxes shall
be withheld from amounts payable under Section 3.1(a), and to the extent the
Executive pays any medical expenses for which he is entitled to be reimbursed
under such plan he shall be reimbursed not later than the last day of the year
following the year in which he pays such expense.

3.2.                  If by the Company
for Cause.  During the Agreement
Term, if the Company shall terminate Executive’s employment for Cause, the
Company’s sole obligation to Executive shall be to pay Executive in cash all
Accrued Obligations.

3.3.                  If by Executive
Other Than for Good Reason, Disability or Death.  During the Agreement Term, if Executive shall
terminate employment other than for Good Reason, 

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Disability or death, the Company’s sole obligation to Executive shall
be to pay Executive in cash all Accrued Obligations.

3.4.                  Tax Considerations.

(a)           Reduced Amount.  If it is determined that any benefit received
or deemed received by the Executive from the Company pursuant to this Agreement
(collectively, “Payments”) is or will become subject to any excise tax
under Section 4999 of the Code or any similar tax payable under any United
States federal, state, local or other law, but not including any tax payable
under Section 409A of the Code (such excise tax and all such similar taxes
collectively, “Excise Taxes”), then the amount of such Payments shall be
reduced to the extent necessary to avoid the imposition of Excise Taxes (the
amount to which the Payments are reduced is hereinafter called the “Reduced
Amount”), unless the portion of the Reduced Amount that the Executive would
retain after the application of all applicable income and other taxes exclusive
of Excise Taxes (hereinafter called the “Applicable Taxes”), would be
less than the portion of the unreduced amount of the Payments that the
Executive would retain after application of Excise Taxes and all Applicable
Taxes.

(b)                   Gross-up
Payment.  Notwithstanding Section
3.4(a), if the portion of the Reduced Amount that the Executive would retain
after the application of all Applicable Taxes, would be less than the portion
of the unreduced amount of the Payments that the Executive would retain after
application of Excise Taxes and all Applicable Taxes, then, in lieu of the reduction
described in Section 3.4(a), the Company shall pay the Executive an amount (“Gross-up
Payment”) equal to the product of (i)      the
amount of such Excise Taxes multiplied by (ii) the Gross-up Multiple (as
defined below).

The “Gross-up Multiple” shall equal a fraction, the numerator of
which is one (1.0), and the denominator of which is one (1.0) minus the sum,
expressed as a decimal fraction, of the effective rates of all Applicable Taxes
and any Excise Taxes applicable to the Gross-up Payment.  The Gross-up Payment is intended to
compensate the Executive for the Excise Taxes and any federal, state, local or
other income or excise taxes or other taxes payable by the Executive with
respect to the Gross-up Payment.  For all
purposes of this Section 3.4, all amounts payable to the Executive shall be
deemed to be subject to the highest effective marginal rates of federal, state,
local or other income or other taxes. 
The Gross-up Payment shall be paid to Executive not later than the end
of the calendar year following the year in which the Executive remits the
Excise Taxes to the Internal Revenue Service. 
The preceding sentence is intended to satisfy the requirements of
Treasury Regulation Section 1.409A-3(i)(1)(v) and shall be so construed.

ARTICLE IV

EQUITY OWNERSHIP PROVISIONS

4.1                   Purchase
of Stock upon Executive’s Death or Disability.  Executive, as Trustee of the David K. Hill
Trust dated March 4, 2004 (the “Trust”), is the owner of 2,818,655
shares of common stock of the Company. 
As used in this Agreement, the term “Trustee” means the Trustee
from time to time of the Trust.  If
Executive’s employment is terminated by reason of Executive’s death or
Disability during the Agreement Term, Trustee shall have the right, but not 

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the obligation, exercisable at any time and from time to time during
the period ending five years after the Termination Date, to put up to 500,000
shares of common stock of the Company (“Shares”) at the price and in the
manner provided hereinafter.

4.2                   Procedures
to Exercise Put Right.

(a)                   Trustee’s
put right may be exercised at any time after the Termination Date in
installments of no less than 1,000 Shares. 
If Trustee wishes to exercise his put right, Trustee shall give written
notice of Trustee’s intention to do so (“Trustee’s Notice of Intent”),
setting forth the number of Shares that Trustee wishes to sell to the Company
at that time.

(b)                   Executive
acknowledges that the Company’s loan and financing agreements, including the
Trust Indenture (the “Trust Indenture”) with respect to the Senior Subordinated
Notes and the Credit Agreement (the “Credit Agreement”) with respect to the
Credit Facility, as they may be amended, modified, refinanced or replaced in
the future, place various limitations, restrictions and constraints upon the
Company’s ability and willingness to redeem Shares from its shareholders.  Executive further acknowledges that the
Company has the right and need to maintain a certain level of financial
availability to make “Restricted Payments” as defined in the aforesaid Trust
Indenture and to avoid the possibility of a default or failure to comply with
any of its covenants and agreements made in the Trust Indenture and the Credit
Agreement.  Accordingly, within thirty
days after receipt of Trustee’s Notice of Intent, the Company shall notify
Trustee in writing (“Company’s Notice of Willingness”) of the maximum
number of Shares that the Company, in its sole discretion, reasonably
determines that the Company is willing to purchase in light of the Company’s
financial condition and prospects and the limitations, restrictions and
constraints in its loan and financing agreements, including the Trust Indenture
and the Credit Agreement, as in force and effect at that time.  Company’s Notice of Willingness also shall
set forth in reasonable detail the basis and business reasons for the Company’s
determination.  Within thirty days after
receipt of Company’s Notice of Willingness, Trustee shall give written notice (“Trustee’s
Put Notice”) to the Company of the number of Shares that Trustee wishes to
sell to the Company (the “Put Shares”), provided that the number of Put
Shares may not exceed the maximum number of Shares that the Company is willing
to purchase as stated in Company’s Notice of Willingness.

(c)                   The purchase
price of the Put Shares shall be the “ESOP Value”, which shall be the
per share valuation of Shares owned by the Company’s employee stock ownership
plan (the “ESOP”) as determined by the most recent appraisal prior to
the date of Company’s receipt of Trustee’s Put Notice made by an independent
appraiser pursuant to Section 409(e) or 4975 of the Internal Revenue Code, as
amended.  If the Company does not
maintain an ESOP, the ESOP Value shall be the fair market value of the Put
Shares as determined reasonably and in good faith by the Board.

(d)                   Within
thirty days after the Company’s receipt of the Trustee’s Put Notice, Trustee
shall deliver to the Company one or more stock certificates representing the
Put Shares, with appropriate executed stock powers conveying title to the Put
Shares and representing and warranting good title free and clear of liens,
encumbrances and claims of others, and the Company shall purchase and pay for
the Put Shares in a single cash payment.

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ARTICLE V

NON-COMPETE AND NON-SOLICITATION

5.1                   Non-Compete.  Executive agrees that, during the Agreement
Term and for the period of three years after the Termination Date (the “Noncompete
Period”), Executive shall not directly or indirectly, either for himself or
for any other person, partnership, corporation, company or other entity, own
any interest in, manage, control, participate in, consult with, render services
for, or in any other manner engage in any business or enterprise which
manufactures homes within the United States (any of the foregoing, a “Competitive
Activity”); provided, however, that during the Noncompete Period Executive
may engage in any activity that is permitted by Section 1.2(c) and Executive
shall not be prohibited from the passive ownership (viz. Executive does
not directly or indirectly participate in the business or management of the
applicable entity) of less than 2% of the stock of a publicly-held corporation
whose stock is traded on a national securities exchange. Executive agrees that
the aforementioned covenant is reasonable with respect to its duration,
geographical area and scope. In particular, Executive acknowledges and agrees
that the geographic scope of this restriction is necessary to protect the
goodwill of the Company.

5.2                   Non-Solicitation.  During the Noncompete Period, Executive shall
not directly or indirectly through another person or entity (i) induce or
attempt to induce any employee of the Company or any of its subsidiaries or
affiliated entities to leave his employer, (ii) hire any person who was an
employee of the Company or any of its subsidiaries or affiliated entities
during the twelve months preceding such hiring, (iii) induce or attempt to
induce any customer, supplier, licensee, licensor, franchisee or other business
relation of the Company or any of its subsidiaries or affiliated entities to
cease doing business with the Company or such subsidiary or affiliated entity,
or (iv) in any way interfere with the relationship between any such customer,
supplier, licensee or business relation and the Company or any of its
subsidiaries or affiliated entities.

5.3                   Judicial
Action and Authority.  Executive
acknowledges that the restrictions contained in this Article V are
reasonable.  However, if, at the time of
enforcement of any of the provisions of this Article V, a court shall hold that
the duration, scope or area restrictions stated herein are unreasonable under
circumstances then existing, the parties agree that the maximum duration, scope
or area reasonable under such circumstances shall be substituted for the stated
duration, scope or area and that the court shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope and area
permitted by law.  In addition, Executive
acknowledges and agrees that in the event of the breach or a threatened breach
by Executive of any of the provisions of this Article V, the Company would
suffer irreparable harm, and in addition and supplementary to other rights and
remedies existing in its favor, the Company shall be entitled to specific
performance and/or injunctive or other equitable relief from a court of
competent jurisdiction in order to enforce or prevent any violations of the
provisions hereof (without posting a bond or other security).  In addition, in the event of a breach or
violation by Executive of this Article V, the Noncompete Period shall be tolled
until such breach or violation has been duly cured.

5.4                   Survival.  The provisions of this Article V shall
survive and continue in full force in accordance with their terms
notwithstanding the termination of the Agreement Term.

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ARTICLE VI

SET-OFF AND MITIGATION

6.1                   No
Set-off by Company.  The Executive’s
right to receive when due the payments and other benefits provided for under
and in accordance with the terms of this Agreement is absolute, unconditional
and shall not be subject to set-off, counterclaim or legal or equitable
defense. Time is of the essence in performance by the Company of its
obligations under this Agreement.

6.2                   No
Mitigation. The Executive shall not have any duty to mitigate the amounts
payable by the Company under this Agreement upon any termination of employment
by seeking new employment following termination. Except as specifically
otherwise provided in this Agreement, all amounts payable pursuant to this
Agreement shall be paid without reduction regardless of any amounts of salary,
compensation or other amounts which may be paid or payable to the Executive as
the result of the Executive’s employment by another employer or
self-employment.

ARTICLE VII

MISCELLANEOUS

7.1                   Legal Fees.  The Company will reimburse Executive for
Executive’s legal fees and expenses incurred in negotiating this Agreement, to
a maximum of $35,000.

7.2                   Submission to Jurisdiction.  Executive and the Company agree that any and
all claims and disputes arising out of or relating to this Agreement or any
breach hereof shall be resolved solely and exclusively by lawsuit or other
judicial action filed in the federal or state courts sitting in Chicago,
Illinois.  Each party waives any
objection to personal jurisdiction (provided that process is properly served)
or venue in such courts, and any defense of forum non conveniens
or any similar doctrine.

7.3                   No
Assignability.  This Agreement is
personal to Executive and without the prior written consent of the Company shall
not be assignable by Executive
otherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of
and be enforceable by Executive’s legal representatives.

7.4                   Successors.  This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns.  The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place.  Any
successor to the business and/or assets of the Company which assumes or agrees
to perform this Agreement by operation of law, contract or otherwise shall be
jointly and severally liable with the Company under this Agreement as if such
successor were the Company.

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7.5                   Payments
to Beneficiary.  If Executive dies
before receiving amounts to which Executive is entitled under this Agreement,
such amounts shall be paid to the beneficiary designated in writing by
Executive, or if none is so designated, to Executive’s estate.

7.6                   Severability.  If any one or more Articles, Sections or
other portions of this Agreement are declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any Article, Section or other portion not so declared to be
unlawful or invalid as long as the general intent of the parties as indicated
in the Agreement can still be carried out. 
Any Article, Section or other portion so declared to be unlawful or
invalid shall be construed so as to effectuate the terms of such Article, Section
or other portion to the fullest extent possible while remaining lawful and
valid.

7.7                   Entire
Agreement; Amendments.  This
Agreement contains the entire understanding of the Company and Executive with
respect to its subject matter.  This
Agreement shall not be altered, amended or modified except by written
instrument executed by the Company and Executive.

7.8                   Notices.  All notices and other communications under
this Agreement shall be in writing and delivered by hand, by nationally
recognized delivery service that promises overnight delivery, or by first class
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

	
  If to the Executive:

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
  2008 Abbotsford
  Drive

  
	
   

  	
   

  	
  Barrington, IL
  60010

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  James A. Moehling

  
	
   

  	
   

  	
  Holland &
  Knight LLP

  
	
   

  	
   

  	
  131 South
  Dearborn Street, 30th Floor

  
	
   

  	
   

  	
  Chicago,
  Illinois 60603

  
	
   

  	
   

  	
   

  
	
  If to the
  Company:

  	
   

  	
  Kimball Hill, Inc.

  
	
   

  	
   

  	
  5999 New Wilke
  Road, Suite 504

  
	
   

  	
   

  	
  Rolling Meadows,
  Illinois 60008

  
	
   

  	
   

  	
  Attention:
  President

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Kimball Hill, Inc.

  
	
   

  	
   

  	
  5999 New Wilke
  Road, Suite 504

  
	
   

  	
   

  	
  Rolling Meadows,
  Illinois 60008

  
	
   

  	
   

  	
  Attention: General Counsel

  

 

or to such other address as either party shall have
furnished to the other in writing. Notice and communications shall be effective
when actually received by the addressee.

7.9                   Liability
Insurance Coverage.  During the
Agreement Term, and for a period of not less than six years after the
Termination Date, Executive shall be covered by any directors and 

 11
 

officers, errors and omissions or other suitable insurance maintained
by the Company on a basis not less favorable than such insurance protection, if
any, provided from time to time to other most senior executive officers or
member of the Board, in connection with claims arising in connection with
Executive’s services to the Company or any corporation, business, person, trust
or other entity which Executive is or was serving at the request of the
Company.

7.10                 Survival
of Executive’s Rights.  Except as
provided in Article III respecting rights terminated under that Article, all of
Executive’s rights hereunder, including without limitation his rights to
compensation, benefits and reimbursement of fees and expenses, shall survive
any termination of the relationship of Executive with the Company, including
expiration of the Agreement Term or termination of this Agreement, and shall be
binding on the successors and assigns of the Company and shall inure to the benefit of the
successors, assigns, heirs and personal representatives of Executive.

7.11                 Governing
Law.  This Agreement shall be
interpreted and construed in accordance with the laws of the State of Illinois,
without regard to its conflict of laws principles.

7.12                 Tax
Withholding.  The Company may withhold
from any amounts payable under this Agreement any federal, state or local taxes
that are required to be withheld pursuant to any applicable law or regulation.

7.13                 No Waiver.  Failure by the Company or Executive to insist
upon strict compliance with any provision of this Agreement shall not be deemed
a waiver of such provision or any other provision of this Agreement.  A waiver of any provision of this Agreement
shall not be deemed a waiver of any other provision, and any waiver of any
default in any such provision shall not be deemed a waiver of any later default
thereof or of any other provision.

7.14                 Grammar.  Except where the context required otherwise,
as used in this Agreement, the masculine gender includes the feminine and
neuter genders and the singular includes the plural.

IN WITNESS WHEREOF,
Executive and the Company have signed this Agreement as of the date first above
written.

	
  

  	
  KIMBALL HILL,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. Kenneth
  Love

  
	
   

  	
   

  	
  C. Kenneth Love,
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ David K.
  Hill

  
	
   

  	
  David K. Hill

  

 

 12Exhibit 10.2
 

 

AMENDED AND RESTATED CREDIT AGREEMENT

DATED AS OF AUGUST 10, 2007,

AMONG

KIMBALL HILL, INC.,

THE GUARANTORS FROM TIME TO TIME PARTIES
HERETO,

THE LENDERS FROM TIME TO TIME PARTIES HERETO,

HARRIS N.A.,

AS ADMINISTRATIVE AGENT,

BANK OF AMERICA, N.A.,

AS SYNDICATION AGENT,

KEYBANK NATIONAL ASSOCIATION,

AS CO-DOCUMENTATION AGENT,

WACHOVIA BANK, NATIONAL ASSOCIATION,

AS CO-DOCUMENTATION AGENT,

BMO CAPITAL MARKETS,

AS CO-LEAD ARRANGER AND JOINT BOOK RUNNER,

AND

BANC OF AMERICA SECURITIES, LLC,

AS CO-LEAD ARRANGER AND JOINT BOOK RUNNER

 

 $500,000,000 REVOLVING CREDIT
FACILITY

 

   
 

 

	
  SECTION 1.      THE
  CREDIT FACILITIES

  	
   

  	
  1

  	
   

  
	
  Section 1.1

  	
   

  	
  Revolving Credit
  Commitments

  	
   

  	
  1 

  	
   

  
	
  Section 1.2

  	
   

  	
  Letters of
  Credit

  	
   

  	
  2

  	
   

  
	
  Section 1.3

  	
   

  	
  Applicable
  Interest Rates

  	
   

  	
  4

  	
   

  
	
  Section 1.4

  	
   

  	
  Minimum
  Borrowing Amounts; Maximum Eurodollar Loans

  	
   

  	
  6

  	
   

  
	
  Section 1.5

  	
   

  	
  Manner of
  Borrowing Loans and Designating Applicable Interest Rates

  	
   

  	
  6

  	
   

  
	
  Section 1.6

  	
   

  	
  Interest Periods

  	
   

  	
  8

  	
   

  
	
  Section 1.7

  	
   

  	
  Maturity of
  Revolving Loans and Swing Loans

  	
   

  	
  9

  	
   

  
	
  Section 1.8

  	
   

  	
  Prepayments

  	
   

  	
  9

  	
   

  
	
  Section 1.9

  	
   

  	
  Default Rate

  	
   

  	
  11

  	
   

  
	
  Section 1.10

  	
   

  	
  The Notes

  	
   

  	
  11

  	
   

  
	
  Section 1.11

  	
   

  	
  Funding
  Indemnity

  	
   

  	
  12

  	
   

  
	
  Section 1.12

  	
   

  	
  Revolving Credit
  Commitment Terminations

  	
   

  	
  12

  	
   

  
	
  Section 1.13

  	
   

  	
  Increase in
  Aggregate Revolving Credit Commitment

  	
   

  	
  13

  	
   

  
	
  Section 1.14

  	
   

  	
  Substitution of
  Lenders

  	
   

  	
  14

  	
   

  
	
  Section 1.15

  	
   

  	
  Swing Loans

  	
   

  	
  14

  	
   

  
	
  SECTION 2.     
  FEES

  	
   

  	
  15

  	
   

  
	
  Section 2.1

  	
   

  	
  Fees

  	
   

  	
  16

  	
   

  
	
  SECTION 3.     
  PLACE AND APPLICATION OF PAYMENTS

  	
   

  	
  16

  	
   

  
	
  Section 3.1

  	
   

  	
  Place and
  Application of Payments

  	
   

  	
  16

  	
   

  
	
  Section 3.2

  	
   

  	
  Account Debit

  	
   

  	
  18

  	
   

  
	
  SECTION 4.     
  GUARANTIES

  	
   

  	
  18

  	
   

  
	
  Section 4.1

  	
   

  	
  Guaranties

  	
   

  	
  18

  	
   

  
	
  Section 4.2

  	
   

  	
  Further
  Assurances

  	
   

  	
  18

  	
   

  
	
  Section 4.3

  	
   

  	
  Collateral

  	
   

  	
  18

  	
   

  
	
  Section 4.4

  	
   

  	
  Mortgages of
  Existing Borrowing Base Property

  	
   

  	
  19

  	
   

  
	
  Section 4.5

  	
   

  	
  Additional
  Borrowing Base Property

  	
   

  	
  19

  	
   

  
	
  Section 4.6

  	
   

  	
  Mortgage Tax
  Arrangements

  	
   

  	
  21

  	
   

  
	
  Section 4.7

  	
   

  	
  Appraisals

  	
   

  	
  21

  	
   

  
	
  Section 4.8

  	
   

  	
  Release of
  Collateral

  	
   

  	
  22

  	
   

  
	
  Section 4.9

  	
   

  	
  Further
  Assurances

  	
   

