Document:

<PAGE>
                                                                   Exhibit 10.12
                           RESTRICTED STOCK AGREEMENT

      This RESTRICTED STOCK AGREEMENT (this "Agreement") is dated as of the 12th
day of May, 2004 between W-H ENERGY SERVICES, INC., a Texas corporation (the
"Company"), and KENNETH T. WHITE, JR. (the "Executive").

      WHEREAS, the Executive currently is employed by the Company as the
Company's President and Chief Executive Officer and serves as Chairman of the
Company's Board of Directors pursuant to an Employment Agreement entered into by
and between the Company and Executive on October 16, 2003 (the "Employment
Agreement"); and

      WHEREAS, in order to induce the Executive to remain with the Company and
devote his best efforts to the business of the Company, the Company has
determined to make a grant of restricted stock to the Executive; and

      WHEREAS, the shareholders of the Company approved the issuance of such
restricted stock to the Executive at the annual meeting of the Company's
shareholders held on May 12, 2004;

      NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein the Company and the Executive hereby agree as
follows:

      1. Issuance of Stock. By the execution of this Agreement, the Company
hereby grants to the Executive 75,000 shares of its common stock, par value
$0.0001 per share (the "Stock"). The shares of Stock issued to the Executive
under this Agreement shall be subject to all of the terms, conditions and
restrictions set forth in this Agreement.

      2. Forfeiture Restrictions. The shares of Stock issued to the Executive
pursuant to this Agreement (i) shall not be sold, assigned, pledged or otherwise
transferred to the extent then subject to the Forfeiture Restrictions (as
defined below) and (ii) the Executive shall be obligated, in the event of the
termination of the Executive's employment with the Company, to forfeit and
surrender to the Company for no consideration any shares of Stock as to which
the Forfeiture Restrictions then apply in accordance with Section 3 hereof. Such
prohibition against sale, assignment, pledge or transfer and the obligation to
forfeit and surrender shares of Stock to the Company are herein referred to as
the "Forfeiture Restrictions," and the shares of Stock which are subject to the
Forfeiture Restrictions are herein sometimes referred to as "Restricted Shares."

      3. Lapse of Forfeiture Restrictions.

      (a) The Forfeiture Restrictions shall lapse as to shares of Stock issued
to the Executive pursuant to this Agreement in accordance with the following
schedule provided that the Executive has been continuously employed by the
Company:
<PAGE>
<TABLE>
<CAPTION>
                                        Number of Shares As To Which
                                          Forfeiture Restrictions
                    Lapse Date                     Lapse
                   ------------                    ------
<S>                                     <C>
                   May 12, 2005                    25,000
                   May 12, 2006                    25,000
                   May 12, 2007                    25,000
</TABLE>

      (b) The Forfeiture Restrictions on all Restricted Shares shall lapse
immediately (i) upon a Change in Control (as defined in the Employment
Agreement) and (ii) upon the termination of the Executive's employment with the
Company; provided, however, that if the Executive's employment is terminated by
the Company for any reason encompassed by paragraph 2.2(iii) of the Employment
Agreement or by the Executive pursuant to paragraph 2.3(iii) of the Employment
Agreement, then such Forfeiture Restrictions shall not lapse, and the Executive
shall forfeit and shall be obligated to and shall surrender to the Company for
no consideration any shares of Stock as to which the Forfeiture Restrictions
then apply.

      4. Shares Received in Reorganization or Stock Split. The prohibition
against the transfer of the shares of Stock subject to the Forfeiture
Restrictions shall not apply to the exchange of Restricted Shares pursuant to a
plan of reorganization of the Company, but the stock or securities received in
exchange therefor, and any stock received as a result of a stock split or stock
dividend with respect to Restricted Shares, shall also become Restricted Shares
subject to the Forfeiture Restrictions.

      5. Endorsement on Certificate. Each certificate representing Restricted
Shares shall be conspicuously endorsed as follows:

            The sale, assignment, pledge or other transfer of the shares of
      stock evidenced by this certificate is prohibited by the terms and
      conditions of that certain Restricted Stock Agreement dated as of May 12,
      2004, a copy of which is attached hereto and incorporated herein, and such
      shares may not be sold, assigned, pledged or otherwise transferred except
      as provided in such agreement.

      6. Community Interest of Spouse. The community interest, if any, of any
spouse of the Executive in any of the Restricted Shares shall be subject to all
the terms, conditions and restrictions of this Agreement, and shall be forfeited
and surrendered to the Company upon the occurrence of any of the events
requiring the Executive's interest in such Restricted Shares to be so forfeited
and surrendered pursuant to this Agreement.

      7. Withholding of Tax. To the extent the issuance of Stock or the lapse of
Forfeiture Restrictions results in the receipt of compensation by the Executive
for tax purposes, the Company shall withhold from any cash compensation then or
thereafter payable to the Executive any tax required to be withheld by reason
thereof. To the extent the Company determines that such cash compensation is or
may be insufficient to fully satisfy such withholding requirement, the Executive
shall deliver to the Company cash in an amount determined by the Company to be
sufficient to satisfy any such withholding requirement.

                                       -2-
<PAGE>
      8. Tax Election. If the Executive makes the election authorized by section
83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), the
Executive shall submit to the Company a copy of the statement filed by the
Executive to make such election.

      9. Stock Power and Retention of Certificates. The Company may require the
Executive to execute and deliver to the Company a stock power in blank with
respect to the Restricted Shares and may, in its sole discretion, determine to
retain possession of the certificates for shares of Stock with respect to which
the Forfeiture Restrictions have not lapsed. The Company shall have the right,
in its sole discretion, to exercise such stock power in the event that the
Company becomes entitled to shares of Stock pursuant to the provisions of
Section 3(b) as a result of a termination of the Executive's employment with the
Company pursuant to the proviso in clause (ii) of Section 3(b). Notwithstanding
retention of such certificates by the Company, the Executive shall have all
rights (including dividend and voting rights) with respect to the shares of
Stock represented by such certificates.

      10. Government Regulation. The Executive understands that at the time of
the execution of this Agreement, the issuance of the shares of Stock to be
issued in accordance with this Agreement has not been registered under the
Securities Act of 1933 (the "Act") or any state securities law and are being
issued pursuant to an exemption from such registration requirements. The
Executive acknowledges and agrees that the shares of Stock that he receives in
accordance with this Agreement are being acquired by the Executive for
investment purposes only and not with a view to distributing same in violation
of the Act or any state securities laws. Such shares of Stock may not be sold or
transferred in the absence of an effective registration statement under the Act
(and any applicable state securities laws) or an applicable exemption from the
registration requirements of the Act (and any applicable state securities laws),
so long as such exemption is available to the Executive in the opinion of
counsel.

      In addition, the Executive agrees (i) that the certificates representing
the shares of Stock received pursuant to this Agreement may bear such legend or
legends as the Board of Directors of the Company deems appropriate in order to
assure compliance with applicable securities laws (ii) that the Company may
instruct its transfer agent to enter stop transfer instructions with respect to
the shares of Stock received pursuant to this Agreement and (iii) that the
Company may refuse to transfer the Stock on the stock transfer records of the
Company unless such proposed transfer would not in the opinion of counsel
violate any applicable securities law.

      As a condition to the obligations of the Company under this Agreement, and
to induce the Company to enter into this Agreement, the Executive hereby
represents that, as of the date of this Agreement, (i) the Executive has such
knowledge and experience in financial and business matters that the Executive is
capable of evaluating the merits and economic risks of this particular
investment in the Stock; (ii) the Executive is able to bear the economic risk of
this particular investment in Stock; (iii) the Executive has access to such
information concerning the business and affairs of the Company as he believes is
necessary to evaluate an investment in the Stock; and (iv) the Executive further
realizes that the Company is under no obligation to register such shares of
Stock for resale by the Executive or to aid the Executive in obtaining any
exemption from the registration requirements under the Act.

                                       -3-
<PAGE>
      11. Parachute Payment. In the event that receipt of the Restricted Shares
upon the lapse of any Forfeiture Restrictions would constitute a parachute
payment (within the meaning of Section 280G of the Code) at a time when the
Employment Agreement (or any successor agreement) is in effect, then the amount
of such parachute payment shall be treated as a payment to the Executive for
purposes of determining the amount of any gross-up payment to be made to the
Executive under the terms of such Employment Agreement (or successor agreement)
with respect to the excise tax imposed by Section 4999 of the Code.

      12. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
the Executive.

      13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without giving effect to any
conflict of laws rule or principle that would refer the construction of this
Agreement to the laws of another jurisdiction.

      IN WITNESS WHEREOF, the Company has executed this Agreement by its duly
authorized officer, and the Executive and his spouse have executed this
Agreement, all as of the day and year first above written.

                                          W-H ENERGY SERVICES, INC.

                                          By:   /s/ Jeffrey L. Tepera
                                              --------------------------------
                                              Jeffrey L. Tepera
                                              Vice President and Chief Financial
                                              Officer

                                          KENNETH T. WHITE, JR.

                                                /s/ Kenneth T. White, Jr.
                                          ------------------------------------

                                          MARLAINE WHITE

                                                /s/ Marlaine White
                                          ------------------------------------

                                       -4-exv10w16

 

EXHIBIT 10.16

Execution Copy

CREDIT AGREEMENT

DATED AS OF JUNE 16, 2004

AMONG

THE RYLAND GROUP, INC.,

THE LENDERS,

BANK ONE, NA

AS AGENT,

BANK OF AMERICA, N.A.

AND

WACHOVIA BANK, NATIONAL ASSOCIATION,

AS SYNDICATION AGENTS,

AND

GUARANTY BANK,

THE ROYAL BANK OF SCOTLAND PLC,

SUNTRUST BANK

AND

WASHINGTON MUTUAL BANK, FA,

AS DOCUMENTATION AGENTS

AND

AMSOUTH BANK

AND

PNC BANK, NATIONAL ASSOCIATION,

AS MANAGING AGENTS

BANC ONE CAPITAL MARKETS, INC.,

LEAD ARRANGER AND SOLE BOOK RUNNER

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	ARTICLE I DEFINITIONS	 	 	1	 
	ARTICLE II THE CREDITS	 	 	19	 
	2.1
	 	Commitment	 	 	19	 
	2.2
	 	Required Payments; Termination	 	 	20	 
	2.3
	 	Ratable Loans	 	 	20	 
	2.4
	 	Types of Advances	 	 	20	 
	2.5
	 	Commitment Fee; Reductions and Increases in Aggregate Commitment	 	 	20	 
	2.6
	 	Minimum Amount of Each Advance	 	 	22	 
	2.7
	 	Optional Principal Payments	 	 	22	 
	2.8
	 	Method of Selecting Types and Interest Periods for New Advances	 	 	23	 
	2.9
	 	Conversion and Continuation of Outstanding Advances	 	 	23	 
	2.10
	 	Changes in Interest Rate, etc	 	 	24	 
	2.11
	 	Rates Applicable After Default	 	 	24	 
	2.12
	 	Method of Payment	 	 	24	 
	2.13
	 	Noteless Agreement; Evidence of Indebtedness	 	 	25	 
	2.14
	 	Telephonic Notices	 	 	26	 
	2.15
	 	Interest Payment Dates; Interest and Fee Basis	 	 	26	 
	2.16
	 	Notification of Advances, Interest Rates, Prepayments	 	 	 	 
	 
	 	and Commitment Reductions	 	 	26	 
	2.17
	 	Lending Installations	 	 	26	 
	2.18
	 	Non-Receipt of Funds by the Agent	 	 	27	 
	2.19
	 	Facility LCs	 	 	27	 
	2.20
	 	Extension of Facility Termination Date	 	 	32	 
	2.21
	 	Replacement of Lender	 	 	34	 
	2.22
	 	Swing Line	 	 	34	 
	ARTICLE III YIELD PROTECTION;
TAXES	 	 	35	 
	3.1
	 	Yield Protection	 	 	35	 
	3.2
	 	Changes in Capital Adequacy Regulations	 	 	36	 
	3.3
	 	Availability of Types of Advances	 	 	37	 
	3.4
	 	Funding Indemnification	 	 	37	 
	3.5
	 	Taxes	 	 	37	 
	3.6
	 	Lender Statements; Survival of Indemnity	 	 	39	 
	ARTICLE IV CONDITIONS PRECEDENT	 	 	39	 
	4.1
	 	Initial Credit Extension	 	 	39	 
	4.2
	 	Each Credit Extension	 	 	40	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES	 	 	41	 
	5.1
	 	Incorporation, Qualification, Powers and Capital Stock	 	 	41	 

i 

 