  	
  23

  	
   

  

 

 

	
  SECTION 5.       DEFINITIONS;
  INTERPRETATION

  	
   

  	
  24

  	
   

  
	
  Section 5.1

  	
   

  	
  Definitions

  	
   

  	
  24

  	
   

  
	
  Section 5.2

  	
   

  	
  Interpretation

  	
   

  	
  41

  	
   

  
	
  Section 5.3

  	
   

  	
  Change in
  Accounting Principles

  	
   

  	
  41

  	
   

  
	
  SECTION 6.     
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  41

  	
   

  
	
  Section 6.1

  	
   

  	
  Organization and
  Qualification

  	
   

  	
  41

  	
   

  
	
  Section 6.2

  	
   

  	
  Subsidiaries

  	
   

  	
  41

  	
   

  
	
  Section 6.3

  	
   

  	
  Authority and
  Validity of Obligations

  	
   

  	
  42

  	
   

  
	
  Section 6.4

  	
   

  	
  Use of Proceeds;
  Margin Stock

  	
   

  	
  42

  	
   

  
	
  Section 6.5

  	
   

  	
  Financial
  Reports

  	
   

  	
  43

  	
   

  
	
  Section 6.6

  	
   

  	
  No Material
  Adverse Change

  	
   

  	
  43

  	
   

  
	
  Section 6.7

  	
   

  	
  Full Disclosure

  	
   

  	
  43

  	
   

  
	
  Section 6.8

  	
   

  	
  Trademarks,
  Franchises, and Licenses

  	
   

  	
  43

  	
   

  
	
  Section 6.9

  	
   

  	
  Governmental
  Authority and Licensing

  	
   

  	
  44

  	
   

  
	
  Section 6.10

  	
   

  	
  Good Title

  	
   

  	
  44

  	
   

  
	
  Section 6.11

  	
   

  	
  Litigation and
  Other Controversies

  	
   

  	
  44

  	
   

  
	
  Section 6.12

  	
   

  	
  Taxes

  	
   

  	
  44

  	
   

  
	
  Section 6.13

  	
   

  	
  Approvals

  	
   

  	
  44

  	
   

  
	
  Section 6.14

  	
   

  	
  Affiliate
  Transactions

  	
   

  	
  45

  	
   

  
	
  Section 6.15

  	
   

  	
  Investment
  Company; Public Utility Holding Company

  	
   

  	
  45

  	
   

  
	
  Section 6.16

  	
   

  	
  ERISA

  	
   

  	
  45

  	
   

  
	
  Section 6.17

  	
   

  	
  Compliance with
  Laws

  	
   

  	
  45

  	
   

  
	
  Section 6.18

  	
   

  	
  Other Agreements

  	
   

  	
  46

  	
   

  
	
  Section 6.19

  	
   

  	
  Solvency

  	
   

  	
  46

  	
   

  
	
  Section 6.20

  	
   

  	
  No Broker Fees

  	
   

  	
  46

  	
   

  
	
  Section 6.21

  	
   

  	
  No Default

  	
   

  	
  46

  	
   

  
	
  SECTION 7.     
  CONDITIONS PRECEDENT

  	
   

  	
  46

  	
   

  
	
  Section 7.1

  	
   

  	
  All Credit
  Events

  	
   

  	
  47

  	
   

  
	
  Section 7.2

  	
   

  	
  Initial Credit
  Event

  	
   

  	
  47

  	
   

  
	
  SECTION 8.     
  COVENANTS

  	
   

  	
  48

  	
   

  
	
  Section 8.1

  	
   

  	
  Maintenance of
  Business

  	
   

  	
  48

  	
   

  
	
  Section 8.2

  	
   

  	
  Maintenance of
  Properties

  	
   

  	
  49

  	
   

  
	
  Section 8.3

  	
   

  	
  Taxes and
  Assessments

  	
   

  	
  49

  	
   

  

 

 ii
 

 

	
  Section 8.4

  	
   

  	
  Insurance

  	
   

  	
  49

  	
   

  
	
  Section 8.5

  	
   

  	
  Financial
  Reports

  	
   

  	
  50

  	
   

  
	
  Section 8.6

  	
   

  	
  Inspection

  	
   

  	
  53

  	
   

  
	
  Section 8.7

  	
   

  	
  Borrowings and
  Guaranties

  	
   

  	
  53

  	
   

  
	
  Section 8.8

  	
   

  	
  Liens

  	
   

  	
  54

  	
   

  
	
  Section 8.9

  	
   

  	
  Investments,
  Acquisitions, Loans and Advances

  	
   

  	
  56

  	
   

  
	
  Section 8.10

  	
   

  	
  Mergers,
  Consolidations and Sales

  	
   

  	
  58

  	
   

  
	
  Section 8.11

  	
   

  	
  Maintenance of
  Subsidiaries

  	
   

  	
  59

  	
   

  
	
  Section 8.12

  	
   

  	
  Dividends and
  Certain Other Restricted Payments

  	
   

  	
  60

  	
   

  
	
  Section 8.13

  	
   

  	
  ERISA

  	
   

  	
  60

  	
   

  
	
  Section 8.14

  	
   

  	
  Compliance with
  Laws

  	
   

  	
  60

  	
   

  
	
  Section 8.15

  	
   

  	
  Burdensome
  Contracts With Affiliates

  	
   

  	
  61

  	
   

  
	
  Section 8.16

  	
   

  	
  No Changes in
  Fiscal Year

  	
   

  	
  61

  	
   

  
	
  Section 8.17

  	
   

  	
  Formation of
  Subsidiaries

  	
   

  	
  61

  	
   

  
	
  Section 8.18

  	
   

  	
  Change in the
  Nature of Business

  	
   

  	
  61

  	
   

  
	
  Section 8.19

  	
   

  	
  Use of Proceeds

  	
   

  	
  61

  	
   

  
	
  Section 8.20

  	
   

  	
  No Restrictions

  	
   

  	
  62

  	
   

  
	
  Section 8.21

  	
   

  	
  Subordinated
  Debt

  	
   

  	
  63

  	
   

  
	
  Section 8.22

  	
   

  	
  Financial
  Covenants

  	
   

  	
  63

  	
   

  
	
  Section 8.23

  	
   

  	
  Inventory
  Restrictions

  	
   

  	
  64

  	
   

  
	
  SECTION 9.     
  EVENTS OF DEFAULT AND REMEDIES

  	
   

  	
  64

  	
   

  
	
  Section 9.1

  	
   

  	
  Events of
  Default

  	
   

  	
  64

  	
   

  
	
  Section 9.2

  	
   

  	
  Non-Bankruptcy
  Defaults

  	
   

  	
  66

  	
   

  
	
  Section 9.3

  	
   

  	
  Bankruptcy
  Defaults

  	
   

  	
  67

  	
   

  
	
  Section 9.4

  	
   

  	
  Collateral for
  Undrawn Letters of Credit

  	
   

  	
  67

  	
   

  
	
  Section 9.5

  	
   

  	
  Additional
  Remedies with Respect to Collateral

  	
   

  	
  68

  	
   

  
	
  Section 9.6

  	
   

  	
  Notice of
  Default

  	
   

  	
  68

  	
   

  
	
  Section 9.7

  	
   

  	
  Expenses

  	
   

  	
  68

  	
   

  
	
  SECTION 10.     
  CHANGE IN CIRCUMSTANCES

  	
   

  	
  69

  	
   

  
	
  Section 10.1

  	
   

  	
  Change of Law

  	
   

  	
  69

  	
   

  
	
  Section 10.2

  	
   

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

  	
   

  	
  69

  	
   

  
	
  Section 10.3

  	
   

  	
  Increased Cost
  and Reduced Return

  	
   

  	
  69

  	
   

  

 

 iii
 

 

	
  Section 10.4

  	
   

  	
  Lending Offices

  	
   

  	
  71

  	
   

  
	
  Section 10.5

  	
   

  	
  Discretion of
  Lender as to Manner of Funding

  	
   

  	
  71

  	
   

  
	
  SECTION 11.     
  THE ADMINISTRATIVE AGENT

  	
   

  	
  72

  	
   

  
	
  Section 11.1

  	
   

  	
  Appointment and
  Authorization of Administrative Agent

  	
   

  	
  72

  	
   

  
	
  Section 11.2

  	
   

  	
  Administrative
  Agent and its Affiliates

  	
   

  	
  72

  	
   

  
	
  Section 11.3

  	
   

  	
  Action by
  Administrative Agent

  	
   

  	
  72

  	
   

  
	
  Section 11.4

  	
   

  	
  Consultation
  with Experts

  	
   

  	
  73

  	
   

  
	
  Section 11.5

  	
   

  	
  Liability of
  Administrative Agent; Credit Decision

  	
   

  	
  73

  	
   

  
	
  Section 11.6

  	
   

  	
  Indemnity

  	
   

  	
  73

  	
   

  
	
  Section 11.7

  	
   

  	
  Resignation of
  Administrative Agent and Successor Administrative Agent

  	
   

  	
  74

  	
   

  
	
  Section 11.8

  	
   

  	
  L/C Issuer

  	
   

  	
  74

  	
   

  
	
  Section 11.9

  	
   

  	
  Hedging
  Liability and Funds Transfer and Deposit Account Liability Arrangements

  	
   

  	
  74

  	
   

  
	
  Section 11.10

  	
   

  	
  Designation of
  Additional Agents

  	
   

  	
  75

  	
   

  
	
  Section 11.11

  	
   

  	
  Rights with
  Respect to Collateral

  	
   

  	
  75

  	
   

  
	
  SECTION 12.     
  THE GUARANTEES

  	
   

  	
  75

  	
   

  
	
  Section 12.1

  	
   

  	
  The Guarantees

  	
   

  	
  75

  	
   

  
	
  Section 12.2

  	
   

  	
  Guarantee
  Unconditional

  	
   

  	
  76

  	
   

  
	
  Section 12.3

  	
   

  	
  Discharge Only
  upon Payment in Full; Reinstatement in Certain Circumstances

  	
   

  	
  76

  	
   

  
	
  Section 12.4

  	
   

  	
  Subrogation

  	
   

  	
  77

  	
   

  
	
  Section 12.5

  	
   

  	
  Waivers

  	
   

  	
  77

  	
   

  
	
  Section 12.6

  	
   

  	
  Limit on
  Recovery

  	
   

  	
  77

  	
   

  
	
  Section 12.7

  	
   

  	
  Stay of
  Acceleration

  	
   

  	
  77

  	
   

  
	
  Section 12.8

  	
   

  	
  Benefit to Guarantors

  	
   

  	
  78

  	
   

  
	
  Section 12.9

  	
   

  	
  Guarantor
  Covenants

  	
   

  	
  78

  	
   

  
	
  SECTION 13.     
  MISCELLANEOUS

  	
   

  	
  78

  	
   

  
	
  Section 13.1

  	
   

  	
  Withholding
  Taxes

  	
   

  	
  78

  	
   

  
	
  Section 13.2

  	
   

  	
  No Waiver,
  Cumulative Remedies

  	
   

  	
  80

  	
   

  
	
  Section 13.3

  	
   

  	
  Non-Business
  Days

  	
   

  	
  80

  	
   

  
	
  Section 13.4

  	
   

  	
  Documentary
  Taxes

  	
   

  	
  80

  	
   

  
	
  Section 13.5

  	
   

  	
  Survival of
  Representations

  	
   

  	
  80

  	
   

  

 

 

 iv
 

 

	
  Section 13.6

  	
   

  	
  Survival of
  Indemnities

  	
   

  	
  80

  	
   

  
	
  Section 13.7

  	
   

  	
  Sharing of
  Set-Off

  	
   

  	
  81

  	
   

  
	
  Section 13.8

  	
   

  	
  Notices

  	
   

  	
  81

  	
   

  
	
  Section 13.9

  	
   

  	
  Counterparts

  	
   

  	
  82

  	
   

  
	
  Section 13.10

  	
   

  	
  Successors and
  Assigns

  	
   

  	
  82

  	
   

  
	
  Section 13.11

  	
   

  	
  Participants

  	
   

  	
  82

  	
   

  
	
  Section 13.12

  	
   

  	
  Assignments

  	
   

  	
  82

  	
   

  
	
  Section 13.13

  	
   

  	
  Amendments

  	
   

  	
  83

  	
   

  
	
  Section 13.14

  	
   

  	
  Headings

  	
   

  	
  84

  	
   

  
	
  Section 13.15

  	
   

  	
  Costs and
  Expenses; Indemnification

  	
   

  	
  84

  	
   

  
	
  Section 13.16

  	
   

  	
  Set-off

  	
   

  	
  85

  	
   

  
	
  Section 13.17

  	
   

  	
  Entire Agreement

  	
   

  	
  85

  	
   

  
	
  Section 13.18

  	
   

  	
  Governing Law

  	
   

  	
  85

  	
   

  
	
  Section 13.19

  	
   

  	
  Severability of
  Provisions

  	
   

  	
  85

  	
   

  
	
  Section 13.20

  	
   

  	
  Excess Interest

  	
   

  	
  86

  	
   

  
	
  Section 13.21

  	
   

  	
  Construction

  	
   

  	
  86

  	
   

  
	
  Section 13.22

  	
   

  	
  Lender’s
  Obligations Several

  	
   

  	
  86

  	
   

  
	
  Section 13.23

  	
   

  	
  Submission to
  Jurisdiction; Waiver of Jury Trial

  	
   

  	
  86

  	
   

  
	
  Section 13.24

  	
   

  	
  USA Patriot Act

  	
   

  	
  87

  	
   

  
	
  Section 13.25

  	
   

  	
  Confidentiality

  	
   

  	
  87

  	
   

  

 

 v

AMENDED AND RESTATED CREDIT AGREEMENT

This Amended and Restated Credit Agreement is entered
into as of August 10, 2007, by and among (a) KIMBALL HILL, INC., an Illinois
corporation (the “Borrower”), (b) the Guarantors
(as defined in Section 4.1 hereof) from time to time party to this Agreement,
(c) the several financial institutions from time to time party to this
Agreement, as Lenders, (d) HARRIS N.A., as Administrative Agent, (e) BANK OF
AMERICA, N.A., as Syndication Agent, (f) KEYBANK NATIONAL ASSOCIATION, as
Co-Documentation Agent, (g) WACHOVIA BANK, NATIONAL ASSOCIATION, as
Co-Documentation Agent, (h) BMO CAPITAL MARKETS FINANCING, INC., as Co-Lead
Arranger and Joint Book Runner, and (i) BANC OF AMERICA SECURITIES, LLC, as
Co-Lead Arranger and Joint Book Runner, all as provided herein.  All capitalized terms used herein without
definition shall have the same meanings herein as such terms are defined in
Section 5.1 hereof.

PRELIMINARY STATEMENT

The Borrower, the Guarantors, the Lenders, the
Administrative Agent, and certain other parties are party to that certain
Credit Agreement, dated December 21, 2005, as amended by that certain First
Modification of Credit Agreement, dated December 15, 2006 (collectively, the “Prior Credit Agreement”).

The parties hereto now desire to amend and restate the
Prior Credit Agreement in its entirety.

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

This Agreement, as executed by the Borrower, the
Guarantors, the Administrative Agent and the Required Lenders, amends and
restates in its entirety the Prior Credit Agreement.  Upon satisfaction of the conditions precedent
to effectiveness set forth herein, the “Notes” given by the Borrower under the
Prior Credit Agreement shall be deemed to be and shall be replaced by the Notes
given under this Agreement.  All
outstanding “Loans,” “Letters of Credit” and “Obligations” under the Prior
Credit Agreement shall now be deemed to be outstanding under this Agreement,
without any novation or loss of priority with respect to any “Obligations”
under the Prior Credit Agreement.  By
execution of this Agreement, the Borrower and the Guarantors acknowledge and
represent that as of the date hereof, the outstanding principal of the
Revolving Loans is $332,759,319.76, the pre-existing Letters of Credit are as
shown on Schedule 1.2 attached hereto, and neither the Borrower nor the
Guarantors have any defenses, claims, counterclaims, or rights of set-off with
respect to the Obligations, Hedging Liability or Funds Transfer and Deposit
Account Liability.  In addition, this
Agreement is intended to be and the indebtedness hereunder is and is intended
to remain “Senior Indebtedness” as defined in the Trust Indenture.

SECTION
1.           THE CREDIT FACILITIES.

Section
1.1            Revolving Credit
Commitments.  Subject
to the terms and conditions hereof, each Lender, by its acceptance hereof,
severally agrees to make a loan or loans

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

Section
1.2            Letters of Credit.  (a)  General Terms. 
Subject to the terms and conditions hereof, as part of the Revolving
Credit, the L/C Issuer shall issue standby and commercial letters of credit
(each a “Letter of Credit”) for the account of
the Borrower or one or more of its Wholly-owned Subsidiaries in an aggregate
undrawn face amount up to the L/C Sublimit. 
Prior to the Closing Date, Harris N.A. issued (under the Prior Credit
Agreement and otherwise) for the account of the Borrower and certain of its
Wholly-owned Subsidiaries the letters of credit listed on Schedule 1.2 attached
hereto, which pre-existing letters of credit shall be deemed to be “Letters of Credit” hereunder and shall be included in
determining future Letter of Credit availability under the L/C Sublimit.  Each Letter of Credit has been or shall be
issued by the L/C Issuer, but each Lender shall be obligated to reimburse the
L/C Issuer for such Lender’s Revolver Percentage of the amount of each drawing
thereunder and, accordingly, each Letter of Credit shall constitute usage of
the Revolving Credit Commitment of each Lender pro rata in an amount equal to
its Revolver Percentage of the L/C Obligations then outstanding.

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

 2
 

expiration date will not
so extend beyond its then scheduled expiration date, unless the Required
Lenders instruct the L/C Issuer otherwise, the L/C Issuer will give such notice
of non-renewal before the time necessary to prevent such automatic extension if
before such required notice date:  (i)
the expiration date of such Letter of Credit if so extended would be later than
30 days prior to the Revolving Credit Termination Date, (ii) the Revolving
Credit Commitments have been terminated, or (iii) a Default or an Event of
Default exists and the Administrative Agent, in its discretion or at the
request of the Required Lenders, has given the L/C Issuer instructions not to
so permit the extension of the expiration date of such Letter of Credit.  The L/C Issuer agrees to issue amendments to
the Letter(s) of Credit increasing the amount, or extending the expiration
date, thereof at the request of the Borrower subject to the conditions of
Section 7 hereof and the other terms of this Section 1.2.

(c)           The Reimbursement
Obligations.  Subject to
Section 1.2(b) hereof, the obligation of the Borrower to reimburse the L/C
Issuer for all drawings under a Letter of Credit (a “Reimbursement
Obligation”) shall be governed by the Application related to such
Letter of Credit, except that reimbursement shall be made by no later than
12:00 Noon (Chicago time) on the date when each drawing is to be paid if the
Borrower has been informed of such drawing by the L/C Issuer on or before 11:30
a.m. (Chicago time) on the date when such drawing is to be paid or, if notice
of such drawing is given to the Borrower after 11:30 a.m. (Chicago time) on the
date when such drawing is to be paid, by the end of such day, in immediately
available funds at the Administrative Agent’s principal office in Chicago,
Illinois or such other office as the Administrative Agent may designate in
writing to the Borrower (who shall thereafter cause to be distributed to the
L/C Issuer such amount(s) in like funds). 
Notwithstanding the foregoing, unless the Borrower shall have notified
the Administrative Agent to the contrary, each drawing upon a Letter of Credit
shall automatically be deemed to be a request for a Borrowing of a Base Rate
Loan pursuant to the terms of Section 1.2(d) hereof, and the Borrower shall
thereafter be responsible for the repayment of such amount pursuant to the
provisions of Section 1.8 hereof.

(d)           The Participating
Interests.  Each Lender (other
than the Lender acting as L/C Issuer in issuing the relevant Letter of Credit),
by its acceptance hereof, severally agrees to purchase from the L/C Issuer, and
the L/C Issuer hereby agrees to sell to each such Lender (a “Participating Lender”), an undivided percentage
participating interest (a “Participating Interest”),
to the extent of its Revolver Percentage, in each Letter of Credit issued by,
and each Reimbursement Obligation owed to, the L/C Issuer.  Unless the Borrower shall have paid the
Reimbursement Obligation by 12:00 Noon (Chicago time) on the date the related
drawing is to be paid, as set forth in Section 1.2(c) above, or if the L/C
Issuer is required at any time to return to the Borrower or to a trustee, receiver,
liquidator, custodian or other Person any portion of any payment of any
Reimbursement Obligation, each Participating Lender shall, not later than the
Business Day it receives a certificate in the form of Exhibit A attached hereto
from the L/C Issuer (with a copy to the Administrative Agent) to such effect,
if such certificate is received before 1:00 p.m. (Chicago time), or not later
than 1:00 p.m. (Chicago time) the following Business Day, if such certificate
is received after such time, pay to the Administrative Agent for the account of
the L/C Issuer an amount equal to such Participating Lender’s Revolver
Percentage of such unpaid or recaptured Reimbursement Obligation together with
interest on such amount accrued from the date the related payment was made by
the L/C Issuer to the date of such payment by such Participating Lender at a
rate per annum equal to:  (i) from the
date 

 3
 

the related payment was made by the L/C Issuer to the
date 2 Business Days after payment by such Participating Lender is due hereunder,
the Federal Funds Rate for each such day and (ii) from the date 2 Business Days
after the date such payment is due from such Participating Lender to the date
such payment is made by such Participating Lender, the Base Rate in effect for
each such day.  Thereafter, all amounts
advanced by the Participating Lenders, including the L/C Issuer’s Revolver
Percentage of the drawn amount under the Letter of Credit, shall be deemed to
be a Borrowing as a Base Rate Loan and shall bear interest and be repaid in
accordance with the terms of this Agreement. 
The several obligations of the Participating Lenders to the L/C Issuer
under this Section 1.2 shall be absolute, irrevocable, and unconditional under
any and all circumstances whatsoever and shall not be subject to any set-off,
counterclaim or defense to payment which any Participating Lender may have or
have had against the Borrower, the L/C Issuer, the Administrative Agent, any
Lender or any other Person whatsoever. 
Without limiting the generality of the foregoing, such obligations shall
not be affected by any Default or Event of Default or by any reduction or
termination of any Revolving Credit Commitment of any Lender, and each payment
by a Participating Lender under this Section 1.2 shall be made without any
offset, abatement, withholding or reduction whatsoever.

(e)           Indemnification.  The Participating Lenders shall, to the
extent of their respective Revolver Percentages, indemnify the L/C Issuer (to
the extent not reimbursed by the Borrower) against any cost, expense (including
reasonable counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from the L/C Issuer’s gross negligence or
willful misconduct) that the L/C Issuer may suffer or incur in connection with
any Letter of Credit issued by it.  The
obligations of the Participating Lenders under this Section 1.2(e) and all
other parts of this Section 1.2 shall survive termination of this Agreement and
of all Applications, Letters of Credit, and all drafts and other documents
presented in connection with drawings thereunder.

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

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

 4
 

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

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

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

	
  Adjusted LIBOR

  	
   

  	
  =

  	
  LIBOR

  
	
   

  	
   

  	
   

  	
  1 - Eurodollar
  Reserve Percentage

  

 

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

“LIBOR” means,
for an Interest Period for a Borrowing of Eurodollar Loans, (a) the LIBOR Index
Rate for such Interest Period, if such rate is available, and (b) if the LIBOR
Index Rate cannot be determined, the arithmetic average of the rates of
interest per annum (rounded 

 5
 

upwards, if necessary, to the nearest 1/100 of 1%) at
which deposits in U.S. Dollars in immediately available funds are offered to
the Administrative Agent at 11:00 a.m. (London, England time) 2 Business Days
before the beginning of such Interest Period by 3 or more major banks in the
interbank eurodollar market selected by the Administrative Agent for delivery
on the first day of and for a period equal to such Interest Period and in an
amount equal or comparable to the principal amount of the Eurodollar Loan
scheduled to be made by the Administrative Agent as part of such Borrowing.

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

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

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

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

Section
1.5            Manner of Borrowing Loans
and Designating Applicable Interest Rates.  (a)  Notice to the Administrative Agent.  The Borrower shall give notice to the
Administrative Agent by no later than 10:00 a.m. (Chicago time):  (i) at least 3 Business Days before the date
on which the Borrower requests the Lenders to advance a Borrowing of Eurodollar
Loans and (ii) on the date the Borrower requests the Lenders to advance a
Borrowing of Base Rate Loans.  The Loans
included in each Borrowing shall bear interest initially at the type of rate
specified in such notice of a new Borrowing. 
Thereafter, subject to the terms and conditions hereof, the Borrower may
from time to time elect to change or continue the type of interest rate borne
by each Borrowing or, subject to Section 1.4’s minimum amount requirement for
each outstanding Borrowing, a portion thereof, as follows:  (A) if such Borrowing is of Eurodollar Loans,
on the last day of the Interest Period applicable thereto, the Borrower may
continue part or all of such Borrowing as Eurodollar Loans or convert part or
all of such Borrowing into Base Rate Loans or (B) if such Borrowing is of Base
Rate Loans, on any Business Day, the Borrower may convert all or part of such
Borrowing into Eurodollar Loans for an Interest Period or Interest Periods
specified by the Borrower.  The Borrower
shall give all such notices requesting the advance, continuation or conversion
of a Borrowing to the Administrative Agent by telephone or telecopy (which
notice shall be irrevocable once given and, if by telephone, shall be promptly
confirmed in writing), substantially in the form attached hereto as Exhibit B
(Notice of Borrowing) or 

 6
 

Exhibit C (Notice of Continuation/Conversion), as
applicable, or in such other form acceptable to the Administrative Agent.  Notice of the continuation of a Borrowing of
Eurodollar Loans for an additional Interest Period or of the conversion of part
or all of a Borrowing of Base Rate Loans into Eurodollar Loans must be given by
no later than 10:00 a.m. (Chicago time) at least 3 Business Days before the
date of the requested continuation or conversion.  All such notices concerning the advance,
continuation or conversion of a Borrowing shall specify the date of the
requested advance, continuation or conversion of a Borrowing (which shall be a
Business Day), the amount of the requested Borrowing to be advanced, continued
or converted, the type of Loans to comprise such new, continued or converted
Borrowing and, if such Borrowing is to be comprised of Eurodollar Loans, the
Interest Period applicable thereto.  The
Borrower agrees that the Administrative Agent may rely on any such telephonic
or telecopy notice given by any person the Administrative Agent in good faith
believes is an Authorized Representative without the necessity of independent
investigation, and in the event any such notice by telephone conflicts with any
written confirmation such telephonic notice shall govern if the Administrative
Agent has acted in reliance thereon.

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

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

(d)           Disbursement of Loans.  Not later than 1:00 p.m. (Chicago time) on
the date of any requested advance of a new Borrowing, subject to Section 7
hereof, each Lender shall make 

 7
 

available its Loan
comprising part of such Borrowing in funds immediately available at the
principal office of the Administrative Agent in Chicago, Illinois.  The Administrative Agent shall make the
proceeds of each new Borrowing available to the Borrower at the Administrative
Agent’s principal office in Chicago, Illinois, by depositing such proceeds to
the credit of the Borrower’s operating account maintained with the
Administrative Agent or as the Borrower and the Administrative Agent may
otherwise agree.

(e)           Administrative Agent
Reliance on Lender Funding. 
Unless the Administrative Agent shall have been notified by a Lender
prior to (or, in the case of a Borrowing of Base Rate Loans, by 1:00 p.m.
(Chicago time) on) the date on which such Lender is scheduled to make payment
to the Administrative Agent of the proceeds of a Loan (which notice shall be
effective upon receipt) that such Lender does not intend to make such payment,
the Administrative Agent may assume that such Lender has made such payment when
due and the Administrative Agent may in reliance upon such assumption (but
shall not be required to) make available to the Borrower the proceeds of the
Loan to be made by such Lender and, if any Lender has not in fact made such
payment to the Administrative Agent, such Lender shall, on demand, pay to the
Administrative Agent the amount made available to the Borrower attributable to
such Lender together with interest thereon in respect of each day during the
period commencing on the date such amount was made available to the Borrower
and ending on (but excluding) the date such Lender pays such amount to the
Administrative Agent at a rate per annum equal to:  (i) from the date the related advance was
made by the Administrative Agent to the date 2 Business Days after payment by
such Lender is due hereunder, the Federal Funds Rate for each such day and (ii)
from the date 2 Business Days after the date such payment is due from such
Lender to the date such payment is made by such Lender, the Base Rate in effect
for each such day.  If such amount is not
received from such Lender by the Administrative Agent immediately upon demand,
the Borrower will, on demand, repay to the Administrative Agent the proceeds of
the Loan attributable to such Lender with interest thereon at a rate per annum
equal to the interest rate applicable to the relevant Loan, but without such
payment being considered a payment or prepayment of a Loan under Section 1.11
hereof so that the Borrower will have no liability under such Section with
respect to such payment.

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

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

 8

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

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

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

Section
1.7            Maturity of Revolving Loans
and Swing Loans.  Each
Revolving Loan and Swing Loan (subject to the provisions of Section 1.15
hereof), both for principal and interest not sooner paid, shall mature and
become due and payable by the Borrower on the Revolving Credit Termination
Date.

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

(b)           Mandatory.  (i)  If
the Borrower or any of its Wholly-owned Subsidiaries shall at any time or from
time to time make or agree to make a Disposition or shall suffer an Event of
Loss with respect to any Property, then the Borrower shall promptly notify the
Administrative Agent of such proposed Disposition or Event of Loss (including
the amount of the estimated Net Cash Proceeds to be received by the Borrower or
such Subsidiary in respect thereof) and, promptly upon receipt by the Borrower
or such Subsidiary of the Net Cash Proceeds of such Disposition or Event of
Loss, the Borrower shall prepay the Obligations in an aggregate amount equal to
100% of the amount of all such Net Cash Proceeds; provided
that this subsection shall not require any such prepayment with respect to Net
Cash Proceeds received on account of 

 9
 

Dispositions during any
fiscal year of the Borrower not exceeding $5,000,000 in the aggregate so long
as no Default or Event of Default then exists. 
The Borrower shall also make such prepayments as may be required under
Section 4.8 hereof.  The amount of each
such prepayment shall be applied first to the outstanding Swing Loans until
paid in full and then to the Revolving Credit. 
If the Administrative Agent or the Required Lenders so request, all
proceeds of such Disposition or Event of Loss shall be deposited with the
Administrative Agent (or its agent) and held by it in the Collateral
Account.  So long as no Default or Event
of Default exists, the Administrative Agent is authorized to disburse amounts
representing such proceeds from the Collateral Account to or at the Borrower’s
direction for application to or reimbursement for the costs of replacing,
rebuilding or restoring such Property.

(ii)           If after the Closing Date the
Borrower shall incur any additional Subordinated Debt or the Borrower or any
Wholly-owned Subsidiary shall issue new equity securities (whether common or
preferred stock or otherwise), other than equity securities issued in
connection with the exercise of employee or director stock options, the
Borrower shall promptly notify the Administrative Agent of the estimated Net
Cash Proceeds of such incurrence or issuance to be received by or for the
account of the Borrower or such Wholly-owned Subsidiary in respect
thereof.  Promptly upon receipt by the
Borrower or such Wholly-owned Subsidiary of Net Cash Proceeds of such issuance,
the Borrower shall apply 100% of the amount of such Net Cash Proceeds first to
the prepayment of the outstanding Swing Loans, until paid in full, second to
the prepayment of the Revolving Loans, until paid in full, and then to the
prefunding of all L/C Obligations.  The
Borrower acknowledges that its performance hereunder shall not limit the rights
and remedies of the Lenders for any breach of Section 8.11 (Maintenance of
Subsidiaries) or Section 9.1(j) (Change of Control) hereof or any other terms
of the Loan Documents.

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

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

(v)           Prepayments of Loans under this
Section 1.8(b) or Section 4.8 hereof shall be applied first to Swing Loans,
until payment in full thereof, second to all other Borrowings of Base Rate
Loans until payment in full thereof, and third to Borrowings of Eurodollar
Loans in the order in which their Interest Periods expire.  Each prepayment of Loans under this Section
1.8(b) shall be made by the payment of the principal amount to be prepaid and,
in the case of any Eurodollar Loans or Swing Loans, accrued interest thereon to
the date of prepayment together 

 10
 

with any amounts due the Lenders under Section 1.11
hereof.  Each prefunding of L/C
Obligations shall be made in accordance with Section 9.4 hereof.

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

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

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

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

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

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

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

Section
1.10         The Notes.

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

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

(c)           Each Lender shall record on its books
and records or on a schedule to its appropriate Note the amount of each Loan
advanced, continued or converted by it, all payments 

 11
 

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

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

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

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

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

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

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

Section
1.12         Revolving Credit Commitment
Terminations.  (a)  Optional Revolving Credit
Terminations.  The Borrower
shall have the right at any time and from time to time, upon 5 Business Days
prior written notice to the Administrative Agent (or such shorter period of
time agreed to by the Administrative Agent), to terminate the Revolving Credit
Commitments without premium or penalty and in whole or in part, any partial
termination to be (i) in an amount not less than $5,000,000 or an integral
multiple of $5,000,000 in excess thereof and (ii) allocated ratably among the
Lenders in proportion to their respective Revolver Percentages, provided that the Revolving Credit Commitments may not be
reduced to an amount less than the sum of the 

 12
 

aggregate principal amount of Revolving Loans, Swing
Loans, and L/C Obligations then outstanding. 
Any termination of the Revolving Credit Commitments shall reduce the L/C
Sublimit by a percentage amount equal to the percentage reduction in the
aggregate Revolving Credit Commitments. 
Any termination of the Revolving Credit Commitments below the Swing Line
Sublimit then in effect shall reduce the Swing Line Sublimit by a like
amount.  The Administrative Agent shall
give prompt notice to each Lender of any such termination of the Revolving
Credit Commitments.

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

Section 1.13         Increase
in Aggregate Revolving Credit Commitment.

The Borrower may, at any time and from time to time,
request, by notice to the Administrative Agent, the Administrative Agent’s
approval, such approval not to be unreasonably withheld, of an increase in the
aggregate Revolving Credit Commitments (a “Facility Increase”)
within the limitations hereafter described, which request shall set forth the
amount of each such requested Facility Increase.  Within twenty (20) days of such request, the
Administrative Agent shall advise the Borrower of its approval or disapproval
of such request, and failure to so advise the Borrower shall constitute
disapproval.  If the Administrative Agent
approves any such Facility Increase, then the aggregate Revolving Credit
Commitments may be increased (up to the amount of such approved Facility
Increase, in the aggregate) by having one or more New Lenders increase the
amount of their then existing Revolving Credit Commitments or become Lenders,
subject to and in accordance with this Section 1.13.  Any Facility Increase shall be subject to the
following limitations and conditions: 
(a) any increase in the aggregate Revolving Credit Commitments shall not
be less than $50,000,000; any increase in any Revolving Credit Commitment and
any new Revolving Credit Commitment shall (unless otherwise agreed to by the
Borrower and the Administrative Agent) not be less than $5,000,000 and shall be
in integral multiples of $1,000,000 if in excess thereof; (b) no Facility
Increase pursuant to this Section 1.13 shall increase the aggregate Revolving
Credit Commitments to an amount in excess of $700,000,000; (c) the Borrower and
each New Lender shall have executed and delivered a commitment and acceptance
(the “Commitment and Acceptance”)
substantially in the form of Exhibit I attached hereto, and the Administrative
Agent shall have accepted and executed the same; (d) the Borrower shall have
executed and delivered to the Administrative Agent such Note or Notes as the
Administrative Agent shall require to reflect such Facility Increase; (e) the
Borrower shall have delivered to the Administrative Agent opinions of counsel
(substantially similar to the form of opinions provided for in Section 7,
modified to apply to the Facility Increase and each Note and Commitment and
Acceptance executed and delivered in connection therewith); (f) the Guarantors
shall have consented in writing to the Facility Increase and shall have agreed
that their guaranties contained in this Agreement or elsewhere continue in full
force and effect; (g) the Borrower and each New Lender shall otherwise have
executed and delivered such other instruments and documents as the
Administrative Agent shall have reasonably requested in connection with such
Facility Increase and (h) each New Lender shall have paid to the other Lenders
an amount sufficient such that the percentage of all outstanding Loans as held
by all Lenders shall equal each Lender’s Revolver Percentage following the
Facility Increase.  The form and
substance of the documents required under clauses (c) through

 13
 

(g) above shall be fully acceptable to the
Administrative Agent.  The Administrative
Agent shall provide written notice to all of the Lenders hereunder of any
Facility Increase.

Section
1.14         Substitution of Lenders.  In the event (a) the Borrower receives a
claim from any Lender for compensation under Section 10.3 or 13.1 hereof, (b)
the Borrower receives notice from any Lender of any illegality pursuant to
Section 10.1 hereof, (c) any Lender is in default in any material respect with
respect to its obligations under the Loan Documents, or (d) a Lender fails to
consent to an amendment or waiver requested under Section 13.13 hereof at a
time when the Required Lenders have approved such amendment or waiver (any such
Lender referred to in clause (a), (b), (c), or (d) above being hereinafter
referred to as an “Affected Lender”),
the Borrower may, in addition to any other rights the Borrower may have
hereunder or under applicable law, require, at the Affected Lender’s expense,
any such Affected Lender to assign, at par plus accrued interest and fees,
without recourse, all of its interest, rights, and obligations hereunder
(including all of its Revolving Credit Commitments and the Loans and
participation interests in Letters of Credit and other amounts at any time
owing to it hereunder and the other Loan Documents) to a commercial bank or
other financial institution specified by the Borrower, provided
that (i) such assignment shall not conflict with or violate any law, rule or
regulation or order of any court or other governmental authority, (ii) the
Borrower shall have received the written consent of the Administrative Agent,
which consent shall not be unreasonably withheld, to such assignment, (iii) the
Borrower shall have paid to the Affected Lender all monies (together with
amounts due such Affected Lender under Section 1.11 hereof as if the Loans
owing to it were prepaid rather than assigned) other than such principal owing
to it hereunder, and (iv) the assignment is entered into in accordance with the
other requirements of Section 13.12 hereof (provided any assignment fees and
reimbursable expenses due thereunder shall be paid by the Borrower).

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

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

(c)           Requests for Swing Loans.  The Borrower shall give the Administrative
Agent prior notice (which may be written or oral, provided that all such
written notices shall be substantially in the form of Exhibit B (Notice of
Borrowing) and all oral notices shall be promptly confirmed in writing) no
later than 12:00 Noon (Chicago time) on the date upon 

 14
 

which the Borrower
requests that any Swing Loan be made, of the amount and date of such Swing
Loan, and the Interest Period requested therefor.  Such Swing Loan shall bear interest at the
rate per annum determined by adding the Applicable Margin for Base Rate Loans
under the Revolving Credit to the Base Rate as from time to time in
effect.  Subject to the terms and
conditions hereof, the proceeds of such Swing Loan shall be made available to
the Borrower on the date so requested at the offices of the Administrative
Agent in Chicago, Illinois, by depositing such proceeds to the credit of the
Borrower’s operating account maintained with the Administrative Agent or as the
Borrower and the Administrative Agent may otherwise agree.  Anything contained in the foregoing to the
contrary notwithstanding, (i) the obligation of the Administrative Agent to
make Swing Loans shall be subject to all of the terms and conditions of this
Agreement and (ii) the Administrative Agent shall not be obligated to make more
than one Swing Loan during any one week.

(d)           Refunding Loans.  In its sole and absolute discretion, the
Administrative Agent may at any time, on behalf of the Borrower (which hereby
irrevocably authorizes the Administrative Agent to act on its behalf for such
purpose) and with notice to the Borrower, request each Lender to make a Revolving
Loan in the form of a Base Rate Loan in an amount equal to such Lender’s
Revolver Percentage of the amount of the Swing Loans outstanding on the date
such notice is given.  Unless an Event of
Default described in Section 9.1(l) or 9.1(m) exists with respect to the
Borrower, regardless of the existence of any other Event of Default, each
Lender shall make the proceeds of its requested Revolving Loan available to the
Administrative Agent, in immediately available funds, at the Administrative
Agent’s principal office in Chicago, Illinois, before 12:00 Noon (Chicago time)
on the Business Day following the day such notice is given.  The proceeds of such Borrowing of Revolving
Loans shall be immediately applied to repay the outstanding Swing Loans.