	 	 	 	 	 	 	 
	5.2
	 	Execution, Delivery and Performance of Loan Documents.	 	 	41	 
	5.3
	 	Compliance with Laws and Other Requirements	 	 	42	 
	5.4
	 	Subsidiaries	 	 	42	 
	5.5
	 	Financial Statements of the Borrower and its Consolidated Subsidiaries	 	 	43	 
	5.6
	 	No Material Adverse Change	 	 	43	 
	5.7
	 	Tax Liability	 	 	44	 
	5.8
	 	Litigation	 	 	44	 
	5.9
	 	ERISA	 	 	44	 
	5.10
	 	Regulations U and X	 	 	45	 
	5.11
	 	No Default or Unmatured Default	 	 	45	 
	5.12
	 	Ownership of Property; Liens	 	 	45	 
	5.13
	 	Environmental Matters	 	 	45	 
	5.14
	 	Investment Company Act	 	 	46	 
	5.15
	 	Public Utility Holding Company Act	 	 	46	 
	5.16
	 	Reportable Transaction	 	 	46	 
	5.17
	 	Subordinated Indebtedness	 	 	46	 
	ARTICLE VI COVENANTS	 	 	46	 
	6.1
	 	Financial Statements	 	 	47	 
	6.2
	 	Certificates; Other Information	 	 	47	 
	6.3
	 	Payment of Obligations	 	 	49	 
	6.4
	 	Conduct of Business and Maintenance of Existence	 	 	49	 
	6.5
	 	Maintenance of Property; Insurance	 	 	49	 
	6.6
	 	Inspection of Property: Books and Records: Discussions	 	 	50	 
	6.7
	 	Notices	 	 	50	 
	6.8
	 	Environmental Laws	 	 	51	 
	6.9
	 	Guaranties from Future Subsidiaries; Release of Guarantors	 	 	51	 
	6.10
	 	Use of Proceeds	 	 	52	 
	6.11
	 	Taxes	 	 	52	 
	6.12
	 	Limitation on Liens	 	 	52	 
	6.13
	 	Limitation on Guarantee Obligations	 	 	53	 
	6.14
	 	Limitations on Fundamental Changes	 	 	54	 
	6.15
	 	Limitations on Sales of Assets	 	 	54	 
	6.16
	 	Limitation on Dividends	 	 	55	 
	6.17
	 	Limitation on Investments	 	 	55	 
	6.18
	 	Limitation on Optional Payments and Modification of Debt Instruments	 	 	56	 
	6.19
	 	Transactions with Affiliates	 	 	57	 
	6.20
	 	Fiscal Year	 	 	57	 
	6.21
	 	Compliance with ERISA	 	 	57	 
	6.22
	 	Preferred Stock	 	 	57	 
	6.23
	 	No Other Negative Pledges	 	 	58	 
	6.24
	 	Consolidated Tangible Net Worth	 	 	58	 
	6.25
	 	Leverage Ratio	 	 	58	 
	6.26
	 	Minimum Fixed Charge Coverage	 	 	58	 
	6.27
	 	Senior Permitted Debt Not to Exceed Borrowing Base	 	 	58	 
	6.28
	 	Limitation on Housing Inventory	 	 	58	 

ii 

 

	 	 	 	 	 	 	 
	6.29
	 	Limitations on Land Inventory	 	 	58	 
	ARTICLE VII DEFAULTS	 	 	59	 
	ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES	 	 	61	 
	8.1
	 	Acceleration; Facility LC Collateral Account	 	 	61	 
	8.2
	 	Amendments	 	 	62	 
	8.3
	 	Preservation of Rights	 	 	63	 
	ARTICLE IX GENERAL PROVISIONS	 	 	63	 
	9.1
	 	Survival of Representations	 	 	63	 
	9.2
	 	Governmental Regulation	 	 	63	 
	9.3
	 	Headings	 	 	63	 
	9.4
	 	Entire Agreement	 	 	63	 
	9.5
	 	Several Obligations; Benefits of this Agreement	 	 	64	 
	9.6
	 	Expenses; Indemnification	 	 	64	 
	9.7
	 	Numbers of Documents	 	 	65	 
	9.8
	 	Accounting	 	 	65	 
	9.9
	 	Severability of Provisions	 	 	65	 
	9.10
	 	Nonliability of Lenders	 	 	65	 
	9.11
	 	Confidentiality	 	 	66	 
	9.12
	 	Nonreliance	 	 	66	 
	9.13
	 	Disclosure	 	 	66	 
	9.14
	 	USA PATRIOT ACT NOTIFICATION	 	 	66	 
	ARTICLE X THE AGENT	 	 	67	 
	10.1
	 	Appointment; Nature of Relationship	 	 	67	 
	10.2
	 	Powers	 	 	67	 
	10.3
	 	General Immunity	 	 	67	 
	10.4
	 	No Responsibility for Loans, Recitals, etc	 	 	67	 
	10.5
	 	Action on Instructions of Lenders	 	 	68	 
	10.6
	 	Employment of Agents and Counsel	 	 	68	 
	10.7
	 	Reliance on Documents; Counsel	 	 	68	 
	10.8
	 	Agent’s Reimbursement and Indemnification	 	 	68	 
	10.9
	 	Notice of Default	 	 	69	 
	10.10
	 	Rights as a Lender	 	 	69	 
	10.11
	 	Lender Credit Decision	 	 	69	 
	10.12
	 	Successor Agent	 	 	70	 
	10.13
	 	Agent and Arranger Fees	 	 	70	 
	10.14
	 	Delegation to Affiliates	 	 	70	 
	10.15
	 	Co-Agent, Documentation Agent, Managing Agent, Syndication Agent, etc	 	 	70	 
	ARTICLE XI SETOFF; RATABLE PAYMENTS	 	 	71	 

iii 

 

	 	 	 	 	 	 	 
	11.1
	 	Setoff	 	 	71	 
	11.2
	 	Ratable Payments	 	 	71	 
	ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS	 	 	71	 
	12.1
	 	Successors and Assigns	 	 	71	 
	12.2
	 	Participations	 	 	72	 
	12.3
	 	Assignments	 	 	73	 
	12.4
	 	Dissemination of Information	 	 	74	 
	12.5
	 	Tax Treatment	 	 	74	 
	ARTICLE XIII NOTICES	 	 	74	 
	13.1
	 	Notices; Effectiveness; Electronic Communication	 	 	74	 
	ARTICLE XIV COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION	 	 	76	 
	14.1
	 	Counterparts; Effectiveness	 	 	76	 
	14.2
	 	Electronic Execution of Assignments	 	 	76	 
	ARTICLE XV CHOICE OF LAW; CONSENT
TO JURISDICTION; WAIVER OF JURY TRIAL	 	 	76	 
	15.1
	 	CHOICE OF LAW	 	 	76	 
	15.2
	 	CONSENT TO JURISDICTION	 	 	76	 
	15.3
	 	WAIVER OF JURY TRIAL	 	 	77	 

PRICING SCHEDULE

EXHIBIT A  — BORROWING BASE CERTIFICATE

EXHIBIT B  — GUARANTY

EXHIBIT C —  COMMITMENT AND ACCEPTANCE

EXHIBIT D —  NOTE

EXHIBIT E —  ASSIGNMENT AND ASSUMPTION AGREEMENT

EXHIBIT F —  SWING LINE NOTE

EXHIBIT G-1 — OPINIONS OF TIMOTHY J. GECKLE, GENERAL COUNSEL

EXHIBIT G-2 — OPINION OF PIPER RUDNICK LLP

EXHIBIT H —  LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION

EXHIBIT I  —  COMPLIANCE CERTIFICATE

SCHEDULE 1 — LENDERS AND COMMITMENTS

SCHEDULE 2 — EXISTING LCs

SCHEDULE 3 — GUARANTORS

SCHEDULE 5.4 — SUBSIDIARIES

iv 

 

CREDIT AGREEMENT

     This Agreement, dated as of June 16, 2004, is among The Ryland Group,
Inc., a Maryland corporation, the Lenders and Bank One, NA, a national banking
association having its principal office in Chicago, Illinois, as Agent. The
parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     As used in this Agreement:

     “Acquisition” means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or limited liability
company, or division thereof, whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding ownership interests of a partnership or
limited liability company.

     “Additional Lender” is defined in Section 2.5.3(i).

     “Advance” means a borrowing hereunder consisting of Loans (i) made by the
Lenders on the same Borrowing Date, or (ii) converted or continued by the
Lenders on the same date of conversion or continuation, consisting, in either
case, of the aggregate amount of the several Loans of the same Type and, in the
case of Eurodollar Loans, for the same Interest Period.

     “Affected Lender” is defined in Section 2.21(a).

     “Affiliate” of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 25% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.

     “Agent” means Bank One in its capacity as contractual representative of
the Lenders pursuant to Article X, and not in its individual capacity as a
Lender, and any successor Agent appointed pursuant to Article X.

     “Aggregate Commitment” means the aggregate of the Commitments of all the
Lenders, as reduced or increased from time to time pursuant to the terms
hereof. As of the date of this Agreement, the Aggregate Commitment is
$500,000,000.

 

 

     “Aggregate Outstanding Credit Exposure” means, at any time, the sum of (i)
the aggregate of the Outstanding Credit Exposure of all the Lenders and (ii)
the outstanding principal balance of the Swing Line Loans.

     “Agreement” means this credit agreement, as it may be amended or modified
and in effect from time to time.

     “Alternate Base Rate” means, for any day, a rate of interest per annum
equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the
Federal Funds Effective Rate for such day plus 1/2% per annum.

     “Applicable Fee Rate” means, at any time, the percentage rate per annum at
which the Commitment Fee is accruing on the unused portion of the Aggregate
Commitment at such time as set forth in the Pricing Schedule.