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

SECTION
2.           FEES.

 15
 

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

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

(c)           Administrative Agent Fees.  The Borrower shall pay to the Administrative
Agent, for its own use and benefit, and to BMO Capital Markets Financing, Inc.,
the fees agreed to in the fee letters executed by the Borrower, dated [July __,
2007], or as otherwise agreed to in writing among such parties.

(d)           Amendment and Restatement
Fee.  Upon the Closing Date,
the Borrower shall pay to the Administrative Agent a fee equal to 0.15% of the
Revolving Credit Commitments of the Lenders executing this Agreement, and the
Administrative Agent shall promptly distribute such fee to the Lenders
executing this Agreement in proportion to their respective Revolving Credit
Commitments.

SECTION
3.           PLACE AND APPLICATION OF
PAYMENTS.

Section
3.1            Place and Application of
Payments.  All payments
of principal of and interest on the Loans and the Reimbursement Obligations,
and of all other Obligations payable by the Borrower under this Agreement and
the other Loan Documents, shall be made by the Borrower to the Administrative
Agent by no later than 12:00 Noon (Chicago time) on the due date thereof at the
office of the Administrative Agent in Chicago, Illinois (or such other location
as the Administrative Agent may designate to the Borrower) for the benefit of
the Lender or Lenders entitled thereto. 
Any payments received after such time shall be deemed to have been
received by the Administrative Agent on the next Business Day.  All such payments shall be made in U.S.
Dollars, in immediately available funds at the place of payment, in each case 

 16
 

without set-off or counterclaim.  The Administrative Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest on Loans and on Reimbursement Obligations in which the
Lenders have purchased Participating Interests ratably to the Lenders and like
funds relating to the payment of any other amount payable to any Lender to such
Lender, in each case to be applied in accordance with the terms of this
Agreement.  If the Administrative Agent
causes amounts to be distributed to the Lenders in reliance upon the assumption
that the Borrower will make a scheduled payment and such scheduled payment is
not so made, each Lender shall, on demand, repay to the Administrative Agent
the amount distributed to such Lender together with interest thereon in respect
of each day during the period commencing on the date such amount was
distributed to such Lender and ending on (but excluding) the date such Lender
repays such amount to the Administrative Agent, at a rate per annum equal
to:  (i) from the date the distribution
was made to the date 2 Business Days after payment by such Lender is due hereunder,
the Federal Funds Rate for each such day and (ii) from the date 2 Business Days
after the date such payment is due from such Lender to the date such payment is
made by such Lender, the Base Rate in effect for each such day.

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

(a)           first, to the payment of any
outstanding costs and expenses reasonably incurred by the Administrative Agent,
in protecting, preserving or enforcing rights under the Loan Documents
(including any and all costs incurred by the Administrative Agent in obtaining
any title insurance policies, environmental reports or Appraisals with respect
to the Collateral in accordance with the terms of this Agreement), and in any
event including all costs and expenses of a character which the Borrower has
agreed to pay the Administrative Agent under Section 13.15 hereof (such funds
to be retained by the Administrative Agent for its own account unless it has
previously been reimbursed for such costs and expenses by the Lenders, in which
event such amounts shall be remitted to the Lenders to reimburse them for
payments theretofore made to the Administrative Agent);

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

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

 17
 

Hedging Liability, their
Affiliates, to be allocated pro rata in accordance with the aggregate unpaid
amounts owing to each holder thereof;

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

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

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

SECTION
4.           GUARANTIES.

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

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

Section
4.3            Collateral.  The Obligations, Hedging Liability, and Funds
Transfer and Deposit Account Liability shall be secured by valid, perfected,
and enforceable Liens on all 

 18
 

right, title, and interest of the Borrower, each
Guarantor and each SPS Guarantor in all of their accounts held by any of the
Lenders, general tangibles and intangibles related to the Borrowing Base
Properties (as described in the Collateral Documents), and all Borrowing Base
Property (subject to Sections 4.4 and 4.5 below), whether now owned or
hereafter acquired or arising, and all proceeds thereof.  The Borrower acknowledges and agrees that the
Liens on the Collateral shall be granted to the Administrative Agent for the benefit
of the holders of the Obligations, the Hedging Liability, and the Funds
Transfer and Deposit Account Liability and shall be valid and perfected first
priority Liens subject, however, to Liens permitted by Section 8.8 (a), (b),
(f), and (n) hereof, in each case pursuant to one or more Collateral Documents
from such Persons, each in form and substance reasonably satisfactory to the
Administrative Agent.  All costs incurred
by the Administrative Agent in perfecting Liens or recording Mortgages,
including all documentary stamp taxes and mortgage taxes, shall be reimbursed
by the Borrower within 30 days of demand therefor.

Section
4.4            Mortgages of Existing
Borrowing Base Property. 
On or before September 29, 2007, the Borrower, the Guarantors and the
SPS Guarantors shall execute and deliver to the Administrative Agent Mortgages
with respect to each parcel of the Borrowing Base Property existing as of the
Closing Date, except to the extent such Borrowing Base Property has been
transferred to non-Affiliate third-parties in compliance with this
Agreement.  The Borrower shall also, at
its sole cost and expense, deliver to the Administrative Agent, a title search
performed by a Title Insurance Company, with an effective date not earlier than
July 20, 2007, in form reasonably acceptable to the Administrative Agent,
demonstrating to the Administrative Agent’s reasonable satisfaction that the
Mortgages will create a first-in-priority Lien in favor of the Administrative
Agent with respect to such Borrowing Base Property, subject, however, to Liens
permitted by Section 8.8 (a), (b), (f) and (n) hereof.  The Borrower shall pay all costs of recording
the Mortgages required or delivered under this Section 4.4, including any and
all documentary stamp taxes or mortgage taxes payable in connection therewith
and all reasonable attorney fees and costs incurred by the Administrative Agent
in connection therewith, all within 30 days of demand from the Administrative
Agent; provided the Administrative Agent may require the immediate advance of
funds necessary to pay mortgage taxes. 
From and after the Closing Date, the Borrower, the Guarantors and the
SPS Guarantors shall reasonably cooperate with the Administrative Agent and
diligently pursue the completion, execution, and recording of the Mortgages
contemplated by this Section.

Section
4.5            Additional Borrowing Base
Property.

(a)           Requirements for the
Addition of Borrowing Base Property. 
Following the Closing Date, the Borrower and the Guarantors from time to
time may acquire or designate Property for inclusion in the Borrowing Base
Property, which Property or portions thereof shall be included in the Borrowing
Base Property provided the Property or a portion thereof satisfies the
requirements for a category of Borrowing Base Property and provided the
following requirements are satisfied:

(i)            No Default or Event of Default shall
then exist or result from such acquisition or designation;

 19

(ii)           Immediately following such
acquisition or designation, the aggregate amount of the unpaid principal
balance of the Loans and the L/C Obligations shall be less than the Borrowing
Base;

(iii)          The Property shall be located within
or constitute an Approved Project, as contemplated by Section 4.5(b) below;

(iv)          The Property shall be Eligible Land
(either upon designation or promptly following acquisition) and shall be
subject to a first-in-priority Mortgage in favor of the Administrative Agent,
as confirmed by a title search performed by a Title Insurance Company with an
effective date sufficiently recent as would customarily allow such Title
Insurance Company to insure such title in the subject area (it being understood
and agreed that the execution of a Mortgage with respect to such Property by
the subject Guarantor and delivery of such Mortgage to the Administrative Agent
or a Title Insurance Company for recording shall be sufficient to satisfy the
foregoing requirements that a Property be “subject” to a Mortgage);

(v)           The Property shall be intended for
the development and construction of Housing Units; and

(vi)          The Project Budget for the applicable
Property shall have been approved by the Administrative Agent in its reasonable
discretion in accordance with the provisions of this Section 4.5.

(b)           Approved Projects.  As contemplated by Section 4.5(a)(iii) above,
no additional Property may be included in the Borrowing Base Property unless
such Property is located within or constitutes an Approved Project, being a
Project that is either a Pre-Approved Project or a Project that has otherwise
been approved by the Required Lenders. 
The foregoing requirement of this Section 4.5 shall not apply to
Property included as Borrowing Base Property as of the Closing Date.  A Project shall be a Pre-Approved Project if
it meets the following requirements:

(i)            The Project must be located within a
Building Region; and

(ii)           The Project parameters relative to
the proposed number of Housing Units or lots therefor, acquisition and development
costs, and projected base price for Housing Units shall not exceed the
parameters set forth on Schedule 4.5 attached hereto with respect to the
subject Building Region.

(c)           Costs for Mortgages on
Additional Borrowing Base Property. 
The Borrower shall pay all costs of recording the Mortgages required or
delivered under this Section 4.5, including any and all documentary stamp taxes
or mortgage taxes payable in connection therewith and all reasonable attorney
fees and costs incurred by the Administrative Agent in connection therewith,
all within 30 days of demand from the Administrative Agent.

(d)           Confirmation by the
Administrative Agent.  Within
10 days following receipt by the Administrative Agent of all materials and
information required with respect to any proposed Borrowing Base Property as
specified in this Section 4.5 the Administrative Agent shall utilize
commercially reasonable efforts to review the subject Property and obtain the
approval or 

 20
 

disapproval of the
Required Lenders (as necessary), and shall notify the Borrower as to whether
the subject Property may be included in the Borrowing Base Property in
accordance with the provisions of this Section 4.5.  In the event that the Administrative Agent
provides notice that it rejects such Property, such notice shall specify the
basis for such rejection, and the Borrower shall be permitted to resubmit such
Property with modifications for re-consideration by the Administrative Agent
(and the Required Lenders, as necessary).

(e)           SPS Guarantors.  Following the Closing Date, Property of the
SPS Guarantors may be included in the Borrowing Base Property to the extent
such Property was included in the calculation of the “Borrowing Base” under the
Prior Credit Agreement, provided the subject SPS Guarantor has executed a
Mortgage with respect thereto and the Administrative Agent has received all
other instruments and documentation that would be necessary with respect to
Property owned by a Guarantor.  Such
Property need not be located within an Approved Project.

Section
4.6            Mortgage
Tax Arrangements.  In the event that a
Property encumbered or to be encumbered by a Mortgage is located in a Mortgage
Tax State, the Administrative Agent, in its reasonable discretion, shall
utilize commercially reasonable and prudent practices, following consultation
with counsel and Borrower, to avoid the unnecessary payment of taxes
attributable to such Mortgage.  Such
practices may include (a) a limitation on recovery under a given Mortgage or
group of Mortgages to an amount related to the portion of the Borrowing Bases
attributable to Borrowing Base Property located or to be located in such
Mortgage Tax State, or (b) an allocation of indebtedness among various
States.  In this regard, the
Administrative Agent may, in its reasonable discretion, require the
establishment of escrows or the procurement of bonds to address any potential
tax liability associated with such practices. 
Borrower and each of the Guarantors do hereby agree to and shall
indemnify and hold harmless the Administrative Agent from any and all costs,
claims, and liabilities arising from or attributable to any practices employed
by the Administrative Agent in an effort to reduce any tax payable in a
Mortgage Tax State.  Nothing contained in
this Section 4.6 shall be construed to reduce the liability of Borrower or any
Guarantor hereunder in any way or to act as a novation in any respect, although
the recovery of the Administrative Agent under particular Mortgages may be
limited to some extent.

Section
4.7            Appraisals.

(a)           Appraisal of Subsequent
Borrowing Base Property. 
Prior to the inclusion of Property in the Borrowing Base Property after
the Closing Date pursuant to Section 4.5 hereof, the Administrative Agent shall
have received Appraisals of such proposed Borrowing Base Property to determine
the Appraised Value thereof.  Such
Appraisals shall be ordered by the Administrative Agent promptly upon the
Borrower’s request and reviewed and approved by the Administrative Agent in
accordance with Section 4.5 hereof.  The
Borrower shall pay to the Administrative Agent, within 30 days of demand from
the Administrative Agent, all costs of all such Appraisals.

(b)           Appraisals of Existing
Borrowing Base Property. 
Within 120 days following the Closing Date, the Borrower, the
Guarantors, the SPS Guarantors and the Administrative Agent shall reasonably
cooperate and utilize commercially reasonable efforts to obtain Appraisals of 

 21
 

all Borrowing Base
Property, as existing as of the Closing Date (and remaining at the time of determination).  The expense of such Appraisals performed
under this Section shall be at the cost of the Borrower and paid within 30 days
of demand from the Administrative Agent.

(c)           Subsequent Appraisals.  The Administrative Agent may also from time
to time, for the purpose of determining the current Appraised Value of any
Borrowing Base Property with respect to which an Appraisal has previously been
obtained under this Section 4.7, obtain interim Appraisals updating and
revising prior Appraisals with respect to such Borrowing Base Property or such
portion thereof as the Administrative Agent shall determine (i) upon the
occurrence of an Event of Default, (ii) at any time, at the Administrative
Agent’s discretion, with respect to a particular parcel of Borrowing Base
Property, upon the occurrence of a material adverse change as reasonably
determined by the Administrative Agent, or (iii) at any time that the
regulatory requirements of any Lender generally applicable to real estate loans
of the category made under this Agreement shall require additional Appraisals,
as reasonably interpreted by the Administrative Agent, unless the Appraisals
are required due to the failure by any Lender to comply with applicable
regulatory requirements (other than regulatory requirements relating to
Appraisals concerning this Agreement or the Borrowing Base Property), in which
case such Appraisals shall be at the cost of such Lender.  The expense of such Appraisals and updates
performed pursuant to this Section shall be at the cost of the Borrower and
shall be paid within 30 days of demand from the Administrative Agent.

(d)           Appraisal Variations.  The Borrower acknowledges that the
Administrative Agent may make changes or adjustments to the value set forth in
any Appraisal as may be required by the appraisal department of the
Administrative Agent in the exercise of its good faith business judgment, and
that the Administrative Agent is not bound by the value set forth in any
Appraisal performed pursuant to this Agreement and does not make any
representations or warranties with respect to any such Appraisal.  The Borrower further agrees that the
Administrative Agent and the Lenders shall have no liability as a result of or
in connection with any such Appraisal for statements contained in such
Appraisal, including without limitation, the accuracy and completeness of
information, estimates, conclusions and opinions contained in such Appraisal,
or variance of such Appraisal from the value of such property that is the
subject of such Appraisal as given by the local tax assessor’s office, or the
Borrower’s idea of the value of such property.

Section
4.8            Release of Collateral.  Subject to the below terms and provisions,
the Administrative Agent or its duly authorized attorney-in-fact shall release
Property from the Lien of the Mortgages or other Collateral Documents (provided
that such release shall not affect or diminish the Borrower’s or the Guarantors’
obligations under the Indemnity Agreement) under the following circumstances:

(a)           Releases for Closings of
Housing Unit Contracts.  The
Administrative Agent shall release Borrowing Base Property from the lien or
security title of the Mortgages once each month in connection with closings
under Housing Unit Contracts without any corresponding repayment of the Loans;
provided, however, in the event the Borrower, any Guarantor or any SPS
Guarantor transfers Borrowing Base Property corresponding to more than 10% of
the Borrowing Base in any given calendar month, the Borrower shall either (i)
make a principal payment on the Loans in an amount equal to any excess of the
outstanding Loans and L/C 

 22
 

Obligations over the
Borrowing Base (after giving effect to the foregoing releases), or (ii)
demonstrate to the Administrative Agent, by submittal of a new Borrowing Base
Certificate delivered contemporaneously with any request for a release of
Borrowing Base Property corresponding to more than 10% of the Borrowing Base,
that the outstanding Loans and L/C Obligations do not and will not exceed the
Borrowing Base after giving effect to such releases.  The Borrower shall submit to the
Administrative Agent a request for releases under this Section on or before the
fifteenth day of each month and all releases allowed under this Section 4.8
shall be processed and delivered by the Administrative Agent on or before the
last day of each month.  Notwithstanding
the occurrence of a Default or an Event of Default, the Administrative Agent
may continue to release Borrowing Base Property from the Lien of the Mortgages
pursuant to this Section, provided that the above conditions are met and
provided that the value of any remaining Borrowing Base Property will not be
materially diminished thereby.  The
Administrative Agent shall reasonably cooperate with the Borrower and the Guarantors
in providing commercially reasonable standing instructions to Title Insurance
Companies utilized by the Borrower, any Guarantors or any SPS Guarantors for
the sale of Housing Units pursuant to Housing Unit Contracts, such that such
title insurance companies may insure over the Lien of a given Mortgage until
such time as the release contemplated by this Section is processed and
delivered; provided, however, the Administrative Agent shall not be required to
provide any indemnification or hold harmless agreements in this regard.

(b)           Miscellaneous Releases.  The Administrative Agent shall release any
Property in connection with a Disposition subject to compliance by the Borrower
with the requirements of Section 1.8, if applicable.  The Administrative Agent shall release any
Property without consideration to be transferred (i) pursuant to Lot Exchanges,
(ii) pursuant to a corrective deed, (iii) for use as greenbelt, (iv) to a
homeowners association in the normal course of business, (v) for dedication of
public rights-of-way for roads or utilities, or (vi) in order to satisfy a
requirement of a governmental or quasi-governmental authority, including
pursuant to annexation and development agreements or similar items or such
other requirement as is customarily imposed upon or otherwise incurred by
commercial homebuilders in the ordinary course of business (subject to the
provisions of Section 1.8).  The
Administrative Agent shall also, subordinate the Mortgages to reasonable and
customary subdivision declarations, utility easements, and similar instruments
appropriate for the development of any Property.  The Administrative Agent shall also, in its
reasonable discretion, and provided no Default or Event of Default then exists,
release its Lien upon (I) any Collateral that is Real Property but not
Borrowing Base Property or (II) Collateral not constituting Real Property
following a request from the Borrower if such non-Real Property Collateral is
obsolete, unnecessary to the business of the Borrower or its Subsidiaries, or
is being replaced by other Collateral of reasonably equivalent value.  The costs and expenses incurred in connection
with any releases of the Collateral shall be paid by the Borrower within 30
days of demand by the Administrative Agent. 
Except as provided in this Section 4.8, no releases of Collateral shall
be allowed without the prior written approval of the Required Lenders.

Section
4.9            Further Assurances.  The Borrower agrees that it shall, and shall
cause each Guarantor and SPS Guarantor to, from time to time at the request of
the Administrative Agent or the Required Lenders, execute and deliver such
documents and do such acts and things as the Administrative Agent or the
Required Lenders may reasonably request in order to provide for or perfect or
protect such Liens on the Collateral.  In
the event the Borrower or any Guarantor 

 23
 

forms or acquires any other Subsidiary after the date
hereof, except as otherwise provided in Sections 4.1 and 4.2 above, the
Borrower shall promptly upon such formation or acquisition cause such newly
formed or acquired Subsidiary to execute a Guaranty and such Collateral
Documents as the Administrative Agent may then reasonably require, and the
Borrower shall also deliver to the Administrative Agent, or cause such Subsidiary
to deliver to the Administrative Agent, at the Borrower’s cost and expense,
such other instruments, documents, certificates, and opinions reasonably
required by the Administrative Agent in connection therewith.

SECTION 5.           DEFINITIONS; INTERPRETATION.

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

“Act” is defined
in Section 13.24 hereof.

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

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

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

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

“Affected Lender”
is defined in Section 1.14 hereof.