     “Applicable Margin” means, with respect to Eurodollar Advances at any
time, the percentage rate per annum which is applicable at such time with
respect to Eurodollar Advances as set forth in the Pricing Schedule.

     “Approved Fund” means any Fund that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.

     “Arranger” means Banc One Capital Markets, Inc., a Delaware corporation,
and its successors, in its capacity as Lead Arranger and Sole Book Runner.

     “Article” means an article of this Agreement unless another document is
specifically referenced.

     “Authorized Person” means any Responsible Official of the Borrower or any
Person designated, by written notice from any such Responsible Official to the
Agent from time to time, as an “Authorized Person.”

     “Available Aggregate Commitment” means, at any time, the Aggregate
Commitment then in effect minus the Aggregate Outstanding Credit Exposure at
such time.

     “Bank One” means Bank One, NA, a national banking association having its
principal office in Chicago, Illinois, in its individual capacity, and its
successors.

     “Borrower” means The Ryland Group, Inc., a Maryland corporation, and its
successors and assigns.

     “Borrowing Base” means, except as set forth below, an amount equal to the
sum of the following Unencumbered Real Estate Inventory owned by the Borrower
or any Guarantor and Home Proceeds Receivable owned by the Borrower or any
Guarantor:

     (a) 90% of the amount of Home Proceeds Receivable; plus

2

 

     (b) 90% of the book value of Sold Construction in Progress and
Sold Completed Units; plus

     (c) 80% of the book value of Unsold Construction in Progress and
Unsold Completed Units; plus

     (d) 70% of the book value of Finished Lots; plus

     (e) 50% of the book value of the Land Under Development; plus

     (f) 25% of the book value of the Raw Land – Entitled;

     provided, however, that the amount set forth in clause (f) shall not exceed 10%
of the Borrowing Base; and provided further that the sum of the amounts set
forth in clauses (d), (e) and (f) shall not exceed 40% of the Borrowing Base.

     “Borrowing Base Certificate” means a written calculation of the Borrowing
Base, substantially in the form of Exhibit A attached hereto and made a part
hereof, signed by a Responsible Official of the Borrower and properly completed
to provide all information required to be included thereon.

     “Borrowing Date” means a date on which an Advance or Swing Line Loan is
made hereunder.

     “Business” is defined in Section 5.13(b).

     “Borrowing Notice” is defined in Section 2.8.

     “Business Day” means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York City for the conduct of
substantially all of their commercial lending activities, interbank wire
transfers can be made on the Fedwire system and dealings in United States
dollars are carried on in the London interbank market and (ii) for all other
purposes, a day (other than a Saturday or Sunday) on which banks generally are
open in Chicago for the conduct of substantially all of their commercial
lending activities and interbank wire transfers can be made on the Fedwire
system.

     “Capitalized Lease” of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with GAAP.

     “Capitalized Lease Obligations” of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.

     “Cash Equivalents” means: (a) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than 90 days from the
date of acquisition; (b) time deposits and

3

 

certificates of deposit of any of the Lenders, or of any domestic or
foreign commercial banks which has capital and surplus in excess of
$500,000,000 or which has a commercial paper rating meeting the requirements
specified in clause (d) below, having maturities of not more than 90 days from
the date of acquisition; (c) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clauses (a)
and (b) above entered into with any bank meeting the qualifications specified
in clause (b) above; and (d) commercial paper of any Person rated at least A-2
or the equivalent thereof by S&P or P-2 or the equivalent thereof by Moody’s
and in either case maturing within 90 days after the date of acquisition.

     “Change in Control” means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 30% or more of the outstanding shares of voting stock of the
Borrower.

     “Closing Date” means the date on which the conditions set forth in Section
4.1 are satisfied.

     “Code” means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.

     “Collateral Shortfall Amount” is defined in Section 8.1.

     “Commitment” means, for each Lender, the obligation of such Lender to make
Loans to, and participate in Facility LCs issued upon the application of, the
Borrower in an aggregate amount not exceeding the amount set forth opposite its
name in Schedule 1 hereto, as it may be modified as a result of any assignment
that has become effective pursuant to Section 12.3.3 or as otherwise modified
from time to time pursuant to the terms hereof.

     “Commitment and Acceptance” is defined in Section 2.5.3(i).

     “Commitment Fee” is defined in Section 2.5.1.

     “Commonly Controlled Entity” means an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.

     “Completed Unit” means a Unit as to which either (or both) of the
following has occurred: (a) a notice of completion has been filed or recorded
in the appropriate real estate records, or (b) all necessary construction has
been completed in order to obtain a certificate of occupancy (whether or not
such certificate of occupancy has actually been obtained).

     “Consolidated Indebtedness” means at any time the Indebtedness of the
Borrower and the Guarantors (specifically excluding the Indebtedness of any
Subsidiaries, joint ventures and partnerships that are not Guarantors).

     “Consolidated Intangible Assets” means, with respect to any Person at any
date, all amounts, determined in accordance with GAAP, included in the
Consolidated Net Worth of such

4

 

Person and attributable to intangibles including (a) goodwill, including
any amounts (however designated on the balance sheet) representing the cost of
acquisitions of Subsidiaries in excess of underlying tangible assets or (b)
patents, trademarks and copyrights.

     “Consolidated Net Income” means, for any period, the consolidated net
income (or loss) of the Borrower and the Guarantors (specifically excluding any
Subsidiaries, joint ventures and partnerships that are not Guarantors) for such
period (taken as a cumulative whole).

     “Consolidated Net Worth” means, with respect to a Person, all amounts
which would, in accordance with GAAP, be included under shareholders’ equity on
a consolidated balance sheet for such Person and its consolidated Subsidiaries.

     “Consolidated Tangible Net Worth” means (a) Consolidated Net Worth of the
Borrower and the Guarantors (specifically excluding any Subsidiaries, joint
ventures and partnerships that are not Guarantors) less (b) all Consolidated
Intangible Assets included in such Consolidated Net Worth.

     “Construction in Progress” means Finished Lots (a) for which a final
subdivision map has been recorded and (b) upon which construction has
commenced, as evidenced by the commencement of excavation for foundations, but
has not been completed.

     “Contingent Obligation” of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person,
or agrees to maintain the net worth or working capital or other financial
condition of any other Person, or otherwise assures any creditor of such other
Person against loss, including, without limitation, any comfort letter,
operating agreement, take-or-pay contract or the obligations of any such Person
as general partner of a partnership with respect to the liabilities of the
partnership.

     “Contractual Obligation” means, with respect to any Person, any provision
of any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.

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

     “Conversion/Continuation Notice” is defined in Section 2.9.

     “Countrywide” means Countrywide Home Loans, Inc.

     “Countrywide Loan Purchase Agreement” means the Loan Purchase Agreement by
and between Ryland Mortgage Company and Countrywide dated as of June 26, 1995,
as supplemented, modified, amended, restated or extended from time to time.

5

 

     “Credit Advance” means any advance, loan or extension of credit to any
Person or the purchase of any bonds, notes, debentures or other debt securities
of any Person.

     “Credit Extension” means the making of an Advance or Swing Line Loan or
the issuance of a Facility LC hereunder, but not the conversion or continuation
of an Advance.

     “Credit Extension Date” means the Borrowing Date for an Advance or the
issuance date for a Facility LC.

     “Default” means an event described in Article VII.

     “EBITDA” means, for any period, (i) the sum of the following amounts: (a)
Consolidated Net Income for such period; (b) cash distributions received by
Borrower from the Financial Services Segment not otherwise included in the
determination of such Consolidated Net Income; (c) income and franchise taxes
deducted from revenues in determining such Consolidated Net Income; (d)
depreciation and amortization deducted from revenues in determining such
Consolidated Net Income; (e) interest expense deducted from revenues in
determining such Consolidated Net Income (including, without duplication,
previously capitalized interest expense which would be included in “Cost of
Goods Sold” and deducted from revenues in determining such Consolidated Net
Income on a combined income statement of the Borrower and the Guarantors); (f)
other non-cash charges and expenses (including net realizable value write-down
charges) deducted from revenues in determining such Consolidated Net Income;
and (g) any losses arising outside of the ordinary course of business which
have been included in the determination of such Consolidated Net Income; less
(ii) the sum of (x) any non-cash credits included in revenues in determining
such Consolidated Net Income and (y) any gains arising outside of the ordinary
course of business included in the determination of such Consolidated Net
Income.

     “Entitled Land” means (a) land where all requisite zoning requirements and
land use requirements have been satisfied, and all requisite approvals have
been obtained (on a final and unconditional basis) from all applicable
governmental authorities (other than approvals which are simply ministerial and
non-discretionary in nature), in order to develop the land as a residential
housing project and construct Units thereon; and (b) as to land located in
California, land which satisfies the requirements of clause (a) immediately
above, and which is subject to a currently effective vesting, tentative map
(unless a county or city where the land is located does not grant vesting
tentative maps) which has received all necessary approvals (on a final and
unconditional basis) by all applicable Governmental Authorities.

     “Environmental Laws” means any and all foreign, federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of
Law (including common law) as now or may at any time hereafter be in effect
regulating, relating to or imposing liability or standards to conduct
concerning (i) pollution or protection of the environment, (ii) the effect of
the environment on human health, (iii) emissions, discharges or releases of
pollutants, contaminants, hazardous substances or wastes into surface water,
ground water or land, or (iv) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, hazardous substances or wastes or the clean-up or other
remediation thereof.

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     “Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation,
fines, penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Materials of Environmental Concern, (c) exposure to any
Materials of Environmental Concern, (d) the release or threatened release of
any Materials of Environmental Concern into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.

     “Eurodollar Advance” means an Advance which, except as otherwise provided
in Section 2.11, bears interest at the applicable Eurodollar Rate.

     “Eurodollar Base Rate” means, with respect to a Eurodollar Advance for the
relevant Interest Period, the applicable British Bankers’ Association LIBOR
rate for deposits in U.S. dollars as reported by any generally recognized
financial information service as of 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, and having a maturity equal to
such Interest Period, provided that, if no such British Bankers’ Association
LIBOR rate is available to the Agent, the applicable Eurodollar Base Rate for
the relevant Interest Period shall instead be the rate determined by the Agent
to be the rate at which Bank One or one of its Affiliate banks offers to place
deposits in U.S. dollars with first-class banks in the interbank market at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period, in the approximate amount of Bank One’s relevant
Eurodollar Loan and having a maturity equal to such Interest Period.

     “Eurodollar Loan” means a Loan which, except as otherwise provided in
Section 2.11, bears interest at the applicable Eurodollar Rate.

     “Eurodollar Rate” means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar
Base Rate applicable to such Interest Period, divided by (b) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Interest
Period, plus (ii) the Applicable Margin.

     “Excluded Taxes” means, in the case of each Lender or applicable Lending
Installation and the Agent, taxes (including income taxes and franchise taxes)
as are measured by or imposed on its net income.

     “Exhibit” refers to an exhibit to this Agreement, unless another document
is specifically referenced.

     “Existing Credit Agreement” means that certain 2002 Revolving Credit
Agreement dated as of August 22, 2002 (as amended) among the Borrower, Bank of
America, N.A., as administrative agent, and a syndicate of lenders.