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

 24
 

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

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

	
  Level

  	
   

  	
  Margin Leverage

  Ratio For Such Pricing

  Date

  	
   

  	
  Applicable Margin for

  Base Rate Loans 

  Under Revolving Credit

  and Reimbursement

  Obligations

  Shall be:

  	
   

  	
  Applicable Margin

  For Eurodollar

  Loans Under

  Revolving Credit

  Shall Be:

  	
   

  	
  Applicable Margin

  for Commitment Fee Shall

  be:

  	
   

  
	
  IV

  	
   

  	
  Greater than or
  equal to 2.25 to 1.0

  	
   

  	
  0.00

  	
  %

  	
  2.25

  	
  %

  	
  0.30

  	
  %

  
	
  III

  	
   

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

  	
   

  	
  0.00

  	
  %

  	
  2.00

  	
  %

  	
  0.25

  	
  %

  
	
  II

  	
   

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

  	
   

  	
  0.00

  	
  %

  	
  1.75

  	
  %

  	
  0.20

  	
  %

  
	
  I

  	
   

  	
  Less than 1.75 to 1.0

  	
   

  	
  0.00

  	
  %

  	
  1.50

  	
  %

  	
  0.20

  	
  %

  

 

For purposes hereof, the term “Pricing Date”
means, for any fiscal quarter of the Borrower ending on or after September 30,
2007, the date on which the Administrative Agent is in receipt of the Borrower’s
most recent financial statements for the fiscal quarter then ended, pursuant to
Section 8.5 hereof.  The Applicable
Margin shall be established based on the Margin Leverage Ratio for the most
recently completed fiscal quarter and the Applicable Margin established on a
Pricing Date shall remain in effect until the next Pricing Date.  If the Borrower has not delivered its
financial statements by the date such financial statements are required to be
delivered under Section 8.5 hereof, until such financial statements and audit
report are delivered, the Applicable Margin, in the discretion of the
Administrative Agent, shall be the highest Applicable Margin (i.e., Level IV shall apply). 
If the Borrower subsequently delivers such financial statements before
the next Pricing Date, the Applicable Margin established by such late delivered
financial statements shall take effect from the date of delivery until the next
Pricing Date.  In addition, the
Applicable Margin (for Loans and Reimbursement Obligations) calculated pursuant
to the above provisions shall be increased, absent contrary direction from the
Required Lenders, by an additional per annum interest rate amount equal to (a)
0.375% if at any time the Liquidity is less than $100,000,000 but more than
$75,000,000, or (b) 0.875% if at any time the Liquidity is equal to or less
than $75,000,000; provided, however, the foregoing increases to the Applicable
Margin shall only be effective until such time as the Borrower demonstrates to
the reasonable satisfaction of the Administrative Agent that the Liquidity has
increased above the aforementioned amounts. 
Such increases shall be based upon the Liquidity Certificates or any
other information the Administrative Agent may otherwise possess.  In all other circumstances, the Applicable
Margin established by such financial statements shall be in effect from the
Pricing Date that occurs immediately after the end of the fiscal quarter
covered by such financial statements until the next Pricing Date.  Each determination of the Applicable Margin
made by

 25
 

the Administrative Agent in accordance with the
foregoing shall be conclusive and binding on the Borrower and the Lenders if
reasonably determined.

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

“Appraisal” means an appraisal or
evaluation of the Fair Market Value (for residential development as defined by
FIRREA) of Real Property prepared by an appraiser selected by the
Administrative Agent, such appraisal to be in form and substance satisfactory
to the Administrative Agent and to conform to and comply with FIRREA.

“Appraised Value” means the Fair
Market Value determined by the most recent Appraisal obtained pursuant to
Section 4.7 hereof, subject, however, to (a) any changes or adjustments thereto
as may be reflected or referenced in the subject Appraisal to account for the
sale of property over time and (b) such other changes or adjustments to the
value determined by the Appraisal as may be made by the Administrative Agent in
its reasonable discretion consistent with its standard underwriting practices.

“Approved Project” means a
Project which has been approved for inclusion within the Borrowing Base
Property pursuant to Section 4.5 hereof.

“Authorized Representative”
means those persons shown on the list of officers provided by the Borrower
pursuant to Section 7.2 hereof or on any update of any such list provided by
the Borrower to the Administrative Agent, or any further or different officers
of the Borrower so named by any Authorized Representative of the Borrower in a
written notice to the Administrative Agent.

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

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

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

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

“Borrowing Base”
means, as of the date of determination, the sum of the following amounts:  (a) the lesser of (i) 90% of the Housing Unit
Book Value of all Housing Units Under Contract or (ii) 85% of the Housing Unit
Appraised Value for all Housing Units Under Contract, (b) 80% of the lesser of
(i) the Housing Unit Book Value for all Speculative Housing Units or (ii)

 26
 

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

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

“Borrowing Base Property” means
all Property of the Borrower, any Guarantor or any Special Project Subsidiary
as of a given date properly classified under this Agreement as Entitled Land,
Lots Under Development, Finished Lots, Speculative Housing Units, or Housing
Units Under Contract and designated by the Borrower as Property that shall be
included in Borrowing Base Property as reflected in the Borrowing Base
Certificates furnished from time to time by the Borrower pursuant to this
Agreement.

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

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

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

 27
 

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

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

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

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

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

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

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

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

“Collateral” means all
properties, rights, interests, and privileges from time to time subject to the
Liens granted to the Administrative Agent, or any security trustee therefor, by
the Collateral Documents.

 28
 

“Collateral Account”
is defined in Section 9.4 hereof.

“Collateral Documents” means the
Mortgages, and all other mortgages, deeds of trust, security agreements, pledge
agreements, assignments, financing statements and other documents as shall from
time to time secure or relate to the Obligations, the Hedging Liability, and
the Funds Transfer and Deposit Account Liability or any part thereof.

“Commitment and Acceptance” is
defined in Section 1.13.

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

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

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

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

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

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

“Eligible Land” means Real
Property owned by the Borrower, a Wholly-owned Subsidiary or a Special Project
Subsidiary in fee simple, which is subject to a valid Mortgage (provided that
Real Property owned by the Borrower, any Guarantor or any Special Project
Subsidiary as of the Closing Date need not be subject to a Mortgage before
September 29, 2007 to be classified as Eligible Land) but not subject to any
other Lien (other than as allowed under Section 8.8(a), (b), (f), (n) and (o)),
and which, subject to non-material and customary conditions imposed by the
applicable governmental authority, is (i) zoned by the appropriate governmental
authority to allow for the construction and use of Housing Units, (ii) properly
and legally subdivided for residential development or with respect to which the
Borrower, a Wholly-owned Subsidiary or a Special Project Subsidiary has
obtained all necessary approvals for subdivision into residential lots, and
(iii) not subject to any governmental moratoriums regarding the construction of
Housing Units or the connection to necessary infrastructure or utilities.

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

 29

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

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

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

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

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

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

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

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

“Excess Interest”
is defined in Section 13.20 hereof.

“Facility Increase” is defined in
Section 1.13.

“Fair Market Value” means the
price a willing buyer would pay to a willing seller in an arm’s length
transaction with neither party being under a compulsion to act.

 30
 

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

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

“FIRREA” means Title XI of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C.
3331 et seq.), as amended from time to time.

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

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

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

“Global Land” means all Real
Property owned by the Borrower or any Subsidiary for current or future
development or for the future construction of Housing Units, excluding any
subdivided portions thereof upon which construction of a Housing Unit has
commenced.

“Global Land Value” means the sum
of all costs incurred by the Borrower or any Subsidiary with respect to the
acquisition and development of Global Land, excluding any marketing, corporate,
general, or administrative expenses.

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

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

“Hazardous Material”
means any substance, chemical, compound, product, solid, gas, liquid, waste,
byproduct, pollutant, contaminant or material which is hazardous or toxic, and
includes, without limitation, (a) toxic mold, toxic fungus, asbestos,
polychlorinated biphenyls

 31
 

and petroleum (including crude oil or any fraction
thereof) and (b) any material classified or regulated as “hazardous” or “toxic”
or words of like import pursuant to an Environmental Law.

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

“Hedging Liability”
means the liability of the Borrower or any of its Subsidiaries to any of the
Lenders, or any Affiliates of such Lenders, in respect of any interest rate,
foreign currency, and/or commodity swap, exchange, cap, collar, floor, forward,
future or option agreement, or any other similar interest rate, currency or
commodity hedging arrangement, as the Borrower or such Subsidiary, as the case
may be, may from time to time enter into with any one or more of the Lenders
party to this Agreement or their Affiliates in connection with any Indebtedness
for Borrowed Money arising under or in connection with this Agreement.

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

“Housing Unit Appraised Value”
means, with respect to each Housing Unit Under Contract, the lesser of (a) the
Appraised Value of such Housing Unit Under Contract, if any, or (b) the
contract sale price under the subject Housing Unit Contract.

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

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

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

 32
 

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

“Impairment Amount” means, as of
the date of determination, the lesser of (a) the cumulative amount of all
abandonments and impairments occurring since March 31, 2007, as contemplated by
GAAP, to the extent such amounts have actually then reduced the calculation of
Net Worth hereunder or (b) $40,000,000.

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

“Indemnity Agreement” means that
certain Environmental Indemnity Agreement of even date herewith as executed by
the Borrower and the Guarantors, in favor of the Administrative Agent, as
amended, modified, restated, or supplemented from time to time after the
Closing Date.

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

“Interest Incurred” means, for
any period, the total interest paid or accrued by the Borrower, the
Wholly-owned Subsidiaries and the Special Project Subsidiaries (including the
interest component of any Capital Lease) as calculated in accordance with GAAP,
minus, to the extent included in the
foregoing amount, amortization of any financing fees and costs.

“Interest Period”
is defined in Section 1.6 hereof.

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

“L/C Issuer”
means the Administrative Agent, or any other Lender requested by the Borrower
and approved by the Administrative Agent in its sole discretion as an issuer
with 

 33
 

respect to any Letter of Credit, and includes Harris
N.A. with respect to the Letters of Credit listed on Schedule 1.2 attached
hereto.

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

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

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

“Lenders” means
and includes Harris N.A. and the other financial institutions from time to time
party to this Agreement (as set forth on Schedule 1 as of the date hereof or
hereafter amended), including each New Lender and each assignee Lender pursuant
to Section 13.12 hereof.

“Lending Office”
is defined in Section 10.4 hereof.

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

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

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

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

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

“Liquidity” means, at the time of
determination, the sum of (a) Borrowing Capacity, (b) all unencumbered
immediately available funds of the Borrower and its Wholly-Owned Subsidiaries,
(c) all funds that would (subject to the provisions of Section 8.7 of this
Agreement) be immediately available to be borrowed by the Borrower or a
Guarantor under available lines of credit (other than this Agreement) and (d)
all amounts then payable to the Borrower or any Wholly-Owned Subsidiary from
any Housing Unit Closings that have occurred.

“Liquidity Certificate” means the
certificate in the form of Exhibit J attached hereto, to be delivered to the
Administrative Agent pursuant to Section 8.5 hereof.

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

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

 34
 

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

“Lot Exchanges” means the
exchange of parcels of Real Property by the Borrower or a Subsidiary to a third
party purchaser in exchange, in whole or in part, for a lot or lots previously
purchased by the third party purchaser from the Borrower or a Subsidiary.

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

“Margin Leverage Ratio” means the
ratio of Total Liabilities to the sum of (a) Adjusted Tangible Net Worth, less
(b) to the extent added to the calculation of Tangible Net Worth, the
Impairment Amount.

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

“Maximum Rate”
is defined in Section 13.20 hereof.

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

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

“Mortgages” means, collectively,
each Mortgage and Security Agreement with Assignments of Rents and each Deed of
Trust and Security Agreement with Assignment of Rents between the Borrower, the
relevant Guarantor or the relevant Special Project Subsidiary and the
Administrative Agent delivered to the Administrative Agent or a Title Insurance
Company for public recording pursuant to Sections 4.4 or 4.5 hereof, as the
same may be amended, modified, supplemented or restated from time to time.

 35
 

“Mortgage Tax State”
means, as of the Closing Date, the State of Florida, and thereafter any State
within, including or constituting a Building Region, which State imposes a
mortgage tax, intangible recording tax, or documentary stamp tax in connection
with the recording of any mortgage, deed to secure debt, or deed of trust.

“Net Cash Proceeds”
means, as applicable, (a) with respect to any Disposition by a Person, cash and
cash equivalent proceeds received by or for such Person’s account, net of (i)
reasonable direct costs relating to such Disposition and (ii) sale, use or
other transactional taxes paid or payable by such Person as a direct result of
such Disposition, (b) with respect to any Event of Loss of a Person, cash and
cash equivalent proceeds received by or for such Person’s account (whether as a
result of payments made under any applicable insurance policy therefor or in
connection with condemnation proceedings or otherwise), net of reasonable
direct costs incurred in connection with the collection of such proceeds,
awards or other payments, and (c) with respect to any offering of debt or
equity securities of a Person cash and cash equivalent proceeds received by or
for such Person’s account, net of reasonable legal, underwriting, and other
fees and expenses incurred as a direct result thereof.

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

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

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

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

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

 36
 

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

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

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

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

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

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

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

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

“Pre-Approved Project” means a
Project meeting the requirements of Section 4.5(b) hereof.

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

 37
 

“Prior Credit Agreement” means
that certain Credit Agreement among the Borrower, certain of the Guarantors,
the Administrative Agent, the Lenders, and certain other parties, as amended by
that certain First Modification of Credit Agreement, dated December 15, 2006,
all as defined in the Preliminary Statement hereto.

“Project” means one or more
parcels of Real Property intended for the development and construction of one
or more Housing Units in a distinct residential development.

“Project Budget” means a budget
delivered to the Administrative Agent with respect to prospective Borrowing
Base Property pursuant to Section 4.5 hereof, containing such information
specified in Schedule 4.5 hereof and otherwise being in such form as the
Administrative Agent shall reasonably request.

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

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

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

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

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

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

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

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

 38
 

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

“Revolving Credit
Termination Date” means December 21, 2009, or such earlier date on
which the Revolving Credit Commitments are terminated in whole pursuant to
Section 1.12, 9.2 or 9.3 hereof.

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

“Revolving Note”
is defined in Section 1.10 hereof.

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

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

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

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

“SPS Guarantor” means a Special
Project Subsidiary that owns Borrowing Base Property.

“SPS Guaranty”
means any guaranty agreement in favor of the Administrative Agent with respect
to the Obligations, Hedging Liability, and Funds Transfer and Deposit Account
Liability in form and substance reasonably acceptable to the Administrative
Agent, as the same may be amended, modified or supplemented from time to time,
executed by any of the Special Project Subsidiaries.

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

 39
 

incurred by the Borrower as of the date hereof pursuant
to the Trust Indenture qualifies as Subordinated Debt.

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

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

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

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

“Swing Note” is
defined in Section 1.10 hereof.

“Tangible Net Worth” means the
sum of (a) the Net Worth, less (b) to the extent included in the calculation of
Net Worth, the sum of (i) the value of all assets properly classified as
intangible assets under GAAP and (ii) all amounts representing any write-up in
the book value of any assets occurring since September 30, 2006, plus (c) to
the extent deducted in the calculation of Net Worth, the Impairment Amount.

“Title Insurance Company” means a
national title insurance company or such other title insurance company as is
reasonably acceptable to the Administrative Agent.

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

“Trust Indenture” means that
certain Indenture, dated December 19, 2005, executed by the Borrower, certain
of the Guarantors, and U.S. Bank National Association.

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

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

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

 40

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

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

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

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

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

SECTION
6.           REPRESENTATIONS AND WARRANTIES.

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

 41
 

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

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

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

 42
 

covenant, indenture or agreement of or affecting the
Borrower or any Subsidiary or any of their Property, in each case where such
contravention or default, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, or (c) except as expressly provided
herein, result in the creation or imposition of any Lien on any Property of the
Borrower or any Subsidiary.

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

Section
6.5            Financial Reports.  The consolidated balance sheet of the
Borrower and its Subsidiaries as at September 30, 2006, and as at March 31,
2007, and the related consolidated statements of income, retained earnings and
cash flows of the Borrower and its Subsidiaries for the fiscal year and
quarter, respectively, then ended, and accompanying notes thereto, which
financial statements are accompanied by the audit report of Deloitte &
Touche LLP (as to the September 30, 2006 statements), heretofore furnished to
the Administrative Agent and the Lenders, fairly present in all material
respects the consolidated financial condition of the Borrower and its
Subsidiaries as at said date and the consolidated results of their operations
and cash flows for the periods then ended in conformity with GAAP applied on a
consistent basis.  Neither the Borrower
nor any of its Subsidiaries has contingent liabilities which are material to it
other than as indicated or disclosed on such financial statements, or, with
respect to future periods, on the financial statements furnished pursuant to
Section 8.5 hereof.

Section
6.6            No Material Adverse Change.  Since March 31, 2007, there has been no
change in the condition (financial or otherwise) or business prospects of the
Borrower or any Subsidiary except those occurring in the ordinary course of
business, none of which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect.

Section
6.7            Full Disclosure.  The statements and information furnished in
writing to the Administrative Agent and the Lenders in connection with the
negotiation of this Agreement  and the
other Loan Documents and the commitments by the Lenders to provide all or part
of the financing contemplated hereby do not contain any untrue statements of a
material fact or omit a material fact necessary to make the material statements
contained herein or therein not misleading, the Administrative Agent and the
Lenders acknowledging that as to any projections furnished in writing to the
Administrative Agent and the Lenders, the Borrower only represents that the
same were prepared on the basis of information and estimates the Borrower
believed to be reasonable at the time made. 
Notwithstanding anything contained herein to the contrary, it is hereby
acknowledged and agreed by the Administrative Agent and each Lender that (a)
any financial or business projections furnished to the Administrative Agent or
any Lender by the 

 43
 

Borrower or any of its Subsidiaries are subject to
significant uncertainties and contingencies, which may be beyond the Borrower’s
or its Subsidiaries’ control, (b) no assurance is given by the Borrower or its
Subsidiaries that the results forecast in such projections will be realized,
and (c) the actual results may differ from the forecast results set forth in
such projections and such differences may be material.

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

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

Section
6.10         Good Title.  The Borrower and its Subsidiaries have good
and marketable title (or valid leasehold interests) to their assets as
reflected on the most recent consolidated balance sheet of the Borrower and its
Subsidiaries furnished to the Administrative Agent and the Lenders (except for
sales of assets as permitted under Section 8.10), subject to no Liens other
than such thereof as are permitted by Section 8.8 hereof.  Each Parcel of the Borrowing Base Property,
as of October 1, 2007, will be subject to a valid, first-in-priority Mortgage,
and the Borrower, the Guarantors, and the SPS Guarantors have valid,
indefeasible title to all Borrowing Base Property, subject to no Liens other
than as permitted under Section 8.8 (a), (b), (f), (n) and (o) (it being
understood and agreed that the execution of a Mortgage with respect to such
Property by the subject Guarantor or SPS Guarantor and delivery of such
Mortgage to the Administrative Agent or a Title Insurance Company for recording
shall be sufficient to satisfy the foregoing requirement that a Property be “subject”
to a Mortgage).

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

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

 44
 

assessments, fees and governmental charges, if any, as
are being contested in good faith and by appropriate proceedings which prevent
enforcement of the matter under contest and as to which adequate reserves
established in accordance with GAAP have been provided.  The Borrower does not know of any proposed
additional tax assessment against it or its Subsidiaries for which adequate
provisions in accordance with GAAP have not been made on their accounts.  Adequate provisions in accordance with GAAP
for taxes on the books of the Borrower and each Subsidiary have been made for
all open years, and for its current fiscal period.

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

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

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

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

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

(b)           Without limiting the representations
and warranties set forth in Section 6.17(a) above, except for such matters,
individually or in the aggregate, which could not reasonably be

 45
 

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

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

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

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

 46
 

Section
6.21         No Default.  No Default or Event of Default has occurred
and is continuing, and no default by the Borrower or its Subsidiaries exists
with respect to any other Indebtedness for Borrowed Money, except for defaults
with respect to Indebtedness for Borrowed Money, the principal amount of which
is less than $3,000,000, provided such defaults, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

SECTION
7.           CONDITIONS PRECEDENT.

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

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

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

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

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

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

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

 47
 

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

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

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

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

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

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

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

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

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

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

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

 48
 

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

SECTION
8.           COVENANTS.

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

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

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

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

Section
8.4            Insurance.  The Borrower shall, and shall cause each of
its Subsidiaries to, at their expense, maintain the following insurance with
good and responsible insurance companies reasonably satisfactory to the
Administrative Agent:

(a)           Builders’ Risk.  The Borrower will insure, or cause to be
insured, the improvements upon the Borrowing Base Property and all materials
and supplies delivered to the Borrowing Base Property for use in connection
with construction of improvements and all equipment to be used for that purpose
under insurance policies in builders’ risk form with standard non-contributory
mortgagee clauses providing that any loss is to be adjusted with, and any
recovery payable to, the Administrative Agent as its interest may appear.  Upon termination or invalidity, said builder’s
risk policy shall be replaced with all-perils property insurance reasonably
acceptable to the Administrative Agent. 
All such policies shall be in such amounts, contain such overages and
insure against such risks as shall be reasonably satisfactory to the
Administrative Agent.  All of the
foregoing insurance may provide for reasonable deductibility 

 49
 

from coverage.  The Borrower shall exhibit to the
Administrative Agent from time to time upon request (and, in addition thereto,
without request no less frequently than quarterly) evidence of the above
coverage.

(b)           Other Insurance.  The Borrower shall, and shall cause each of
its Subsidiaries to, maintain such other insurance in such amounts and covering
such risks as is usually carried by companies engaged in the same or a similar
business and similarly situated (including flood risks if any of the
improvements owned by such entities are in an area designated as having special
flood hazards and the area in which the improvements are located is
participating in the National Flood Insurance Program), which insurance may
provide for reasonable deductibility from coverage.

(c)           Policy Provisions.  All insurance maintained by the Borrower and
its Subsidiaries shall be maintained with good and responsible insurance
companies, shall provide that no cancellation thereof shall be effective until
at least thirty (30) days after receipt by the Administrative Agent of written
notice thereof, shall be maintained under policies containing loss payable
clauses to the Administrative Agent as its interest may appear and, if
applicable, naming the Administrative Agent as an additional insured on such
policy, on behalf of the Lenders, and shall be reasonably satisfactory to the
Administrative Agent in all other respects.

(d)           Renewal Policies.  The Borrower will deliver to the
Administrative Agent an original certificate of any policy required under the
provisions of this Section 8.4 (or, if coverage is provided under a master
policy, a photocopy of such policy and an assigned certificate of insurance)
and will cause renewal certificates to be delivered to the Administrative Agent
at least fifteen (15) days prior to the expiration of any such policies.

(e)           Adjustment of Loss.  The Borrower, the Guarantors and the SPS
Guarantors hereby authorize the Administrative Agent, at the Administrative
Agent’s option, to adjust and compromise any losses under any insurance
afforded; provided the Borrower shall have the right, absent the existence of
an Event of Default, to adjust and compromise the losses as aforesaid in the
case of losses not exceeding $1,000,000.

(f)            Additional Policies.  Neither the Borrower nor its Subsidiaries
shall take out or maintain separate insurance concurrent in kind or form or
contributing in the event of loss with any insurance required hereinabove.

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

(a)           as soon as available, and in any
event within 15 days after the last day of each calendar month, a Borrowing
Base Certificate showing the computation of the Borrowing Base and Borrowing
Capacity in reasonable detail as of the close of business on the last day of
the subject month, together with such supporting 

 50
 

documentation as the
Administrative Agent may reasonably request and together with a summary report
of accounts receivable and accounts payable aging (with any supporting
documentation that the Administrative Agent may reasonably request), all
prepared by the Borrower and certified by its chief financial officer or
another officer of the Borrower acceptable to the Administrative Agent, all
being in form acceptable to the Administrative Agent;

(b)           as soon as available, and in any
event within 15 days after the last day of each calendar month, a Liquidity
Certificate showing (i) the computation of the Liquidity in reasonable detail
as of close of business on the last day of the subject month, together with
such supporting documentation as the Administrative Agent may reasonably
request, (ii) a forecast of the Liquidity in reasonable detail for the 13
calendar week period following the last day of the subject month, and (iii) a
comparison of the Liquidity forecast submitted pursuant to clause (ii) above
with the Liquidity forecast given during the previous calendar month, all
prepared by the Borrower and certified by its chief financial officer or
another officer of the Borrower acceptable to the Administrative Agent, all
being in form acceptable to the Administrative Agent;

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

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

(e)           as soon as available, and in any
event within 90 days after the last day of each fiscal year of the Borrower, a
copy of the consolidated balance sheet of the Borrower and its Subsidiaries as
of the last day of the fiscal year then ended and the consolidated statements
of income, retained earnings, and cash flows of the Borrower and its
Subsidiaries for the fiscal year then ended, and accompanying notes thereto,
each in reasonable detail, all in form and scope acceptable to the
Administrative Agent, showing in comparative form the figures for the previous
fiscal year, accompanied by an independent auditor’s report from Deloitte &
Touche LLP, or another firm of 

 51
 

independent public
accountants of recognized standing, selected by the Borrower and reasonably
satisfactory to the Administrative Agent, to the effect that the consolidated
financial statements have been prepared in accordance with GAAP and present
fairly in accordance with GAAP the consolidated financial condition of the
Borrower and its Subsidiaries as of the close of such fiscal year and the
results of their operations and cash flows for the fiscal year then ended and
that an examination of such accounts in connection with such financial
statements has been made in accordance with GAAP and, accordingly, such
examination included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;

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

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

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

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

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

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

 52

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

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

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

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

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

 53
 

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

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

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

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

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

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

(g)           indebtedness of the Borrower or its
Subsidiaries not contemplated by the other clauses of this Section 8.7, in an
amount not to exceed $15,000,000 at any one time outstanding; provided such
indebtedness shall not at any time be secured by any Property of the Borrower
or its Subsidiaries;

(h)           indebtedness in the form of a
guarantee of (including any indemnity or other undertaking with respect to) the
indebtedness or other obligations of any Joint Venture; provided all such guaranties
shall not exceed in the aggregate 35% of the Adjusted Tangible Net Worth; and

(i)            indemnification, adjustment of
purchase price or similar obligations, including title insurance, of the
Borrower or any Subsidiary, in each case incurred in connection with the
acquisition of disposition of any Property of the Borrower or any 

 54
 

Subsidiary (other than
guarantees of indebtedness incurred by any Person acquiring all or any portion
of such assets for the purpose of financing such acquisition); provided, however,
that such indebtedness is not reflected on the balance sheet of the Borrower or
any Subsidiary and provided further that, contingent obligations referred to in
a footnote to financial statements, and not otherwise reflected on the balance
sheet will not be deemed to be reflected on such balance sheet for purposes
hereof.

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

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

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

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

(d)           Liens existing on the Closing Date
with respect to Property of the Borrower or any Subsidiary of the Borrower
created solely for the purpose of securing indebtedness permitted by Section
8.7(b) hereof, representing or incurred to finance the purchase price or
development of such Property, provided that no such Lien shall extend to or
cover any Borrowing Base Property identified in the most recent Borrowing Base
Certificate or any other Property of the Borrower or its Subsidiaries other
than the Property that is the subject of such acquisition or development;

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

 55
 

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

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

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

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

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

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

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

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

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

(o)           Liens created pursuant to the Loan
Documents.

 56
 

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

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

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

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

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

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

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

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

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

(i)            intercompany advances made from time
to time by the Borrower or its Subsidiaries to another Subsidiary or by a
Subsidiary to the Borrower in the ordinary course of business to finance
working capital or other business operation needs; provided that all advances
made by the Borrower or a Wholly-owned Subsidiary to a Special Project
Subsidiary shall be made pursuant to a budget for such Special Project
Subsidiary, which budget shall be subject to the reasonable approval of the 

 57
 

Administrative Agent; and
provided further that all advances made by the Borrower or a Wholly-owned
Subsidiary to a Special Project Subsidiary shall hereafter be evidenced by a
written promissory note in form and upon terms reasonably acceptable to the
Administrative Agent;

(j)            investments in Joint Ventures having
a business or purpose of residential development or construction, or businesses
that are reasonably related thereto or reasonable extensions thereof
(including, without limitation, residential or mixed-use land acquisition and
development, mortgage financing, insurance brokerage, home alarm, pest control,
and title insurance), which investments are non-recourse to the Borrower and
its investing Subsidiaries (except as evidenced by a written guaranty,
indemnity or undertaking as allowed under Section 8.7(h) hereof), which
investments shall not exceed in the aggregate 25% of the Tangible Net Worth;

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

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

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

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

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

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

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

(r)            interests in interest rate hedging
agreements entered into with respect to Indebtedness for Borrowed Money
permitted under Section 8.7 hereof and not for speculative purposes; provided
any such agreements shall not be in a notional amount greater than the subject
Indebtedness for Borrowed Money.

 58
 

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

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

(a)           the sale of Property in the ordinary
course of business to non-Affiliated third parties pursuant to Housing Unit
Contracts or the conveyance of Real Property upon which no Housing Unit is to
be constructed to third parties in connection with residential infrastructure
or amenity development and completion, all subject to the provisions of
Sections 1.8 and 4.8;

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

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

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

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

(f)            the sale, transfer, lease or other
disposition by the Borrower or its Subsidiaries of Property as part of a sale
and leaseback transaction, provided that (i) the aggregate book value of all
Property conveyed during any fiscal year pursuant to such transactions does not
exceed the sum of (A) for transactions concerning any Property (including model
Housing Units), $5,000,000, plus (B) for transactions concerning Property
designated as model Housing Units for display to prospective third-party
purchasers, an additional $25,000,000, (ii) such transactions, if concerning
Property designated as model Housing Units, are consummated with entities
reasonably acceptable to the Administrative Agent, and (iii) the terms of such
transactions, if concerning Property designated as model Housing Units, (A) do
not require the Borrower or its Subsidiaries to repurchase the subject Property
and (B) are otherwise reasonably acceptable to the Administrative Agent;

(g)           the sale or transfer of Real Property
to third parties pursuant to land banking arrangements provided such
arrangements are non-recourse to the Borrower 

 59
 

and its Subsidiaries, and
provided the aggregate book value of assets transferred pursuant to such
arrangements shall not exceed $10,000,000 during any fiscal year of the
Borrower; and

(h)           Dispositions of Property, subject to
the requirements of Sections 1.8(b) and 4.8; provided such Dispositions are
conducted in compliance with Section 8.18.

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

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

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

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

 60
 

(b)           Without limiting the agreements set
forth in Section 8.14(a) above, the Borrower shall, and shall cause each
Subsidiary to, at all times, do the following to the extent the failure to do
so, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect:  (i) comply in
all material respects with, and maintain each of the Premises in compliance in
all material respects with, all applicable Environmental Laws; (ii) obtain and
maintain in full force and effect all material governmental approvals required
by any applicable Environmental Law for operations at each of the Premises;
(iii) cure any material violation by it or at any of the Premises of applicable
Environmental Laws; (iv) not allow the presence or operation at any of the
Premises of any (1) landfill or dump or (2) hazardous waste management facility
or solid waste disposal facility as defined pursuant to RCRA or any comparable
state law; (vi) not manufacture, use, generate, transport, treat, store,
release, dispose or handle any Hazardous Material at any of the Premises except
in the ordinary course of its business in compliance with Environmental Laws
and in de minimis amounts; (vii) within 10 Business
Days notify the Administrative Agent in writing of and provide any reasonably
requested documents upon learning of any of the following in connection with
the Borrower or any Subsidiary or any of the Premises: (1) any material
liability for response or corrective action, natural resource damage or other
harm pursuant to CERCLA, RCRA or any comparable state law; (2) any material
Environmental Claim; (3) any material violation of an Environmental Law or
material Release, threatened Release or disposal of a Hazardous Material; (4)
any restriction on the ownership, occupancy, use or transferability arising
pursuant to any (x) Release, threatened Release or disposal of a Hazardous
Material or (y) Environmental Law; or (5) any environmental, natural resource,
health or safety condition, which could reasonably be expected to have a
Material Adverse Effect; (viii) conduct at its expense any investigation,
study, sampling, testing, abatement, cleanup, removal, remediation or other
response action necessary to remove, remediate, clean up or abate any material
Release, threatened Release or disposal of a Hazardous Material as required by
any applicable Environmental Law, (ix) abide by and observe any restrictions on
the use of the Premises imposed by any governmental authority as set forth in a
deed or other instrument affecting the Borrower’s or any Subsidiary’s interest
therein; (x) promptly provide or otherwise make available to the Administrative
Agent any reasonably requested environmental record concerning the Premises
which the Borrower or any Subsidiary possesses or can reasonably obtain; and
(xi) perform, satisfy, and implement any operation or maintenance actions
required by any governmental authority or Environmental Law, or included in any
no further action letter or covenant not to sue issued by any governmental
authority under any Environmental Law.

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

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

 61
 

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

Section
8.18         Change in the Nature of
Business.  The Borrower
shall not, nor shall it permit any of its Subsidiaries to, engage in any
business or activity if as a result the general nature or conduct of the
business of the Borrower or any Subsidiary would be changed in any material
respect from the general nature or conduct of the business engaged in by it as
of the Closing Date.  Notwithstanding the
foregoing, the Borrower and its Subsidiaries may conduct residential
development and home building activities in areas outside of the current
Building Regions; provided the Borrower gives the Administrative Agent prior
written notice of such activity, in which event the Administrative Agent, in
its reasonable discretion, may designate a new Building Region or include such
new area within an existing Building Region.

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

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

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

(b)           encumbrances or restrictions existing
under this Agreement or as contemplated in the Trust Indenture;

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

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

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

 62
 

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

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

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

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

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

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

Section
8.22         Financial Covenants.  (a)  Tangible Net Worth. 
The Borrower shall, as of the end of each fiscal quarter of the
Borrower, maintain a Tangible Net Worth in an amount not less than the sum of
(i) $302,000,000 and (ii) 50% of the positive Net Income as earned subsequent
to March 31, 2007.

(b)           Leverage Ratio.  The Borrower shall not, at the end of any
fiscal quarter of the Borrower, permit the Leverage Ratio to exceed the ratios
set forth in the below table as corresponding to the fiscal quarters of the
Borrower specified therein:

 63
 

 

	
  Fiscal Quarter Ending

  	
   

  	
  Maximum Leverage

  Ratio

  	
   

  
	
  September 30,
  2007 through and until September 30, 2008

  	
   

  	
  1.75 to 1.00

  	
   

  
	
  December 31, 2008 and
  thereafter

  	
   

  	
  2.50 to 1.00

  	
   

  

 

(c)           Builder  Leverage Ratio.  The
Borrower shall not, at the end of any fiscal quarter of the Borrower, permit
the Builder Leverage Ratio to exceed 1.50 to 1.00.

(d)           Interest Coverage
Ratio.  The Borrower shall
not, at the end of any fiscal quarter of the Borrower ending on or after March
31, 2009, permit the ratio of EBITDA to Interest Incurred, as calculated over
the preceding 4 fiscal quarters of the Borrower, to be less than 2.25 to 1.00.

(e)           Global Land Value to
Adjusted Tangible Net Worth Ratio. 
The Borrower shall not, at the end of any fiscal quarter of the
Borrower, permit the ratio of Global Land Value to Adjusted Tangible Net Worth
to be greater than 1.50 to 1.00.

(f)            Minimum EBITDA.  The Borrower shall, as of the end of each
fiscal quarter of the Borrower, maintain EBITDA, as calculated over the
preceding 4 fiscal quarters of the Borrower, of not less than $25,000,000.

(g)           Minimum Liquidity.  The Borrower shall not, at any time, permit
the Liquidity to be less than $50,000,000.

Section
8.23         Inventory Restrictions.  The Borrower shall not at any time allow (a)
the number of Speculative Housing Units (including Housing Units held for
exhibition to prospective buyers), as owned by the Borrower and its
Subsidiaries in the aggregate, to exceed 30% of the total number of Housing
Units actually sold and transferred by the Borrower and its Subsidiaries
pursuant to Housing Unit Contracts during the preceding 12 calendar months then
ended, or (b) the number of Speculative Housing Units (including Housing Units
held for exhibition to prospective buyers), as owned by the Borrower and its
Subsidiaries in any Building Region other than Nevada, to exceed 35% of the
total number of Housing Units actually sold and transferred by the Borrower and
its Subsidiaries pursuant to Housing Unit Contracts within such Building Region
during the preceding 12 calendar months then ended.  On and after September 1, 2007, the Borrower
shall not at any time allow the number of Speculative Housing Units (including
Housing Units held for exhibition to prospective buyers), as owned by the
Borrower and its Subsidiaries in the Nevada Building Region, to exceed 35% of
the total number of Housing Units actually sold and transferred by the Borrower
and its Subsidiaries pursuant to Housing Unit Contracts within such Building
Region during the preceding 12 calendar months then ended.  In the event the Borrower or any of its
Subsidiaries begins to conduct business in a new Building Region, the
Administrative Agent and the Borrower shall reasonably agree upon the number of
Speculative Housing Units that may be constructed or held at any one time
during the first 12 calendar months in which the Borrower or its Subsidiaries
conduct activities in such Building Region.

 64

SECTION
9.           EVENTS OF DEFAULT AND REMEDIES.

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

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

(b)           any default in the observance or
performance of any covenant set forth in Sections 4.4, 8.6, 8.7, 8.9, 8.10,
8.11, 8.12, 8.16, 8.17, 8.20, 8.21, 8.22, or 8.23 hereof or any covenant
contained herein requiring the Borrower or its Subsidiaries to notify the
Administrative Agent of a particular occurrence;

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

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

(e)           any representation or warranty made
herein or in any other Loan Document or in any certificate furnished to the
Administrative Agent or the Lenders pursuant hereto or thereto or in connection
with any transaction contemplated hereby or thereby proves untrue in any material
respect as of the date of the issuance or making or deemed making thereof;

(f)            any event occurs or condition exists
(other than those described in subsections (a) through (d) above) which is
specified as an event of default under any of the other Loan Documents, or any
of the Loan Documents shall for any reason not be or shall cease to be in full
force and effect or is declared to be null and void, or any 

 65
 

Subsidiary of the
Borrower takes any action for the purpose of terminating, repudiating or
rescinding any Loan Document executed by it or any of its obligations
thereunder;

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

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

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

(j)            any Change of Control shall occur;

(k)           David K. Hill shall no longer hold
one of the following positions: (i) Chairman, or (ii) Chief Executive Officer,
and Borrower shall have failed to appoint or establish a successor to David K.
Hill who is reasonably acceptable to Administrative Agent, within ninety (90)
days after the date David K. Hill no longer holds any one of such positions;

(l)            the Borrower or any Subsidiary of
the Borrower shall (i) have entered involuntarily against it an order for
relief under the United States Bankruptcy Code, as amended, (ii) not pay, or
admit in writing its inability to pay, its debts generally as they become due,
(iii) make an assignment for the benefit of creditors, (iv) apply for, seek,
consent to or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, 

 66
 

liquidator or similar
official for it or any substantial part of its Property, (v) institute any
proceeding seeking to have entered against it an order for relief under the
United States Bankruptcy Code, as amended, to adjudicate it insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file
an answer or other pleading denying the material allegations of any such
proceeding filed against it, (vi) take any action in furtherance of any matter
described in parts (i) through (v) above, or (vii) fail to contest in good
faith any appointment or proceeding described in Section 9.1(m) hereof; or

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

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

Section
9.3            Bankruptcy Defaults.  When any Event of Default described in
subsections (l) or (m) of Section 9.1 hereof has occurred and is continuing,
then all outstanding Notes shall immediately become due and payable together
with all other amounts payable under the Loan Documents without presentment,
demand, protest or notice of any kind; the obligation of the Lenders to extend
further credit pursuant to any of the terms hereof shall immediately terminate;
and the Borrower shall immediately pay to the Administrative Agent the full
amount then available for drawing under all outstanding Letters of Credit, the
Borrower acknowledging and 

 67
 

agreeing that the Lenders would not have an adequate
remedy at law for failure by the Borrower to honor any such demand and that the
Lenders, and the Administrative Agent on their behalf, shall have the right to
require the Borrower to specifically perform such undertaking whether or not
any draws or other demands for payment have been made under any of the Letters
of Credit.  In addition, in its
discretion, or if so directed by the Required Lenders, the Administrative Agent
may proceed to protect and enforce the rights and remedies under the Loan
Documents, whether by suit in equity, action at law, judicial or non-judicial
foreclosure as against the Collateral, seeking the appointment of a receiver,
or other appropriate proceedings.