     “Existing LCs” means those Letters of Credit issued for the account of the
Borrower prior to the date hereof and listed on Schedule 2 hereto.

7

 

     “Extension Request” is defined in Section 2.20(a).

     “Facility Increase Request” is defined in Section 2.5.3(i).

     “Facility LC” is defined in Section 2.19.1.

     “Facility LC Application” is defined in Section 2.19.3.

     “Facility LC Collateral Account” is defined in Section 2.19.12.

     “Facility Termination Date” means June 15, 2009 or any later date as may
be specified as the Facility Termination Date in accordance with Section 2.20
or any earlier date on which the Aggregate Commitment is reduced to zero or
otherwise terminated pursuant to the terms hereof.

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

     “Financial LC” means any Letter of Credit (other than a Performance LC)
that represents an irrevocable obligation on the part of the issuer (a) to
repay money borrowed by or advanced to or for the account of the Borrower or a
Subsidiary or (b) to make payment on account of any Indebtedness undertaken by
the Borrower or a Subsidiary, in the event that the Borrower or Subsidiary
fails to fulfill its obligation to the beneficiary.

     “Financial Services Segment” means the business segment of the Borrower
and its Subsidiaries engaged in mortgage banking (including the title and
escrow business), homeowners’ insurance, mortgage servicing, securities
issuance, bond administration and management services and related activities,
which segment currently consists principally of the activities of Ryland
Mortgage Company and its Subsidiaries but excludes the Limited-Purpose
Subsidiaries.

     “Finished Lots” means lots of Entitled Land as to which (a) a final
subdivision map has been recorded; (b) all major off-site construction and
infrastructure has been completed to local governmental requirements; (c)
utilities have been installed to local government requirements; and (d)
building permits may be pulled and construction commenced without the
satisfaction of any further material conditions.

     “Fixed Charges” means, for any period, without duplication, the sum of the
following amounts: (a) interest expense of the Borrower and the Guarantors
(specifically excluding any Subsidiaries, joint ventures and partnerships that
are not Guarantors) for such period (including such interest expense
constituting capitalized interest for such period); (b) principal payments
(excluding balloon payments) on long-term Indebtedness scheduled to have been
made by the Borrower and the Guarantors (specifically excluding any
Subsidiaries, joint ventures and

8

 

partnerships that are not Guarantors) during such period; (c) the
principal portion of payments in respect of Capitalized Leases scheduled to
have been made by the Borrower and the Guarantors (specifically excluding any
Subsidiaries, joint ventures and partnerships that are not Guarantors) during
such period; and (d) dividends on any of the Borrower’s preferred stock paid or
payable during such period.

     “Floating Rate” means, for any day, a rate per annum equal to the
Alternate Base Rate for such day, in each case changing when and as the
Alternate Base Rate changes.

     “Floating Rate Advance” means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the Floating Rate.

     “Floating Rate Loan” means a Loan which, except as otherwise provided in
Section 2.11, bears interest at the Floating Rate.

     “Fund” means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

     “GAAP” means generally accepted accounting principles as in effect from
time to time in the United States, applied in a manner consistent with that
used in preparing the financial statements referred to in Section 5.5.

     “Governmental Authority” means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

     “Guarantee Obligations” means, as to any Person (the “guaranteeing
person”), any obligation of the guaranteeing person or another Person
(including any bank under any letter of credit) to induce the creation of which
the guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
indebtedness, leases, dividends or other obligations (the “primary
obligations”) of any third Person (the “primary obligor”) in any manner,
whether directly or indirectly, including any obligation of the guaranteeing
person, whether or not contingent, (1) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (2) to
advance or supply funds (A) for the purchase or payment of any such primary
obligations or (B) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor or (C) to purchase property, securities or services for the purpose of
assuring the owner of such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (D) otherwise to assure
or hold harmless the owner of such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation shall be deemed to
be the maximum or stated amount of the primary obligation relating to such
Guarantee Obligation (or, if less, the maximum stated liability set forth in
the instrument

9

 

embodying such Guarantee Obligation), provided, however, that in the
absence of any such stated amount or stated liability, the amount of such
Guarantee Obligation shall be such guaranteeing person’s maximum reasonably
anticipated liability in respect thereof as reasonably determined by the
Borrower in good faith.

     “Guarantor” means (a) the Subsidiaries of Borrower identified on Schedule
3 hereto and (b) any Subsidiary that hereafter guarantees the Obligations,
subject, in the case of either (a) or (b) to release of an entity as a
Guarantor as provided in Section 6.9(b).

     “Guaranty” means that certain Guaranty of even date herewith in the form
of Exhibit B hereto executed by the Guarantors in favor of the Agent, for the
ratable benefit of the Lenders, as it may be amended, modified or supplemented
(including by delivery of a Supplemental Guaranty) and in effect from time to
time.

     “Hedge Agreement” means, as to any Person, any swap, cap, collar or
similar arrangement entered into by such Person providing for protection
against fluctuations in interest rates or currency exchange rates or the
exchange of nominal interest obligations, either generally or under specific
contingencies.

     “Hedge Agreement Termination Value” means, in respect of any one or more
Hedge Agreements, after taking into account the effect of any legally
enforceable netting agreement relating to such Hedge Agreements, (a) for any
date on or after the date such Hedge Agreements have been closed out and
termination value(s) determined in accordance therewith, such termination
value(s), and (b) for any date prior to the date referenced in clause (a), the
amount(s) determined as the mark-to-market value(s) for such Hedge Agreements,
as determined based upon one or more mid-market or other readily available
quotations provided by any recognized dealer in such Hedge Agreements (which
may include a Lender or any Affiliate of a Lender).

     “Homebuilding Segment” means the business segment of the Borrower and its
Subsidiaries engaged in the construction and sale of single-family attached and
unattached dwellings and related activities, including all activities of the
Borrower outside the Financial Services Segment but excluding the
Limited-Purpose Subsidiaries.

     “Home Proceeds Receivable” means, with respect to the Borrower or a
Guarantor, funds due to the Borrower or such Guarantor held at an escrow or
title company (including an escrow or title company which is a Subsidiary of
the Borrower) following the sale and conveyance of title of a Unit to a buyer.

     “Improvements” means on and off-site development work, including but not
limited to filling to grade, main water distribution and sewer collection
systems and drainage system installation, paving, and other improvements
necessary for the use of residential dwelling units and as required pursuant to
development agreements which may have been entered into with Governmental
Authorities.

     “Increase Date” is defined in Section 2.5.3(ii).

     “Indebtedness” of any Person means all of the following, whether or not
included as indebtedness or liabilities in accordance with GAAP: (a) all
obligations of such Person for

10

 

borrowed money; (b) all obligations of such Person for the deferred
purchase price of Property or services (other than trade liabilities due 90
days or less from invoice and accrued expenses incurred in the ordinary course
of business and payable in accordance with customary practices); (c) all net
obligations of such Person under any Hedge Agreement (measured as the Hedge
Agreement Termination Value thereof); (d) any other obligations of such Person
evidenced by a note, bond, debenture or similar instrument; (e) all Capitalized
Lease Obligations of such Person; (f) all obligations, contingent or otherwise,
of such Person in respect of Letters of Credit (excluding Performance LCs not
yet drawn upon) and acceptances issued or created for the account of such
Person; (g) all liabilities secured by any lien on any Property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment thereof; (h) all Guarantee Obligations of such Person; (i) such
Person’s Unfunded Liabilities; and (j) any other obligation for borrowed money
or other financial accommodations which in accordance with GAAP would be shown
as a liability on the consolidated balance sheet of such Person. For all
purposes hereof, the Indebtedness of any Person shall include its pro rata
share of the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer except to the extent that such
Indebtedness is Non-Recourse Indebtedness of such Person.

     “Insolvency” or “Insolvent” means, with respect to any Multiemployer Plan,
the condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.

     “Interest Period” means, with respect to a Eurodollar Advance, a period of
one, two, three or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such Interest Period shall end on the day
which corresponds numerically to such date one, two, three or six months
thereafter, provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.

     “Investment” of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable
arising in the ordinary course of business on terms customary in the trade) or
contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any deposit accounts and certificate of deposit owned by such Person;
and structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.

     “Investment Grade Rating” means a rating of the Borrower’s unsecured
senior public debt of BBB- or higher from S&P or Baa3 or higher from Moody’s.

     “Land Under Development” means Entitled Land upon which a final
subdivision map has been recorded and upon which construction of Improvements
has commenced and is being diligently pursued but has not been completed.

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     “Laws” means, collectively, all international, foreign, federal, state and
local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents.

     “LC Fee” is defined in Section 2.19.4.

     “LC Issuer” means Bank One (or any subsidiary or affiliate of Bank One
designated by Bank One and acceptable to the Borrower), any other Lender that
is the issuer of an Existing Letter of Credit and any other Lender that, at the
request of the Borrower and with the approval of the Agent, shall issue
Facility LCs, each in its capacity as issuer of Facility LCs hereunder.

     “LC Obligations” means, at any time, the sum, without duplication, of (i)
the aggregate undrawn stated amount under all Facility LCs outstanding at such
time plus (ii) the aggregate unpaid amount at such time of all Reimbursement
Obligations.

     “LC Payment Date” is defined in Section 2.19.6.

     “Lenders” means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.

     “Lending Installation” means, with respect to a Lender or the Agent, the
office, branch, subsidiary or affiliate of such Lender or the Agent listed on
the signature pages hereof or on a Schedule or otherwise selected by such
Lender or the Agent pursuant to Section 2.17.

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

     “Leverage Ratio” means, at any date, the ratio of (a) Consolidated
Indebtedness at such date to (b) Consolidated Tangible Net Worth at such date.

     “Lien” means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).

     “Limited-Purpose Subsidiaries” means subsidiaries of the Borrower included
within the Limited-Purpose Subsidiaries Segment.

     “Limited-Purpose Subsidiaries Segment” means the business segment of the
Borrower and its Subsidiaries which facilitates, through special-purpose
entities created or existing solely for such purpose, the financing of mortgage
loans and mortgage-backed securities and the securitization of mortgage loans
and other related activities.

     “Loan” means, with respect to a Lender, such Lender’s loan made pursuant
to Article II (or any conversion or continuation thereof).

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     “Loan Documents” means this Agreement, the Facility LC Applications, the
Swing Line Note, any Notes issued pursuant to Section 2.13 and the Guaranty.

     “Material Adverse Effect” means a material adverse effect on (i) the
business or financial condition of the Borrower and its Restricted Subsidiaries
taken as a whole, (ii) the ability of the Borrower to perform its obligations
under the Loan Documents to which it is a party, or (iii) the validity or
enforceability of any of the Loan Documents or the rights or remedies of the
Agent, the LC Issuers or the Lenders thereunder.

     “Material Indebtedness” means Indebtedness in an outstanding principal
amount of $10,000,000 or more in the aggregate.

     “Material Indebtedness Agreement” means any agreement under which any
Indebtedness was created or is governed, which Indebtedness has an outstanding
principal balance of $10,000,000 or more or which provides for the incurrence
of Indebtedness on a revolving basis in an amount which would constitute
Material Indebtedness (whether or not an amount of Indebtedness constituting
Material Indebtedness is outstanding thereunder).

     “Materials of Environmental Concern” means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including asbestos, polychlorinated
biphenyls, urea-formaldehyde insulation and mold.

     “Model Unit” means a Completed Unit to be used as a model home in
connection with the sale of Units in a residential housing project.

     “Modify” and “Modification” are defined in Section 2.19.1.

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

     “Multiemployer Plan” means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.

     “New Lender” is defined in Section 2.5.3(i).

     “Non-Recourse Indebtedness” means, with respect to any Person, any
Indebtedness of such Person for which the owner of such Indebtedness has no
recourse, directly or indirectly, to such Person for the principal of, premium,
if any, and interest on such Indebtedness, and for which such Person is not
directly or indirectly obligated or otherwise liable for the principal of,
premium, if any, and interest on such Indebtedness, except pursuant to Liens on
Property to which such Indebtedness relates, provided that recourse obligations
or liabilities solely for fraud, environmental matters and other customary
“non-recourse carve-outs” in respect of any Indebtedness will not prevent
Indebtedness from being classified as Non-Recourse Indebtedness.

     “Non-U.S. Lender” is defined in Section 3.5(iv).

     “Note” is defined in Section 2.13.

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     “Obligations” means all unpaid principal of and accrued and unpaid
interest on the Loans and Swing Line Loans, all Reimbursement Obligations, all
accrued and unpaid fees and all expenses, reimbursements, indemnities and other
obligations of the Borrower to the Lenders or to any Lender, the Agent, any LC
Issuer, the Swing Line Lender or any indemnified party arising under the Loan
Documents.

     “Other Taxes” is defined in Section 3.5(ii).

     “Outstanding Credit Exposure” means, as to any Lender at any time, the sum
of (i) the aggregate principal amount of its Loans outstanding at such time,
plus (ii) an amount equal to its Pro Rata Share of the LC Obligations at such
time.

     “Participants” is defined in Section 12.2.1.

     “Payment Date” means the first day of each calendar month.

     “PBGC” means the Pension Benefit Guaranty Corporation, or any successor
thereto.

     “Performance LC” means a letter of credit issued by a Lender or other
Person for the account of the Borrower or a Subsidiary to a party, as
beneficiary, to which the Borrower, or such Subsidiary owes certain performance
obligations in connection with its real estate development and homebuilding
activity in the ordinary course of business (for example, to a municipality, as
beneficiary, to support the Borrower’s or a Subsidiary’s obligation to widen
public streets in connection with a residential development project). A direct
pay Letter of Credit to support community improvement bonds associated with the
Borrower’s residential development operations is a Financial LC and not a
Performance LC.

     “Person” means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.

     “Plan” means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have
any liability.

     “Pricing Schedule” means the Schedule attached hereto identified as such.

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

     “Property” of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased
or operated by such Person.

     “Pro Rata Share” means, with respect to a Lender, a portion equal to a
fraction the numerator of which is such Lender’s Commitment and the denominator
of which is the Aggregate Commitment.

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     “Purchasers” is defined in Section 12.3.1.

     “Quarterly Payment Date” is defined in Section 2.19.4.

     “Raw Land” means Raw Land – Entitled and Raw Land – Unentitled.

     “Raw Land – Entitled” means land not under development which is Entitled
Land.

     “Raw Land – Unentitled” means land not under development which is not
Entitled Land but which the Borrower in its reasonable commercial judgment
believes it will be able to develop as residential property for its own use and
not to be held speculatively.

     “Real Estate Inventory” means Construction in Progress, Completed Units
(including Model Units), Finished Lots, Land Under Development, Raw Land –
Entitled, and Raw Land – Unentitled.

     “Refinancing Indebtedness” means, with respect to any specified
Indebtedness, Indebtedness that refinances such specified Indebtedness but does
not increase the amount thereof.

     “Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or
other regulation or official interpretation of said Board of Governors relating
to reserve requirements applicable to member banks of the Federal Reserve
System.

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

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

     “Reimbursement Obligations” means, at any time, the aggregate of all
obligations of the Borrower then outstanding under Section 2.19 to reimburse
the LC Issuers for amounts paid by the LC Issuers in respect of any one or more
drawings under Facility LCs.

     “Rejecting Lender” is defined in Section 2.20(a).

     “Rejecting Lender’s Facility Termination Date” is defined in Section
2.20(a).

     “Reorganization” means, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of Section 241
of ERISA.

     “Replacement Lender” is defined in Section 2.21(a).

15

 

     “Reportable Event” means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of
the notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.

     “Reports” is defined in Section 9.6.

     “Required Lenders” means Lenders in the aggregate having at least 66 2/3%
of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66-2/3% of the aggregate
unpaid principal amount of the Aggregate Outstanding Credit Exposure.

     “Requirement of Law” means, as to any Person, any Law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon such Person
or any of its Property or to which such Person or any of its Property is
subject.

     “Reserve Requirement” means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
Eurocurrency liabilities.

     “Responsible Official” means (a) with respect to the Borrower, any of the
chief executive officer, president or chief financial officer of the Borrower
or, with respect to financial matters, the chief accounting officer or the
treasurer of the Borrower and (b) with respect to a Guarantor, any of the chief
executive officer, the president, any vice president or the treasurer of such
Guarantor.

     “Restricted Payments” is defined in Section 6.16.

     “Restricted Subsidiary” means any Subsidiary of the Borrower other than
(a) Limited-Purpose Subsidiaries, (b) those Subsidiaries identified on Schedule
5.4 as not being Restricted Subsidiaries and (c) any Subsidiary that the
Required Lenders agree in writing is not to be deemed a Restricted Subsidiary.

     “Ryland Financial Division” means all Subsidiaries and operations of the
Borrower and its Subsidiaries other than the Homebuilding Segment.

     “Ryland Mortgage Company” means Ryland Mortgage Company, an Ohio
corporation.

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

     “Schedule” refers to a specific schedule to this Agreement, unless another
document is specifically referenced.

16

 

     “Section” means a numbered section of this Agreement, unless another
document is specifically referenced.

     “Senior Permitted Debt” means (without duplication) the Obligations, the
LC Obligations and all Indebtedness of the Borrower or the Guarantors
(specifically excluding the Indebtedness of any Subsidiary that is not a
Guarantor) senior to or ranking in equal priority to the Obligations, other
than (a) Indebtedness that is secured by any Property that would have been
included in the Borrowing Base if such asset were not subject to or encumbered
by a Lien, (b) Indebtedness which is Non-Recourse Indebtedness of the Borrower
and its Subsidiaries and (c) with respect to purchase money Indebtedness, such
Indebtedness for which recourse is limited solely to the Property financed with
the proceeds of such Indebtedness.

     “Single Employer Plan” means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.

     “Sold” means, with respect to any item of Real Estate Inventory, that (a)
a third party purchase contract has been executed for such item of Real Estate
Inventory; (b) the third party purchaser for such item of Real Estate Inventory
has made a cash deposit for such item (except that up to 1% of Real Estate
Inventory at any time may be deemed “Sold” even if such deposit has not been
made); and (c) such third party purchaser’s obligation to purchase such item of
Real Estate Inventory pursuant to such third party purchase contract is not
subject to any contingencies other than the contingency that it shall have
obtained mortgage financing or that it shall have sold other identified
property.

     “Specified Debt” means the Borrower’s senior debt securities issued
pursuant to the Borrower’s Registration Statements on Form S-3 (Registration
Nos. 333-31034, 333-58208 and 333-100167) or any subsequent registration
statement and whether outstanding on the date of this Agreement or hereafter
incurred.

     “Subordinated Debt” means (a) Indebtedness of the Borrower outstanding on
the date hereof issued pursuant to the Subordinated Debt Indentures and (b) any
other unsecured Indebtedness of the Company that is contractually subordinated
in right of payment and otherwise to the Obligations upon terms and conditions
that, in the reasonable determination of the Agent, are consistent with those
set forth in the Subordinated Debt Indentures or upon other terms and
conditions satisfactory to the Required Lenders.

     “Subordinated Debt Indenture” means the Indenture, dated as of June 12,
2001, between the Borrower and SunTrust Bank, as trustee, pursuant to which the
Borrower’s 9-1/8% Senior Subordinated Notes due June, 2011 were issued.

     “Subsidiary” of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (ii) any partnership, limited liability company, association, joint venture
or similar business organization more than 50% of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled. Unless otherwise

17

 

expressly provided, all references herein to a “Subsidiary” shall mean a
Subsidiary of the Borrower.

     “Substantial Portion” means, with respect to the Property of the Borrower
and its Subsidiaries, Property which represents more than 10% of the
consolidated assets of the Borrower and its Subsidiaries or property which is
responsible for more than 10% of the consolidated net sales or of the
consolidated net income of the Borrower and its Subsidiaries, in each case, as
would be shown in the consolidated financial statements of the Borrower and its
Subsidiaries as at the beginning of the twelve-month period ending with the
month in which such determination is made (or if financial statements have not
been delivered hereunder for that month which begins the twelve-month period,
then the financial statements delivered hereunder for the quarter ending
immediately prior to that month).

     “Supplemental Guaranty” means a Supplemental Guaranty in the form provided
for in, and attached to, the Guaranty.

     “Swing Line Commitment” means the commitment of the Swing Line Lender to
make Swing Line Loans pursuant to Section 2.22(a) hereof. The Swing Line
Commitment is in the amount of $50,000,000.

     “Swing Line Lender” means Bank One or any Purchaser to which Bank One
assigns the Swing Line Commitment in accordance with Section 12.3 hereof.

     “Swing Line Loan” is defined in Section 2.22(a).

     “Swing Line Note” is defined in Section 2.22(a).

     “Taxes” means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes and Other Taxes.

     “Third Party LC” means a Letter of Credit issued for the account of the
Borrower or a Subsidiary (other than a Facility LC). A Third Party LC may be
either a Financial LC or a Performance LC.

     “Transferee” is defined in Section 12.4.

     “Type” means, with respect to any Advance, its nature as a Floating Rate
Advance or a Eurodollar Advance and with respect to any Loan, its nature as a
Floating Rate Loan or a Eurodollar Loan.

     “Unit” means a single-family residential housing unit available for sale.

     “Unencumbered Real Estate Inventory” means Real Estate Inventory which is
not subject to or encumbered by any deed of trust, mortgage, judgment lien,
attachment lien or any other Lien (other than (a) liens which have been bonded
over so as to remove such liens as encumbrances against the Real Estate
Inventory, (b) liens for taxes not yet due or which are being contested,
provided that adequate reserves are maintained, (c) mechanic’s liens and
similar

18

 

liens arising in the ordinary course of business that are not overdue for
a period of more than 60 days or that are being contested in good faith and (d)
easements, rights of way, restrictions and other similar encumbrances incurred
during the ordinary course of business which, in the aggregate, are not
substantial in amount and which do not in any case materially detract from the
value of the applicable Property or materially interfere with the ordinary
conduct of the business of the Borrower or Guarantor that owns the applicable
Property.

     “Unfunded Liabilities” means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.

     “Unmatured Default” means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.