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

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

Section
9.5            Additional Remedies with
Respect to Collateral. 
The Borrower acknowledges and agrees that the Lenders have attempted to
accommodate the Borrower by not requiring title insurance or environmental
reviews with respect to the Borrowing Base Property.  

 68
 

Upon the occurrence of any Event of Default hereunder,
whether or not the Loans have been accelerated, the Administrative Agent, in
its discretion or at the direction of the Required Lenders, may obtain title
insurance policies and environmental reports with respect to all Borrowing Base
Property, all at the expense of the Borrower.

Section
9.6            Notice of Default.  The Administrative Agent shall give notice to
the Borrower under Section 9.1(a), (c) or (d) hereof, as the case may be, at
any time in its discretion or promptly upon being requested to do so by the
Required Lenders and shall thereupon notify all the Lenders thereof.

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

SECTION
10.         CHANGE IN CIRCUMSTANCES.

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

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

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

(b)           the Required Lenders advise the
Administrative Agent that (i) LIBOR as determined by the Administrative Agent
will not adequately and fairly reflect the 

 69
 

cost to such Lenders of
funding their Eurodollar Loans for such Interest Period or (ii) that the making
or funding of Eurodollar Loans become impracticable,

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

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

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

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

and the result of any of the foregoing is to increase
the cost to such Lender (or its Lending Office) of making or maintaining any
Eurodollar Loan, issuing or maintaining a Letter of Credit, or participating
therein, or to reduce the amount of any sum received or receivable by such
Lender (or its Lending Office) under this Agreement or under any other Loan
Document with respect thereto, by an amount deemed by such Lender to be
material, then, within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall be obligated to pay to such Lender
such additional amount or amounts as will compensate such 

 70
 

Lender for such increased cost or reduction; provided
that the Borrower shall not be required to compensate a Lender pursuant to this
Section for any increased costs or reductions incurred more than 60 days prior
to the date such Lender notifies the Borrower of the change in law giving rise
to such increased costs or reductions and of such Lender’s intention to claim
compensation therefore.

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

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

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

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

 71
 

otherwise be
disadvantageous to such Lender.  The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Lender in connection with any such designation or assignment.

Section
10.4         Lending Offices.  Each Lender may, at its option, elect to make
its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof (each a “Lending Office”)
for each type of Loan available hereunder or at such other of its branches,
offices or affiliates as it may from time to time elect and designate in a
written notice to the Borrower and the Administrative Agent.  To the extent reasonably possible, a Lender
shall designate an alternative branch or funding office with respect to its
Eurodollar Loans to reduce any liability of the Borrower to such Lender under
Section 10.3 hereof or to avoid the unavailability of Eurodollar Loans under
Section 10.2 hereof, so long as such designation is not otherwise
disadvantageous to the Lender.

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

SECTION
11.         THE ADMINISTRATIVE AGENT.

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

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

 72
 

Section
11.3         Action by Administrative
Agent.  If the
Administrative Agent receives from the Borrower a written notice of an Event of
Default pursuant to Section 8.5 hereof, the Administrative Agent shall promptly
give each of the Lenders written notice thereof.  The obligations of the Administrative Agent
under the Loan Documents are only those expressly set forth therein.  Without limiting the generality of the
foregoing, the Administrative Agent shall not be required to take any action
hereunder with respect to any Default or Event of Default, except as expressly
provided in Sections 9.2 and 9.6.  Unless
and until the Required Lenders give such direction, the Administrative Agent may
(but shall not be obligated to) take or refrain from taking such actions as it
deems appropriate and in the best interest of all the Lenders.  In no event, however, shall the
Administrative Agent be required to take any action in violation of applicable
law or of any provision of any Loan Document, and the Administrative Agent
shall in all cases be fully justified in failing or refusing to act hereunder
or under any other Loan Document unless it first receives any further
assurances of its indemnification from the Lenders that it may require,
including prepayment of any related expenses and any other protection it
requires against any and all costs, expense, and liability which may be
incurred by it by reason of taking or continuing to take any such action.  The Administrative Agent shall be entitled to
assume that no Default or Event of Default exists unless notified in writing to
the contrary by a Lender or the Borrower. 
In all cases in which the Loan Documents do not require the
Administrative Agent to take specific action, the Administrative Agent shall be
fully justified in using its discretion in failing to take or in taking any
action thereunder.  Any instructions of
the Required Lenders, or of any other group of Lenders called for under the
specific provisions of the Loan Documents, shall be binding upon all the
Lenders and the holders of the Obligations.

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

Section
11.5         Liability of Administrative
Agent; Credit Decision. 
Neither the Administrative Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or not taken by it in
connection with the Loan Documents:  (i)
with the consent or at the request of the Required Lenders or (ii) in the
absence of its own gross negligence or willful misconduct.  Neither the Administrative Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into or verify: 
(i) any statement, warranty or representation made in connection with this
Agreement, any other Loan Document or any Credit Event; (ii) the performance or
observance of any of the covenants or agreements of the Borrower or any
Subsidiary contained herein or in any other Loan Document; (iii) the
satisfaction of any condition specified in Section 7 hereof, except receipt of
items required to be delivered to the Administrative Agent; or (iv) the
validity, effectiveness, genuineness, enforceability, perfection, value, worth
or collectibility hereof or of any other Loan Document or of any other
documents or writing furnished in connection with any Loan Document; and the
Administrative Agent makes no representation of any kind or character with
respect to any such matter mentioned in this sentence.  The Administrative Agent may execute any of
its duties under any of the Loan Documents by or through employees, agents, and
attorneys in fact and shall not be answerable to the Lenders, the Borrower, or
any other Person for the default or misconduct of any such agents or
attorneys-in-fact selected with reasonable care.  The Administrative Agent shall not incur any
liability by acting in reliance upon any 

 73
 

notice, consent, certificate, other document or
statement (whether written or oral) believed by it to be genuine or to be sent
by the proper party or parties.  In
particular and without limiting any of the foregoing, the Administrative Agent
shall have no responsibility for confirming the accuracy of any compliance
certificate or other document or instrument received by it under the Loan Documents.  The Administrative Agent may treat the payee
of any Note as the holder thereof until written notice of transfer shall have
been filed with the Administrative Agent signed by such payee in form
satisfactory to the Administrative Agent. 
Each Lender acknowledges that it has independently and without reliance
on the Administrative Agent or any other Lender, and based upon such
information, investigations and inquiries as it deems appropriate, made its own
credit analysis and decision to extend credit to the Borrower in the manner set
forth in the Loan Documents.  It shall be
the responsibility of each Lender to keep itself informed as to the
creditworthiness of the Borrower and its Subsidiaries, and the Administrative
Agent shall have no liability to any Lender with respect thereto.

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

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

 74
 

predecessor.  If
the Administrative Agent resigns and no successor is appointed, the rights and
obligations of such Administrative Agent shall be automatically assumed by the
Required Lenders and the Borrower shall be directed to make all payments due
each Lender hereunder directly to such.

Section
11.8         L/C Issuer.  The L/C Issuer shall act on behalf of the
Lenders with respect to any Letters of Credit issued by it and the documents
associated therewith.  The L/C Issuer
shall have all of the benefits and immunities (i) provided to the
Administrative Agent in this Section 11 with respect to any acts taken or
omissions suffered by the L/C Issuer in connection with Letters of Credit
issued by it or proposed to be issued by it and the Applications pertaining to
such Letters of Credit as fully as if the term “Administrative Agent”, as used
in this Section 11, included the L/C Issuer with respect to such acts or
omissions and (ii) as additionally provided in this Agreement with respect to
such L/C Issuer.

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

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

Section
11.11       Rights with Respect to
Collateral.  The
Administrative Agent shall have the sole right to exercise any and all remedies
with respect to the Collateral as agent for itself and all other Lenders
hereunder, and no other Lender shall have any rights with respect to the
Collateral except as expressly provided hereunder.

SECTION
12.         THE GUARANTEES.

Section
12.1         The Guarantees.  To induce the Lenders to provide the credits
described herein and in consideration of benefits expected to accrue to the
Borrower by reason of the Revolving Credit Commitments and for other good and
valuable consideration, receipt of which is hereby acknowledged, each
Subsidiary party hereto (including any Subsidiary formed or 

 75
 

acquired after the Closing Date executing an
Additional Guarantor Supplement in the form attached hereto as Exhibit G or
such other form acceptable to the Administrative Agent) hereby unconditionally
and irrevocably guarantees jointly and severally to the Administrative Agent,
the Lenders, and their Affiliates, the due and punctual payment of all present
and future Obligations, Hedging Liability, and Funds Transfer and Deposit
Account Liability, including, but not limited to, the due and punctual payment
of principal of and interest on the Notes, the Reimbursement Obligations, and
the due and punctual payment of all other Obligations now or hereafter owed by
the Borrower under the Loan Documents and the due and punctual payment of all
Hedging Liability and Funds Transfer and Deposit Account Liability, in each
case as and when the same shall become due and payable, whether at stated
maturity, by acceleration, or otherwise, according to the terms hereof and
thereof (including interest which, but for the filing of a petition in
bankruptcy, would otherwise accrue on any such indebtedness, obligation, or
liability).  In case of failure by the
Borrower or other obligor punctually to pay any Obligations, Hedging Liability,
or Funds Transfer and Deposit Account Liability guaranteed hereby, each
Guarantor hereby unconditionally agrees to make such payment or to cause such
payment to be made punctually as and when the same shall become due and
payable, whether at stated maturity, by acceleration, or otherwise, and as if
such payment were made by the Borrower or such obligor, it being agreed that
this is a guaranty of payment as opposed to a guaranty of collection.  This Section 12 is intended to amend and
restate the provisions of Section 12 set forth in the Prior Credit Agreement
without effecting any novation or release thereunder.

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

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

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

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

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

 76

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

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

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

(h)           any other act or omission to act or
delay of any kind by the Administrative Agent, any Lender, or any other Person
or any other circumstance whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the obligations of any
Guarantor under this Section 12.

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

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

 77
 

shall forthwith be paid to the Administrative Agent
for the benefit of the Lenders (and their Affiliates) or be credited and
applied upon the Obligations, Hedging Liability, and Funds Transfer and Deposit
Account Liability, whether matured or unmatured, in accordance with the terms
of this Agreement.

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

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

Section
12.7         Stay of Acceleration.  If acceleration of the time for payment of
any amount payable by the Borrower or other obligor under this Agreement or any
other Loan Document, or under any agreement relating to Hedging Liability or
Funds Transfer and Deposit Account Liability, is stayed upon the insolvency,
bankruptcy or reorganization of the Borrower or such obligor, all such amounts
otherwise subject to acceleration under the terms of this Agreement or the
other Loan Documents, or under any agreement relating to Hedging Liability or Funds
Transfer and Deposit Account Liability, shall nonetheless be payable by the
Guarantors hereunder forthwith on demand by the Administrative Agent made at
the request of the Required Lenders.

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

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

SECTION
13.         MISCELLANEOUS.

Section
13.1         Withholding Taxes.  (a)  Payments Free of Withholding.  Except as otherwise required by law and
subject to Section 13.1(b) hereof, each payment by the Borrower and the
Guarantors under this Agreement or the other Loan Documents shall be made
without withholding for or on account of any present or future taxes (other
than overall net income taxes on the recipient) imposed by or within the
jurisdiction in which the Borrower or such Guarantor is domiciled, any
jurisdiction from which the Borrower or such Guarantor makes any payment, or
(in each case) any political subdivision or taxing authority thereof or
therein, excluding, in the case of the Administrative Agent and each Lender,
(i) taxes imposed on or measured by its net income, and franchise taxes imposed
on it (in lieu of net income taxes), by the jurisdiction (or any political
subdivision thereof) under the Legal Requirements of which the Administrative 

 78
 

Agent or such Lender, as the case may be, is organized
or maintains a lending office and (ii) in the case of a foreign Lender, any
withholding tax that is imposed on amounts payable to such Lender at the time
such foreign Lender becomes a party to this Agreement (or designates a new
Lending Office) or is attributable to such foreign Lender’s failure to comply
with Section 13.1(b).  If any such
withholding is so required, the Borrower or such Guarantor shall make the
withholding, pay the amount withheld to the appropriate governmental authority
before penalties attach thereto or interest accrues thereon, and forthwith pay
such additional amount as may be necessary to ensure that the net amount
actually received by each Lender and the Administrative Agent free and clear of
such taxes (including such taxes on such additional amount) is equal to the
amount which that Lender or the Administrative Agent (as the case may be) would
have received had such withholding not been made.  If the Administrative Agent or any Lender
pays any amount in respect of any such taxes, penalties or interest, the
Borrower or such Guarantor shall reimburse the Administrative Agent or such
Lender for that payment on demand in the currency in which such payment was
made.  If the Borrower or such Guarantor
pays any such taxes, penalties or interest, it shall deliver official tax
receipts evidencing that payment or certified copies thereof to the Lender or
Administrative Agent on whose account such withholding was made (with a copy to
the Administrative Agent if not the recipient of the original) on or before the
thirtieth day after payment. 
Notwithstanding anything to the contrary herein, the Borrower and the
Guarantors shall have no liability or responsibility for payment of any penalties,
interest or fines accruing on any taxes pursuant to this Section 13 which arise
or result from the Administrative Agent’s or any Lender’s failure to comply
with any Legal Requirement.

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

 79
 

States person (as such
term is defined in Section 7701(a)(30) of the Code) shall submit to the
Borrower and the Administrative Agent a certificate to the effect that it is
such a United States person.

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

(d)           Refunds.  If the Administrative Agent or any
Lender determines, in its sole discretion, that it has received a refund of any
taxes as to which it has been indemnified by the Borrower under this Agreement
or with respect to which the Borrower has paid additional amounts pursuant to
this Section, it shall pay to the Borrower an amount equal to such refund (but
only to the extent of indemnity payments made under this Agreement or
additional amounts paid by the Borrower under this Section with respect to the
taxes giving rise to such refund), net of all out-of-pocket expenses of the
Administrative Agent or such Lender, as the case may be, and without interest (other
than any interest paid by the relevant governmental authority with respect to
such refund, provided that the Borrower, upon the request of the Administrative
Agent or such Lender, agrees to repay the amount paid over to the Borrower to
the Administrative Agent or such Lender in the event the Administrative Agent
or such Lender is required to repay such refund to such governmental authority.

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

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

 80
 

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

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

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

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

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

Section
13.8         Notices.  Except as otherwise specified herein, all
notices hereunder and under the other Loan Documents shall be in writing
(including, without limitation, notice by telecopy) and shall be given to the
relevant party at its address or telecopier number set forth below, or such
other address or telecopier number as such party may hereafter specify by
notice to the Administrative Agent and the Borrower given by courier, by United
States certified or 

 81
 

registered mail, by telecopy or by other
telecommunication device capable of creating a written record of such notice
and its receipt.  Notices under the Loan
Documents to the Lenders and the Administrative Agent shall be addressed to
their respective addresses or telecopier numbers set forth on the signature
pages hereof, and to the Borrower or any Guarantor to:

	
  Kimball Hill, Inc.

  
	
  5999 New Wilke
  Road, Suite 504

  
	
  Rolling Meadows,
  Illinois 60008

  
	
  Attention:

  	
   

  	
  Treasurer

  
	
  Telephone:

  	
   

  	
  (847) 364-7300

  
	
  Telecopy:

  	
   

  	
  (847) 290-1565

  
	
   

  	
   

  	
   

  
	
  and a copy to:

  
	
   

  
	
  Kimball Hill, Inc.

  
	
  5999 New Wilke
  Road, Suite 504

  
	
  Rolling Meadows,
  Illinois 60008

  
	
  Attention:

  	
   

  	
  General Counsel

  
	
  Telephone:

  	
   

  	
  (847) 364-7300

  
	
  Telecopy:

  	
   

  	
  (847) 981-2980

  

 

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

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

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

Section
13.11       Participants.  Each Lender shall have the right at its own
cost to grant participations (to be evidenced by one or more agreements or
certificates of participation) in the Loans made and Reimbursement Obligations
and/or Revolving Credit Commitments held by such Lender at any time and from
time to time to one or more other Persons; provided that
no such participation shall relieve any Lender of any of its obligations under
this Agreement, and, provided, further
that no such participant shall have any rights under this Agreement except as
provided in this Section, and the Administrative Agent shall have no obligation
or responsibility 

 82
 

to such participant. 
Any agreement pursuant to which such participation  is granted shall provide that the granting
Lender shall retain the sole right and responsibility to enforce the
obligations of the Borrower under this Agreement and the other Loan Documents
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of the Loan Documents, except that such agreement
may provide that such Lender will not agree to any modification, amendment or
waiver of the Loan Documents that would reduce the amount of or postpone any
fixed date for payment of any Obligation in which such participant has an
interest.  Any party to which such a
participation has been granted shall have the benefits of Section 1.11 and
Section 10.3 hereof.  The Borrower
authorizes each Lender to disclose to any participant or prospective
participant under this Section any financial or other information pertaining to
the Borrower or any Subsidiary, provided such participant expressly agrees to
be bound by the provisions of Section 13.25 hereof.

Section
13.12       Assignments.  (a) 
Each Lender shall have the right at any time, with the prior consent of
the Administrative Agent (and the L/C Issuers, if other than the Administrative
Agent) (except in the case of assignments to an existing Lender or an Affiliate
thereof, in which case no consent by the Administrative Agent shall be needed)
and, so long as no Event of Default then exists, the Borrower (which consent of
the Borrower shall not be unreasonably withheld) to sell, assign, transfer or
negotiate all or any part of its rights and obligations under the Loan
Documents (including, without limitation, the indebtedness evidenced by the
Notes then held by such assigning Lender, together with an equivalent
percentage of its obligation to make Loans and participate in Letters of
Credit) to one or more commercial banks or other financial institutions or
investors, provided that, unless otherwise agreed
to by the Administrative Agent, such assignment shall be of a fixed percentage
(and not by its terms of varying percentage) of the assigning Lender’s rights
and obligations under the Loan Documents; provided, however,
that in order to make any such assignment (i) unless the assigning Lender is
assigning all of its Revolving Credit Commitments, outstanding Loans and
interests in L/C Obligations, the assigning Lender shall retain at least
$5,000,000 in unused Revolving Credit Commitments, outstanding Loans and
interests in Letters of Credit, (ii) the assignee Lender shall have Revolving
Credit Commitments, outstanding Loans and interests in Letters of Credit of at
least $5,000,000, (iii) each such assignment shall be evidenced by a written
agreement (substantially in the form attached hereto as Exhibit H or in such
other form acceptable to the Administrative Agent) executed by such assigning
Lender, such assignee Lender or Lenders, the Administrative Agent (and the L/C
Issuers, if other than the Administrative Agent) and, if required as provided
above, the Borrower, which agreement shall specify in each instance the portion
of the Obligations which are to be assigned to the assignee Lender and the
portion of the Revolving Credit Commitments of the assigning Lender to be
assumed by the assignee Lender, and (iv) the assigning Lender shall pay to the
Administrative Agent a processing fee of $3,500 and any out-of-pocket attorneys’
fees and expenses incurred by the Administrative Agent in connection with any
such assignment agreement.  Any such
assignee shall become a Lender for all purposes hereunder to the extent of the
rights and obligations under the Loan Documents it assumes and the assigning
Lender shall be released from its obligations, and will have released its
rights, under the Loan Documents to the extent of such assignment.  The address for notices to such assignee
Lender shall be as specified in the assignment agreement executed by it.  Promptly upon the effectiveness of any such
assignment agreement, the Borrower shall execute and deliver replacement Notes
to the assignee Lender and the assigning Lender in the respective amounts of
their Revolving Credit Commitments (or assigned principal amounts, as
applicable) 

 83
 

after giving effect to the reduction occasioned by
such assignment (all such Notes to constitute “Notes”
for all purposes of the Loan Documents), and the assignee Lender shall
thereafter surrender to the Borrower its old Notes.  The Borrower authorizes each Lender to
disclose to any purchaser or prospective purchaser of an interest in the Loans
and interest in Letters of Credit owed to it or its Revolving Credit
Commitments under this Section any financial or other information pertaining to
the Borrower or any Subsidiary.