     “Unsold” means, with respect to any item of Real Estate Inventory, that
such item of Real Estate Inventory is not Sold.

     “Unsold Housing Inventory” means, collectively, Unsold Construction in
Progress, Unsold Units and Unsold Model Units.

     “Wholly-Owned Subsidiary” of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability
company, association, joint venture or similar business organization 100% of
the ownership interests having ordinary voting power of which shall at the time
be so owned or controlled.

     The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.

ARTICLE II

THE CREDITS

     2.1 Commitment. From and including the date of this Agreement and prior
to the Facility Termination Date, each Lender severally agrees, on the terms
and conditions set forth in this Agreement, to (i) make Loans to the Borrower
and (ii) participate in Facility LCs issued upon the request of the Borrower
(including the Existing LCs), provided that, after giving effect to the making
of each such Loan and the issuance of each such Facility LC (including the
participations in the Existing LCs), (a) such Lender’s Outstanding Credit
Exposure shall not exceed its Commitment and (b) the Aggregate Outstanding
Credit Exposure does not exceed the Aggregate Commitment. Subject to the terms
of this Agreement, the Borrower may borrow, repay and reborrow the Loans at any
time prior to the Facility Termination Date. The Commitments to extend credit
hereunder shall expire on the Facility Termination Date. The LC Issuers will
issue Facility LCs hereunder on the terms and conditions set forth in Section
2.19.

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     2.2 Required Payments; Termination. The Aggregate Outstanding Credit
Exposure and all other unpaid Obligations shall be paid in full by the Borrower
on the Facility Termination Date.

     2.3 Ratable Loans. Each Advance hereunder shall consist of Loans made
from the several Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.

     2.4 Types of Advances. The Advances may be Floating Rate Advances or
Eurodollar Advances, or a combination thereof, selected by the Borrower in
accordance with Sections 2.8 and 2.9.

     2.5 Commitment Fee; Reductions and Increases in Aggregate Commitment.

     2.5.1 Commitment Fee. The Borrower agrees to pay to the Agent for
the account of each Lender a commitment fee (the “Commitment Fee”) at a
per annum rate equal to the Applicable Fee Rate on the daily unused
portion of such Lender’s Commitment from the date hereof to and including
the Facility Termination Date, payable in arrears on each Quarterly
Payment Date hereafter and on the Facility Termination Date. For
purposes of determining the Commitment Fee payable to the Swing Line
Lender, its Swing Line Loans shall be treated as usage of its Commitment.

     2.5.2 Reduction in Aggregate Commitment. The Borrower may
permanently reduce the Aggregate Commitment in whole, or in part ratably
among the Lenders in the minimum amount of $10,000,000 (and in multiples
of $1,000,000 in excess thereof), upon at least five Business Days’
written notice to the Agent, which notice shall specify the amount of any
such reduction, provided, however, that the amount of the Aggregate
Commitment may not be reduced below the Aggregate Outstanding Credit
Exposure. All accrued Commitment Fees and LC Fees shall be payable on
the effective date of any termination of the obligations of the Lenders
to make Credit Extensions hereunder.

     2.5.3 Increases in Aggregate Commitment.

	 	(i)	 	Subject to the provisions of this Section 2.5.3,
the Borrower may, at any time and from time to time, request
(“Facility Increase Request”), by notice to the Agent, the
Agent’s approval of an increase of the Aggregate Commitment
within the limitations hereinafter set forth, which Facility
Increase Request shall set forth the amount of such requested
increase. Within twenty (20) days of such Facility Increase
Request, Agent shall advise Borrower of its approval or
disapproval thereof; failure to so advise Borrower shall
constitute disapproval. Upon approval of the Agent, the
Aggregate Commitment may be so increased either by having
financial institutions (other than the Lenders then holding a
Commitment hereunder) approved by the Borrower and the Agent
(each, a “New Lender”) become Lenders hereunder and/or by
having any one or more of Lenders then holding a Commitment
hereunder (at their respective election in their sole
discretion) that have been approved by the Borrower

20

 

	 	 	 	and the Agent increase the amount of their Commitments (any
such Lender that elects to increase its Commitment and any
New Lender being hereinafter referred to as an “Additional
Lender”), provided that (A) no Default or Unmatured Default
shall then exist nor would occur immediately after giving
effect to such increase, (B) unless otherwise agreed by the
Borrower and the Agent, the Commitment of any New Lender
shall not be less than $5,000,000 (and, if in excess thereof,
in integral multiples of $1,000,000), (C) unless otherwise
agreed by the Borrower and the Agent, the increase in the
Commitment of any Lender shall be not less than $5,000,000
(and, if in excess thereof, in integral multiples of
$1,000,000); (D) the Aggregate Commitment shall not exceed
$650,000,000; (E) the Borrower and each Additional Lender
shall have executed and delivered a commitment and acceptance
(the “Commitment and Acceptance”) substantially in the form
of Exhibit C hereto, and the Agent shall have accepted and
executed the same; (F) the Borrower shall have executed and
delivered to the Agent a Note payable to the order of each
Additional Lender that requests a Note, each such Note to be
in the amount of such Additional Lender’s Commitment or
increased Commitment (as applicable); (G) the Borrower shall
have delivered to the Agent opinions of counsel
(substantially similar to the forms of opinion referred to in
Section 4.1(v), modified to apply to the increase in the
Aggregate Commitment and each Note and Commitment and
Acceptance executed and delivered in connection therewith);
(H) each of the Guarantors shall have consented in writing to
the new Commitments or increases in Commitments (as
applicable) and shall have agreed that its Guaranty continues
in full force and effect; and (I) the Borrower and each
Additional Lender shall otherwise have executed and delivered
such other instruments and documents as the Agent shall have
reasonably requested in connection with such new Commitment
or increase in the Commitment (as applicable). The form and
substance of the documents required under clauses (E) through
(I) above shall be fully acceptable to the Agent. The Agent
shall promptly provide written notice to the Lenders
following any such increase in the Aggregate Commitment.
	 
	 	(ii)	 	On the effective date of any increase in the
Aggregate Commitment pursuant to the provisions hereof
(“Increase Date”), which Increase Date shall be mutually
agreed upon by Borrower, each Additional Lender and the Agent,
each Additional Lender shall make a payment to the Agent in an
amount sufficient, upon the application of such payments by
all Additional Lenders to the reduction of the outstanding
Floating Rate Advances held by the Lenders, to cause the
principal amount outstanding under the Floating Rate Loans
made by all Lenders (including any Additional Lender) to be in
the proportion of their respective Commitments (as of such
Increase Date). The Borrower hereby irrevocably authorizes
each Additional Lender to fund to the Agent the payment
required to be made pursuant to the immediately preceding
sentence for application to the reduction of the outstanding
Floating Rate

21

 

	 	 	 	Loans held by each Lender, and each such payment shall
constitute a Floating Rate Loan hereunder. Such Additional
Lender shall not participate in any Eurodollar Advance
outstanding on the Increase Date, but, if the Borrower shall
at any time on or after such Increase Date convert or
continue any Eurodollar Advance outstanding on such Increase
Date, the Borrower shall be deemed to repay such Eurodollar
Advance on the date of the conversion or continuation thereof
and then to reborrow as a Eurodollar Advance a like amount on
such date so that each Additional Lender shall make a
Eurodollar Loan on such date in its Pro Rata Share of such
Eurodollar Advance. Each Additional Lender shall also make a
Loan in the amount of its Pro Rata Share of all Advances made
on or after such Increase Date and shall otherwise have all
of the rights and obligations of a Lender hereunder on and
after such Increase Date. Notwithstanding the foregoing,
upon the occurrence of a Default prior to the date on which
an Additional Lender is holding Loans equal to its Pro Rata
Share of all Advances hereunder, such Additional Lender
shall, upon notice from the Agent, on or after the date on
which the Obligations are accelerated or become due following
such Default, pay to the Agent (for the account of the other
Lenders, to which the Agent shall pay their Pro Rata Shares
upon receipt) a sum equal to such Additional Lender’s Pro
Rata Share of each Advance then outstanding with respect to
which such Additional Lender does not then hold a Loan equal
to its Pro Rata Share thereof.
	 
	 	(iii)	 	On the Increase Date and the making of the Loans
by an Additional Lender in accordance with the provisions of
the first sentence of Section 2.5.2(ii), such Additional
Lender shall also be deemed to have irrevocably and
unconditionally purchased and received, without recourse or
warranty, from the Lenders party to this Agreement immediately
prior to the Increase Date, an undivided interest and
participation in any Facility LC then outstanding, ratably,
such that all Lenders (including each Additional Lender) hold
participation interests in each such Facility LC in the
proportion of their respective Commitments (as so increased).
	 
	 	(iv)	 	Nothing contained herein shall constitute, or
otherwise be deemed to be, a commitment or agreement on the
part of any Lender to increase its Commitment hereunder at any
time or a commitment or agreement on the part of the Borrower
or the Agent to give or grant any Lender the right to increase
its Commitment hereunder at any time.

     2.6 Minimum Amount of Each Advance. Each Advance shall be in the minimum
amount of $5,000,000 (and in multiples of $500,000 in excess thereof),
provided, however, that any Floating Rate Advance may be in the amount of the
unused Aggregate Commitment.

     2.7 Optional Principal Payments. The Borrower may from time to time pay,
without penalty or premium, all outstanding Floating Rate Advances, or, in a
minimum aggregate amount of $5,000,000 or any integral multiple of $500,000 in
excess thereof, any portion of the outstanding Floating Rate Advances upon
prior notice to the Agent not later than noon (Chicago

22

 

time) on the day of prepayment. The Borrower may from time to time pay,
subject to the payment of any funding indemnification amounts required by
Section 3.4 but without penalty or premium, all outstanding Eurodollar
Advances, or, in a minimum aggregate amount of $5,000,000 or any integral
multiple of $500,000 in excess thereof, any portion of the outstanding
Eurodollar Advances upon not less than five (5) Business Days’ prior notice to
the Agent.

     2.8 Method of Selecting Types and Interest Periods for New Advances. The
Borrower shall select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable thereto from time to time. The
Borrower shall give the Agent irrevocable notice (a “Borrowing Notice”) from an
Authorized Person not later than 11:00 a.m. (Chicago time) on the Borrowing
Date of each Floating Rate Advance and noon (Chicago time) three Business Days
before the Borrowing Date for each Eurodollar Advance, specifying:

	 	(i)	 	the Borrowing Date, which shall be a Business
Day, of such Advance,
	 
	 	(ii)	 	the aggregate amount of such Advance,
	 
	 	(iii)	 	the Type of Advance selected, and
	 
	 	(iv)	 	in the case of each Eurodollar Advance, the
Interest Period applicable thereto.

Not later than noon (Chicago time) on each Borrowing Date, each Lender shall
make available its Loan or Loans in funds immediately available in Chicago to
the Agent at its address specified pursuant to Article XIII (or otherwise
provided by the Agent to the Lenders). The Agent will make the funds so
received from the Lenders available to the Borrower at the Agent’s aforesaid
address.

     2.9 Conversion and Continuation of Outstanding Advances. Floating Rate
Advances shall continue as Floating Rate Advances unless and until such
Floating Rate Advances are converted into Eurodollar Advances pursuant to this
Section 2.9 or are repaid in accordance with Section 2.7. Each Eurodollar
Advance shall continue as a Eurodollar Advance until the end of the then
applicable Interest Period therefor, at which time such Eurodollar Advance
shall be automatically converted into a Floating Rate Advance unless (x) such
Eurodollar Advance is or was repaid in accordance with Section 2.7 or (y) the
Borrower shall have given the Agent a Conversion/Continuation Notice (as
defined below) requesting that, at the end of such Interest Period, such
Eurodollar Advance continue as a Eurodollar Advance for the same or another
Interest Period. Subject to the limitations set forth in Section 2.6, the
Borrower may elect from time to time to convert all or any part of a Floating
Rate Advance into a Eurodollar Advance. The Borrower shall give the Agent
irrevocable notice (a “Conversion/Continuation Notice”) from an Authorized
Person of each conversion of a Floating Rate Advance into a Eurodollar Advance
or continuation of a Eurodollar Advance not later than noon (Chicago time) at
least three Business Days prior to the date of the requested conversion or
continuation, specifying:

	 	(i)	 	the requested date, which shall be a Business
Day, of such conversion or continuation,

23

 

	 	(ii)	 	the aggregate amount and Type of the Advance
which is to be converted or continued, and
	 
	 	(iii)	 	the amount of such Advance which is to be
converted into or continued as a Eurodollar Advance and the
duration of the Interest Period applicable thereto.

     2.10 Changes in Interest Rate, etc. Each Floating Rate Advance shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is automatically converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9, to but
excluding the date it is paid or is converted into a Eurodollar Advance
pursuant to Section 2.9 hereof, at a rate per annum equal to the Floating Rate
for such day. Each Swing Line Loan shall bear interest on the outstanding
principal amount thereof, for each day from and including the date such Swing
Line Loan is made, to but excluding the date it is paid, at a rate per annum
equal to the Floating Rate for such day. Changes in the rate of interest on
that portion of any Advance maintained as a Floating Rate Advance and on any
Swing Line Loan will take effect simultaneously with each change in the
Alternate Base Rate. Each Eurodollar Advance shall bear interest on the
outstanding principal amount thereof from and including the first day of the
Interest Period applicable thereto to (but not including) the last day of such
Interest Period at the interest rate determined by the Agent as applicable to
such Eurodollar Advance based upon the Borrower’s selections under Sections 2.8
and 2.9 and otherwise in accordance with the terms hereof. No Interest Period
may end after the Facility Termination Date.

     2.11 Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.8, 2.9 or 2.10, during the continuance of a
Default or Unmatured Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that no
Advance may be made as, converted into or continued as a Eurodollar Advance.
During the continuance of a Default the Required Lenders may, at their option,
by notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that
(i) each Eurodollar Advance shall bear interest for the remainder of the
applicable Interest Period at the rate otherwise applicable to such Interest
Period plus 2% per annum, and (ii) each Floating Rate Advance and Swing Line
Loan shall bear interest at a rate per annum equal to the Floating Rate in
effect from time to time plus 2% per annum, and (iii) the LC Fee shall be
increased by 2% per annum, provided that, during the continuance of a Default
under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii)
above and the increase in the LC Fee set forth in clause (iii) above shall be
applicable to all Credit Extensions without any election or action on the part
of the Agent or any Lender.

     2.12 Method of Payment. All payments of the Obligations hereunder shall
be made, without setoff, deduction, or counterclaim, in immediately available
funds to the Agent at the Agent’s address specified pursuant to Article XIII,
or at any other Lending Installation of the Agent specified in writing by the
Agent to the Borrower, by 2:00 p.m. (Chicago time) on the date when due and
shall be applied ratably by the Agent among the Lenders. Each payment
delivered

24

 

to the Agent for the account of any Lender shall (except in the case of
Reimbursement Obligations for which an LC Issuer has not been fully indemnified
by the Lenders, or as otherwise specifically required hereunder) be applied
ratably by the Agent among the Lenders. Each payment delivered to the Agent
for the account of any Lender shall be delivered promptly by the Agent to such
Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIII or at any Lending Installation specified in
a notice received by the Agent from such Lender. If the Agent receives, for
the account of a Lender, a payment from the Borrower and fails to remit such
payment to such Lender on the Business Day such payment is received (if
received by 2:00 p.m., Chicago time, by the Agent) or on the next Business Day
(if received after 2:00 p.m., Chicago time, by the Agent), the Agent shall pay
to such Lender interest on such payment at a rate per annum equal to the
Federal Funds Effective Rate for each day for which such payment is so delayed.
The Agent is hereby authorized to charge the account of the Borrower
maintained with Bank One for each payment of principal, interest, Reimbursement
Obligations and fees as it becomes due hereunder. Each reference to the Agent
in this Section 2.12 shall also be deemed to refer, and shall apply equally, to
the LC Issuers, in the case of payments required to be made by the Borrower to
the LC Issuers pursuant to Section 2.19.7.

     2.13 Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall
maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender resulting from each
Loan made by such Lender from time to time, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.

     (ii) The Agent shall also maintain accounts in which it will record (a) the
amount of each Loan made hereunder, the Type thereof and the Interest Period
with respect thereto and the amount of each Swing Line Loan made hereunder, (b)
the amount of any principal or interest due and payable or to become due and
payable from the Borrower to each Lender and the Swing Line Lender hereunder,
(c) the original stated amount of each Facility LC and the amount of LC
Obligations outstanding at any time and (d) the amount of any sum received by
the Agent hereunder from the Borrower and each Lender’s share thereof and the
amount thereof paid to the Swing Line Lender.

     (iii) The entries maintained in the accounts maintained pursuant to
paragraphs (i) and (ii) above shall be prima facie evidence of the existence
and amounts of the Obligations therein recorded; provided, however, that the
failure of the Agent or any Lender (or the Swing Line Lender) to maintain such
accounts or any error therein shall not in any manner affect the obligation of
the Borrower to repay the Obligations in accordance with their terms.

     (iv) Any Lender may request that its Loans be evidenced by a promissory
note in substantially the form of Exhibit D (a “Note”). In such event, the
Borrower shall prepare, execute and deliver to such Lender such Note payable to
the order of such Lender. Thereafter, the Loans evidenced by such Note and
interest thereon shall at all times (prior to any assignment pursuant to
Section 12.3) be represented by one or more Notes payable to the order of the
payee named therein, except to the extent that any such Lender subsequently
returns any such Note for cancellation and requests that such Loans once again
be evidenced as described in paragraphs (i) and (ii) above.

25

 

     2.14 Telephonic Notices. The Borrower hereby authorizes the Lenders and
the Agent and the Swing Line Lender to extend, convert or continue Advances and
Swing Line Loans, effect selections of Types of Advances and to transfer funds
based on telephonic notices made by any person or persons the Agent or any
Lender in good faith believes to be acting on behalf of the Borrower, it being
understood that the foregoing authorization is specifically intended to allow
Borrowing Notices and Conversion/Continuation Notices to be given
telephonically. The Borrower agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent or any Lender or
Swing Line Lender, of each telephonic notice signed by an Authorized Officer.
If the written confirmation differs in any material respect from the action
taken by the Agent and the Lenders or Swing Line Lender, the records of the
Agent and the Lenders or Swing Line Lender shall govern absent manifest error.

     2.15 Interest Payment Dates; Interest and Fee Basis. Interest accrued on
each Floating Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, on any date on which
the Floating Rate Advance is prepaid, whether due to acceleration or otherwise,
and on the Facility Termination Date. Interest accrued on that portion of the
outstanding principal amount of any Floating Rate Advance converted into a
Eurodollar Advance on a day other than a Payment Date shall be payable on the
Payment Date following the date of such conversion. Interest accrued on each
Eurodollar Advance shall be payable on the last day of its applicable Interest
Period, on any date on which the Eurodollar Advance is prepaid, whether by
acceleration or otherwise, and at maturity. Interest accrued on each
Eurodollar Advance having an Interest Period longer than three months shall
also be payable on the last day of each three-month interval during such
Interest Period. Commitment Fees and LC Fees and interest on Eurodollar Loans
shall be calculated for actual days elapsed on the basis of a 360-day year;
interest on Floating Rate Loans and Swing Line Loans shall be calculated for
actual days elapsed on the basis of a 365-day (or, if applicable, 366-day)
year. Interest shall be payable for the day an Advance is made but not for the
day of any payment on the amount paid if payment is received prior to 2:00 p.m.
(Chicago time) in accordance with Section 2.12. If any payment of principal of
or interest on an Advance shall become due on a day which is not a Business
Day, such payment shall be made on the next succeeding Business Day and, in the
case of a principal payment, such extension of time shall be included in
computing interest in connection with such payment.

     2.16 Notification of Advances, Interest Rates, Prepayments and Commitment
Reductions. Promptly after receipt thereof, the Agent will notify each Lender
of the contents of each Aggregate Commitment reduction notice, Borrowing
Notice, Conversion/Continuation Notice, and repayment notice received by it
hereunder. Promptly after notice from an LC Issuer, the Agent will notify each
Lender of the contents of each request for issuance of a Facility LC hereunder.
The Agent will notify each Lender of the interest rate applicable to each
Eurodollar Advance promptly upon determination of such interest rate and will
give each Lender prompt notice of each change in the Alternate Base Rate.

     2.17 Lending Installations. Each Lender may book its Loans and its
participation in any LC Obligations, the Swing Line Lender may book the Swing
Line Loans and each LC Issuer may book the Facility LCs at any Lending
Installation selected by such Lender, Swing Line Lender or LC Issuer, as the
case may be, and may change its Lending Installation from time to time. All
terms of this Agreement shall apply to any such Lending Installation and the
Loans,

26

 

Swing Line Loans, Facility LCs, participations in LC Obligations and any
Notes and the Swing Line Note issued hereunder shall be deemed held by each
Lender, Swing Line Lender or LC Issuer, as the case may be, for the benefit of
any such Lending Installation. Each Lender, Swing Line Lender and LC Issuer
may, by written notice to the Agent and the Borrower in accordance with Article
XIII, designate replacement or additional Lending Installations through which
Loans and Swing Line Loans will be made by it or Facility LCs will be issued by
it and for whose account Loan or Swing Line Loan payments or payments with
respect to Facility LCs are to be made.

     2.18 Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender,
as the case may be, notifies the Agent (i) in the case of the Borrower, prior
to the date on which it is scheduled to make a payment of principal, interest
or fees to the Agent for the account of the Lenders or (ii) in the case of a
Lender, prior to the date on which it is scheduled to make a Eurodollar Advance
or 30 minutes prior to the time at which it is scheduled to make a Floating
Rate Advance, that it does not intend to make such payment, the Agent may
assume that such payment has been made. The Agent may, but shall not be
obligated to, make the amount of such payment available to the intended
recipient in reliance upon such assumption. If such Lender or the Borrower, as
the case may be, has not in fact made such payment to the Agent, the recipient
of such payment shall, on demand by the Agent, repay to the Agent the amount so
made available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to (x)
in the case of payment by a Lender, the Federal Funds Effective Rate for such
day for the first three days and, thereafter, the interest rate applicable to
the relevant Loan or (y) in the case of payment by the Borrower, the interest
rate applicable to the relevant Loan.