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

Section
13.13       Amendments.  Any provision of this Agreement or the other
Loan Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by (a) the Borrower, (b) the Required
Lenders, and (c) if the rights or duties of the Administrative Agent or the L/C
Issuer are affected thereby, the Administrative Agent or such L/C Issuer, as
applicable; provided that:

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

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

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

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

Section
13.15       Costs and Expenses;
Indemnification. 
(a)  The Borrower agrees to pay
all costs and expenses of the Administrative Agent in connection with the
preparation, negotiation, syndication, and administration of the Loan
Documents, including, without limitation, the 

 84
 

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

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

Section
13.16       Set-off.  In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence of any Event of Default, each Lender and each subsequent
holder of any Obligation is hereby authorized by the Borrower and each
Guarantor at any time or from time to time, without notice to the Borrower or
such Guarantor or to any other Person, any such notice being hereby expressly
waived, to set-off and 

 85
 

to appropriate and to apply any and all deposits
(general or special, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including trust
accounts, and in whatever currency denominated) and any other indebtedness at
any time held or owing by that Lender or that subsequent holder to or for the
credit or the account of the Borrower or such Guarantor, whether or not
matured, against and on account of the Obligations of the Borrower or such
Guarantor to that Lender or that subsequent holder under the Loan Documents,
including, but not limited to, all claims of any nature or description arising
out of or connected with the Loan Documents, irrespective of whether or not (a)
that Lender or that subsequent holder shall have made any demand hereunder or
(b) the principal of or the interest on the Loans or Notes and other amounts
due hereunder shall have become due and payable pursuant to Section 9 and
although said obligations and liabilities, or any of them, may be contingent or
unmatured.

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

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

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

Section
13.20       Excess Interest.  Notwithstanding any provision to the contrary
contained herein or in any other Loan Document, no such provision shall require
the payment or permit the collection of any amount of interest in excess of the
maximum amount of interest permitted by applicable law to be charged for the
use or detention, or the forbearance in the collection, of all or any portion
of the Loans or other obligations outstanding under this Agreement or any other
Loan Document (“Excess Interest”).  If any Excess Interest is provided for, or is
adjudicated to be provided for, herein or in any other Loan Document, then in
such event (a) the provisions of this Section shall govern and control, (b)
neither the Borrower nor any guarantor or endorser shall be obligated to pay
any Excess Interest, (c) any Excess Interest that the Administrative Agent or
any Lender may have received hereunder shall, at the option of the
Administrative Agent, be (i) applied as a credit against the then outstanding
principal amount of Obligations hereunder and accrued and unpaid interest
thereon (not to exceed the maximum amount permitted by applicable law), (ii)
refunded to the Borrower, or (iii) any combination of the foregoing, (d) the
interest rate payable hereunder or under any other Loan Document shall be
automatically subject to reduction to the maximum lawful contract rate allowed
under applicable 

 86
 

usury laws (the “Maximum Rate”),
and this Agreement and the other Loan Documents shall be deemed to have been,
and shall be, reformed and modified to reflect such reduction in the relevant
interest rate, and (e) neither the Borrower nor any guarantor or endorser shall
have any action against the Administrative Agent or any Lender for any damages
whatsoever arising out of the payment or collection of any Excess
Interest.  Notwithstanding the foregoing,
if for any period of time interest on any of Borrower’s Obligations is
calculated at the Maximum Rate rather than the applicable rate under this
Agreement, and thereafter such applicable rate becomes less than the Maximum
Rate, the rate of interest payable on the Borrower’s Obligations shall remain
at the Maximum Rate until the Lenders have received the amount of interest
which such Lenders would have received during such period on the Borrower’s
Obligations had the rate of interest not been limited to the Maximum Rate
during such period.

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

Section
13.22       Lender’s Obligations Several.  The obligations of the Lenders hereunder are
several and not joint.  Nothing contained
in this Agreement and no action taken by the Lenders pursuant hereto shall be
deemed to constitute the Lenders a partnership, association, joint venture or
other entity.

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

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

Section
13.25       Confidentiality.  Each of the Administrative Agent, the
Lenders, the L/C Issuer and any participant under Section 13.11 hereof agrees
to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed (a) to its and its Affiliates’ directors,
officers, employees and agents, including accountants, legal counsel and other
advisors to the extent any such Person has a need to know such Information (it
being understood that the Persons to whom such disclosure is made will first be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b)

 87
 

to the extent requested by any regulatory authority,
such as the National Association of Insurance Commissioners), (c) to the extent
required by applicable laws or regulations or by any subpoena or similar legal
process, (d) to any other party hereto, (e) in connection with the exercise of
any remedies hereunder or under any other Loan Document or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to (A)
any assignee of or participant in, or any prospective assignee of or
participant in, any of its rights or obligations under this Agreement or (B)
any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to the Borrower or any of its Subsidiaries and
its obligations, (g) with the prior written consent of the Borrower, (h) to the
extent such Information (A) becomes publicly available other than as a result
of a breach of this Section or (B) becomes available to the Administrative
Agent, any Lender or the L/C Issuer on a non-confidential basis from a source
other than the Borrower or any of its Subsidiaries or any of their directors,
officers, employees or agents, including accountants, legal counsel and other
advisors, (i) to rating agencies if requested or required by such agencies in
connection with a rating relating to the Loans or Revolving Credit Commitments
hereunder, of (j) to entities which compile and publish information about the
syndicated loan market, provided that
only basic information about the pricing and structure of the transaction
evidenced hereby may be disclosed pursuant to this subsection (j), or (k) to
holders of any Subordinated Debt.

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

[SIGNATURE PAGES TO
FOLLOW]

 88

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

	
  

  	
  “Borrower”

  
	
   

  	
   

  
	
   

  	
  KIMBALL HILL, INC., an
  Illinois corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/David K. Hill

  
	
   

  	
  Name:

  	
  David K. Hill

  
	
   

  	
  Title:

  	
  Chairman, Chief Executive Officer and Director

  

 

 

	
  

  	
  “Guarantors”

  
	
   

  	
   

  
	
   

  	
  Cactus Hills, LLC

  
	
   

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

  
	
   

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

  
	
   

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

  
	
   

  	
  Kimball Hill Far East
  Detroit, LLC

  
	
   

  	
  KH Financial Holding
  Company

  
	
   

  	
  KHH Texas Trading
  Company L.P.

  
	
   

  	
  Kimball Hill Homes
  Austin, L.P.

  
	
   

  	
  Kimball Hill Homes
  California, Inc.

  
	
   

  	
  Kimball Hill Homes
  Dallas, L.P.

  
	
   

  	
  Kimball Hill Homes
  Florida, Inc.

  
	
   

  	
  Kimball Hill Homes
  Houston, L.P.

  
	
   

  	
  Kimball Hill Homes
  Illinois, LLC

  
	
   

  	
  Kimball Hill Homes
  Nevada, Inc.

  
	
   

  	
  Kimball Hill Homes
  Ohio, Inc.

  
	
   

  	
  Kimball Hill Homes
  Oregon, Inc.

  
	
   

  	
  Kimball Hill Homes
  Realty Florida, Inc.

  
	
   

  	
  Kimball Hill Homes
  San Antonio, L.P.

  
	
   

  	
  Kimball Hill Homes
  Texas, Inc.

  
	
   

  	
  Kimball Hill Homes
  Washington, Inc.

  
	
   

  	
  Kimball Hill Homes
  Wisconsin, Inc.

  
	
   

  	
  National Credit and
  Guaranty Corporation

  
	
   

  	
  River Oaks Realty,
  L.P.

  
	
   

  	
  18th and Peoria, LLC

  
	
   

  	
  Kimball Hill Suburban
  Centers, L.L.C.

  
	
   

  	
  Kimball Hill Urban
  Centers, L.L.C.

  
	
   

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

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David K. Hill

  
	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
  Chairman and CEO

  

 

 

	
  

  	
  East Lake Park, Inc.

  
	
   

  	
  Kimball Hill
  Stateway, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David K. Hill

  
	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
  Kimball Hill Bellevue
  Ranch, LLC

  
	
   

  	
  Kimball Hill
  Reflections, LLC

  
	
   

  	
  Kimball Hill Sheldon
  Lakes, LLC

  
	
   

  	
  Kimball Hill
  Villages, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes California, Inc., its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

 

	
  

  	
  Bridle Ridge Limited
  Partnership

  
	
   

  	
  Parkview Limited
  Partnership

  
	
   

  	
  River Pointe Limited
  Partnership

  
	
   

  	
  Sonata at Morada
  Ranch Limited Partnership

  
	
   

  	
  Windmill Park Limited
  Partnership

  
	
   

  	
  Kimball Hill Chadwick
  Farms Limited Partnership

  
	
   

  	
  Kimball West Frisco
  Limited Partnership

  
	
   

  	
  Kimball Hill Calusa
  Palms Limited Partnership

  
	
   

  	
  Kimball Hill Marbella
  Estates Limited Partnership

  
	
   

  	
  Indian Trails Limited
  Partnership

  
	
   

  	
  Astor Place Limited
  Partnership

  
	
   

  	
  Bolingbrook Limited
  Partnership

  
	
   

  	
  Edgewater Limited
  Partnership

  
	
   

  	
  Huntington Chase
  Limited Partnership

  
	
   

  	
  Legend Lakes Limited
  Partnership

  
	
   

  	
  Waterford Limited
  Partnership

  
	
   

  	
  Whispering Meadow
  Limited Partnership

  
	
   

  	
  White Oak Limited
  Partnership

  
	
   

  	
  Kimball Hill
  Centennial Heights Limited Partnership

  
	
   

  	
  Kimball Hill
  Heathers/Caparola Limited Partnership

  
	
   

  	
  Kimball Mountain
  First Limited Partnership

  
	
   

  	
  Kimball Cove Limited
  Partnership

  
	
   

  	
  Gables at Hiddenbrook
  Limited Partnership

  
	
   

  	
  Park Shore, L.L.C.

  
	
   

  	
  KIMBALL HILL URBAN
  CENTERS SPECIAL PURPOSES, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David K. Hill

  
	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
  Chairman and CEO

  

 

 

	
  

  	
  Kimball Hill TX
  Properties, LLC

  
	
   

  	
   

  
	
   

  	
  By:

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  THE HAMILTON PLACE PARTNERSHIP

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Illinois, LLC, its general
  partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  KH Ingham Park South,
  LLC

  
	
   

  	
  KH SRAV II, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Illinois, LLC, its manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  River Oaks Homes, LLP

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Kimball Hill Homes Texas, Inc., its manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David K. Hill

  
	
   

  	
   

  	
   

  	
  David K. Hill

  
	
   

  	
   

  	
   

  	
  Chairman and CEO

  

 

 

	
  

  	
  “Lenders”

  
	
   

  	
   

  
	
   

  	
  HARRIS N.A., in its individual
  capacity as a Lender, as L/C Issuer, and as Administrative Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott W. Morris

  
	
   

  	
  Name:

  	
  Scott W. Morris

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  111 W. Monroe Street, 10th Floor West

  
	
   

  	
  Chicago, IL 60603

  
	
   

  	
  Attention:

  	
  Scott Morris

  
	
   

  	
  Telecopy:

  	
  (312) 461-2968

  
	
   

  	
  Telephone:

  	
  (312) 461-6791

  
				

 

 

	
  

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia A. Provenzano

  
	
   

  	
  Name:

  	
  Patricia A. Provenzano

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  One Lincoln Centre, Suite 300

  
	
   

  	
  18W140 Butterfield Rd.

  
	
   

  	
  Oakbrook Terrace, IL 60181

  
	
   

  	
  Attention:

  	
  Patricia A. Provenzano

  
	
   

  	
  Telecopy:

  	
  (630) 627-1948

  
	
   

  	
  Telephone:

  	
  (630) 620-3954

  
				

 

 

	
  

  	
  KEYBANK NATIONAL ASSOCIATION,
  as Co-Documentation Agent and a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kevin DeLozier

  
	
   

  	
  Name:

  	
  Kevin DeLozier

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  8117 Preston Road

  
	
   

  	
  Preston Commons West Tower #440

  
	
   

  	
  Dallas, TX 75225

  
	
   

  	
  Attention:

  	
  Kevin Delozier

  
	
   

  	
  Telecopy:

  	
  (214) 414-2621

  
	
   

  	
  Telephone:

  	
  (214) 414-2585

  
				

 

 

	
  

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kurt Kuyawa

  
	
   

  	
  Name:

  	
  Kurt Kuyawa

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  One Grant Square - ILG402

  
	
   

  	
  Hinsdale, IL 60521

  
	
   

  	
  Attention:

  	
  Kurt Kuyawa

  
	
   

  	
  Telecopy:

  	
  (630) 850-8340

  
	
   

  	
  Telephone:

  	
  (630) 794-8721

  
				

 

 

	
  

  	
  FIRST BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Brennan

  
	
   

  	
  Name:

  	
  James Brennan

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  2100 S. Elmhurst

  
	
   

  	
  Mount Prospect, Illinois 60056

  
	
   

  	
  Attention:

  	
  Jim Brennan

  
	
   

  	
  Telecopy:

  	
  (847) 437-1530

  
	
   

  	
  Telephone:

  	
  (847) 472-7923

  
				

 

	
  

  	
  LaSALLE BANK NATIONAL ASSOCIATION,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Russ Ruhnke

  
	
   

  	
  Name:

  	
  Russ Ruhnke

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  135 South LaSalle

  
	
   

  	
  Suite 1225

  
	
   

  	
  Chicago, Illinois 60603

  
	
   

  	
  Attention:

  	
  Brad Amundsen

  
	
   

  	
  Telecopy:

  	
  (312) 904-6392

  
	
   

  	
  Telephone:

  	
  (312) 904-1473

  
				

 

 

	
  

  	
  FIFTH THIRD BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas O’Connell

  
	
   

  	
  Name:

  	
  Thomas O’Connell

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  1701 Golf Road

  
	
   

  	
  Tower 1, GRLM7E

  
	
   

  	
  Rolling Meadows, IL 60008

  
	
   

  	
  Attention:

  	
  Thomas O’Connell

  
	
   

  	
  Telecopy:

  	
  (847) 354-7150

  
	
   

  	
  Telephone:

  	
  (847) 354-7096

  
				

 

 

	
  

  	
  ASSOCIATED BANK NATIONAL ASSOCIATION,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert J. Burda

  
	
   

  	
  Name:

  	
  Robert J. Burda

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  500 Lake Cook Road, Suite 210

  
	
   

  	
  Deerfield, IL 60015

  
	
   

  	
  Attention:

  	
  Rob Burda

  
	
   

  	
  Telecopy:

  	
  (847) 236-0996

  
	
   

  	
  Telephone:

  	
  (847) 236-4462

  
				

 

 

	
  

  	
  NATIONAL CITY BANK, as a
  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Todd R. Olsen

  
	
   

  	
  Name:

  	
  Todd R. Olsen

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  1 North Franklin, Suite 2150

  
	
   

  	
  Chicago, IL 60606

  
	
   

  	
  Attention:

  	
  Todd R. Olsen

  
	
   

  	
  Telecopy:

  	
  (312) 384-4623

  
	
   

  	
  Telephone:

  	
  (312) 338-5209CICI

  
				

 

 

	
  

  	
  CITIBANK TEXAS, N.A., as a
  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Cory Lebouf

  
	
   

  	
  Name:

  	
  J. Cory Lebouf

  
	
   

  	
  Title:

  	
  Relationship Manager

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  2000 West Sam Houston Parkway So. #600

  
	
   

  	
  Houston, TX 77042

  
	
   

  	
  Attention:

  	
  J. Cory Lebouf

  
	
   

  	
  Telecopy:

  	
  (713) 954-2053

  
	
   

  	
  Telephone:

  	
  (713) 260-3073

  
				

 

 

	
  

  	
  FRANKLIN BANK, SSB, as a
  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sherry K. Day

  
	
   

  	
  Name:

  	
  Sherry K. Day

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  9800 Richmond Ave, #680

  
	
   

  	
  Houston, TX 77042

  
	
   

  	
  Attention:

  	
  Sherry K. Day

  
	
   

  	
  Telecopy:

  	
  (713) 339-8949

  
	
   

  	
  Telephone:

  	
  (713) 339-8943

  
				

 

 

	
  

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jennifer S. Kelley

  
	
   

  	
  Name:

  	
  Jennifer S. Kelley

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  131 S. Dearborn St., 5th Floor

  
	
   

  	
  Mail code IL1-0458

  
	
   

  	
  Chicago, IL 60603

  
	
   

  	
  Attention:

  	
  Jennifer S. Kelley

  
	
   

  	
  Telecopy:

  	
  (312) 325-5173

  
	
   

  	
  Telephone:

  	
  (312) 325-5014

  
				

 

 

	
  

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Pamela McGlynn

  
	
   

  	
   

  	
  Pamela McGlynn,

  
	
   

  	
   

  	
  Vice President & Documentation Supervisor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Stacy Michrowski

  
	
   

  	
   

  	
  Stacy Michrowski,

  
	
   

  	
   

  	
  Senior Vice President, Syndications

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  4041 MacArthur Blvd., Suite 100

  
	
   

  	
  Newport Beach, CA 92660

  
	
   

  	
  Attention:

  	
  Dana O. White

  
	
   

  	
  Telecopy:

  	
  (949) 833-3275

  
	
   

  	
  Telephone:

  	
  (949) 622-6024

  
				

 

 

	
  

  	
  COMERICA BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Charles Weddell

  
	
   

  	
  Name:

  	
  Charles Weddell

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  500 Woodward Ave., MC 3256

  
	
   

  	
  Detroit, MI 48226

  
	
   

  	
  Attention:

  	
  Charles Weddell

  
	
   

  	
  Telecopy:

  	
  (313) 222-9295

  
	
   

  	
  Telephone:

  	
  (313) 222-3323

  
				

 

 

	
  

  	
  COMPASS BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Johanna Duke Paley

  
	
   

  	
  Name:

  	
  Johanna Duke Paley

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  15 South 20th Street, 15th Floor

  
	
   

  	
  Birmingham, AL 35233

  
	
   

  	
  Attention:

  	
  Johanna Duke Paley

  
	
   

  	
  Telecopy:

  	
  (205) 297-7212

  
	
   

  	
  Telephone:

  	
  (205) 297-3851

  
				

 

 

	
  

  	
  BMO CAPITAL MARKETS FINANCING, INC.,
  as Co-Lead Arranger and Joint Book Runner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Sumit Sengupta

  
	
   

  	
  Name:

  	
  Sumit Sengupta

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  Scott Morris

  
	
   

  	
  Telecopy:

  	
  (312) 461-2968

  
	
   

  	
  Telephone:

  	
  (312) 461-6791

  
				

 

 

 

	
  Exhibit A

  	
   

  	
  Form of Notice of
  Payment Request

  	
   

  
	
  Exhibit
  B

  	
   

  	
  Form of Notice of
  Borrowing

  	
   

  
	
  Exhibit
  C

  	
   

  	
  Form of Notice of
  Continuation/Conversion

  	
   

  
	
  Exhibit
  D-1

  	
   

  	
  Form of Revolving Note

  	
   

  
	
  Exhibit
  D-2

  	
   

  	
  Form of Swing Note

  	
   

  
	
  Exhibit
  E

  	
   

  	
  Form of Borrowing Base
  Certificate

  	
   

  
	
  Exhibit
  F

  	
   

  	
  Form of Compliance
  Certificate

  	
   

  
	
  Exhibit
  G

  	
   

  	
  Form of Additional
  Guarantor Supplement

  	
   

  
	
  Exhibit
  H

  	
   

  	
  Form of Assignment and
  Acceptance

  	
   

  
	
  Exhibit
  I

  	
   

  	
  Form of Commitment and
  Acceptance

  	
   

  
	
  Exhibit
  J

  	
   

  	
  Form of Liquidity Certificate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule
  1

  	
   

  	
  Revolving Credit
  Commitments

  	
   

  
	
  Schedule
  1.2

  	
   

  	
  Pre-existing Letters of
  Credit

  	
   

  
	
  Schedule
  4.5

  	
   

  	
  Parameters for
  Projected Base Price for Housing Units

  	
   

  
	
  Schedule 6.2

  	
   

  	
  Subsidiaries

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00128-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00128-of-00352.parquet"}]]