     2.19 Facility LCs.

     2.19.1 Issuance. Each LC Issuer hereby agrees, on the terms and
conditions set forth in this Agreement, to issue standby Letters of
Credit (each such Letter of Credit and each Existing LC, a “Facility LC”)
and to renew, extend, increase, decrease or otherwise modify each
Facility LC (“Modify,” and each such action a “Modification”), from time
to time from and including the date of this Agreement and prior to the
Facility Termination Date upon the request of the Borrower; provided that
immediately after each such Facility LC is issued or Modified, (i) the
aggregate amount of the outstanding LC Obligations shall not exceed
$250,000,000 and (ii) the Aggregate Outstanding Credit Exposure shall not
exceed the Aggregate Commitment and provided, further, that with respect
to each Modification (other than an increase or extension), the
beneficiary under such Facility LC shall have consented in writing
thereto. No Facility LC shall have an expiry date later than the
Facility Termination Date.

     2.19.2 Participations. Upon the issuance or Modification by the LC
Issuer of a Facility LC in accordance with this Section 2.19 (or, in the
case of the Existing LC, on the Closing Date), the applicable LC Issuer
shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably sold to each Lender, and each Lender
shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably purchased from such LC Issuer, a
participation in such

27

 

Facility LC (and each Modification thereof) and the related LC
Obligations in proportion to its Pro Rata Share.

     2.19.3 Notice. Subject to Section 2.19.1, the Borrower shall give
the applicable LC Issuer notice from an Authorized Person prior to 10:00
a.m. (Chicago time) at least one two (2) Business Days (or such lesser
period to which an LC Issuer may agree) prior to the proposed date of
issuance or Modification of each Facility LC, specifying the beneficiary,
the proposed date of issuance (or Modification) and the expiry date of
such Facility LC, and describing the proposed terms of such Facility LC
and the nature of the transactions proposed to be supported thereby.
Upon receipt of such notice, such LC Issuer shall promptly notify the
Agent, and the Agent shall promptly notify each Lender, of the contents
thereof and of the amount of such Lender’s participation in such proposed
Facility LC. The issuance, renewal, extension or increase by an LC
Issuer of any Facility LC shall, be subject to the conditions precedent
set forth in Article IV (the satisfaction of which the LC Issuer shall
have no duty to ascertain). The issuance or Modification by an LC Issuer
of any Facility LC shall also be subject to the conditions precedent that
such Facility LC shall be satisfactory to the LC Issuer and that the
Borrower shall have executed and delivered such application agreement
and/or such other instruments and agreements relating to such Facility LC
as the LC Issuer shall have reasonably requested (each, a “Facility LC
Application”). In the event of any conflict between the terms of this
Agreement and the terms of any Facility LC Application, the terms of this
Agreement shall control. The LC Issuer shall not issue, renew, extend or
increase any Facility LC hereunder if it has received written notice from
the Agent, the Borrower or the Required Lenders, prior to the requested
date of issuance, renewal, extension or increase of the applicable
Facility LC, that one or more applicable conditions contained in Section
4.2 shall not be satisfied.

     2.19.4 Compensation for Facility LCs. The Borrower agrees to pay to
the Agent, in the case of each Facility LC, a fee (the “LC Fee”)
therefor, in an amount per annum equal to the Applicable Margin for
Eurodollar Advances on the amount of such Facility LC, payable quarterly
in arrears not later than five (5) Business Days following the Agent’s
delivery to Borrower of the quarterly statement specifying the amount of
the LC Fees properly due and payable hereunder with respect to the
preceding calendar quarter (each date on which such payment is due being
herein referred to as a “Quarterly Payment Date”) and on the Facility
Termination Date (which payment shall be in the amount of all accrued and
unpaid Facility LC Fees). LC Fees shall be calculated, on a pro rata
basis for the period to which such payment applies, for actual days on
which such Facility LC was outstanding during such period, on the basis
of a 360-day year. The Agent shall, with reasonable promptness following
receipt from all LC Issuers of the reports provided for in Section 2.19.5
for the months of March, June, September and December, respectively,
deliver to the Borrower a quarterly statement of the LC Fees then due and
payable. The Agent shall promptly remit such LC Fees, when received by
the Agent, as follows: (i) to each LC Issuer, solely for its own
account, with respect to each Facility LC issued by such LC Issuer, an
amount per annum equal to the product of (A) 0.125% per annum and (B) the
face amount of such Facility LC and (ii) to all Lenders, ratably, the
balance of such LC Fees. LC Fees shall be payable hereunder with
respect to the Existing LCs from and after the Closing Date. Each LC
Issuer shall also

28

 

have the right to charge the Borrower, solely for such LC Issuer’s
own account, customary processing fees, charges and expenses of issuing
and servicing Facility LCs.

     2.19.5 LC Issuer Reporting Requirements. Each LC Issuer shall, no
later than the third (3rd) Business Day following the last day of each
month, provide to the Agent a schedule of the Facility LCs issued by it
showing the issuance date, account party, original face amount, amount
(if any) paid thereunder, expiration date and the reference number of
each Facility LC outstanding at any time during such month (and
indicating, with respect to each Facility LC, whether it is a Financial
LC or a Performance LC) and the aggregate amount (if any) payable by the
Borrower to such LC Issuer during the month pursuant to Sections 3.1 and
3.2. Copies of such reports shall be provided promptly to each Lender by
the Agent. The reporting requirements hereunder are in addition to those
set forth in Section 2.19.3.

     2.19.6 Administration; Reimbursement by Lenders. Upon receipt by an
LC Issuer from the beneficiary of any Facility LC of any demand for
payment under such Facility LC, such LC Issuer shall notify the Agent and
the Agent shall promptly notify the Borrower and each other Lender as to
the amount to be paid by such LC Issuer as a result of such demand and
the proposed payment date (the “LC Payment Date”). The responsibility of
the LC Issuer to the Borrower and each Lender shall be only to determine
that the documents (including each demand for payment) delivered under
each Facility LC in connection with such presentment shall be in
conformity in all material respects with such Facility LC. Each LC
Issuer shall endeavor to exercise the same care in the issuance and
administration of the Facility LCs issued by it as it does with respect
to letters of credit in which no participations are granted, it being
understood that in the absence of any gross negligence or willful
misconduct by an LC Issuer, each Lender shall be unconditionally and
irrevocably liable without regard to the occurrence of any Default or any
condition precedent whatsoever, to reimburse such LC Issuer on demand for
(i) such Lender’s Pro Rata Share of the amount of each payment made by
such LC Issuer under each Facility LC to the extent such amount is not
reimbursed by the Borrower pursuant to Section 2.19.7 below, plus (ii)
interest on the foregoing amount to be reimbursed by such Lender, for
each day from the date of such LC Issuer’s demand for such reimbursement
(or, if such demand is made after 11:00 a.m. (Chicago time) on such date,
from the next succeeding Business Day) to the date on which such Lender
pays the amount to be reimbursed by it, at a rate of interest per annum
equal to the Federal Funds Effective Rate for the first three days and,
thereafter, at a rate of interest equal to the rate applicable to
Floating Rate Advances.

     2.19.7 Reimbursement by Borrower. The Borrower shall be irrevocably
and unconditionally obligated to reimburse each LC Issuer on or before
the applicable LC Payment Date for any amounts to be paid by such LC
Issuer upon any drawing under any Facility LC, without presentment,
demand, protest or other formalities of any kind; provided that neither
the Borrower nor any Lender shall hereby be precluded from asserting any
claim for direct (but not consequential) damages suffered by the Borrower
or such Lender to the extent, but only to the extent, caused by (i) the
willful misconduct or gross negligence of such LC Issuer in determining
whether a request presented under any Facility LC issued by it complied
with the terms of such Facility LC or (ii) such LC

29

 

Issuer’s failure to pay under any Facility LC issued by it after the
presentation to it of a request strictly complying with the terms and
conditions of such Facility LC. All such amounts paid by an LC Issuer
and remaining unpaid by the Borrower shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to (x) the rate
applicable to Floating Rate Advances for such day if such day falls on or
before the applicable LC Payment Date and (y) the sum of 2% plus the rate
applicable to Floating Rate Advances for such day if such day falls after
such LC Payment Date. Each LC Issuer will pay to each Lender ratably in
accordance with its Pro Rata Share all amounts received by it from the
Borrower for application in payment, in whole or in part, of the
Reimbursement Obligation in respect of any Facility LC issued by such LC
Issuer, but only to the extent such Lender has made payment to such LC
Issuer in respect of such Facility LC pursuant to Section 2.19.6.
Subject to the terms and conditions of this Agreement (including without
limitation the submission of a Borrowing Notice in compliance with
Section 2.8 and the satisfaction of the applicable conditions precedent
set forth in Article IV), the Borrower may request an Advance hereunder
for the purpose of satisfying any Reimbursement Obligation.

     2.19.8 Obligations Absolute. The Borrower’s obligations under this
Section 2.19 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower may have or have had against any LC Issuer,
any Lender or any beneficiary of a Facility LC. The Borrower further
agrees with each LC Issuer and each Lender that the LC Issuers and the
Lenders shall not be responsible for, and the Borrower’s Reimbursement
Obligation in respect of any Facility LC shall not be affected by, among
other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be
in any or all respects invalid, fraudulent or forged, or any dispute
between or among the Borrower, any of its Affiliates, the beneficiary of
any Facility LC or any financing institution or other party to whom any
Facility LC may be transferred or any claims or defenses whatsoever of
the Borrower or of any of its Affiliates against the beneficiary of any
Facility LC or any such transferee. No LC Issuer shall be liable for any
error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection
with any Facility LC. The Borrower agrees that any action taken or
omitted by any LC Issuer or Lender under or in connection with each
Facility LC and the related drafts and documents, if done without gross
negligence or willful misconduct, shall be binding upon the Borrower and
shall not put any LC Issuer or Lender under any liability to the
Borrower. Nothing in this Section 2.19.8 is intended to limit the right
of the Borrower to make a claim against an LC Issuer for damages as
contemplated by the proviso to the first sentence of Section 2.19.7.

     2.19.9 Actions of LC Issuer. Each LC Issuer shall be entitled to
rely, and shall be fully protected in relying, upon any Facility LC,
draft, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by such LC Issuer. Each LC Issuer
shall be fully justified in failing or refusing to take any action under
this Agreement unless it shall first have received such advice or
concurrence of the

30

 

Required Lenders as it reasonably deems appropriate or it shall
first be indemnified to its reasonable satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. Notwithstanding
any other provision of this Section 2.19, each LC Issuer shall in all
cases be fully protected in acting, or in refraining from acting, under
this Agreement in accordance with a request of the Required Lenders, and
such request and any action taken or failure to act pursuant thereto
shall be binding upon the Lenders and any future holders of a
participation in any Facility LC.

     2.19.10 Indemnification. The Borrower hereby agrees to indemnify
and hold harmless each Lender, each LC Issuer and the Agent, and their
respective directors, officers, agents and employees from and against any
and all claims and damages, losses, liabilities, costs or expenses which
such Lender, such LC Issuer or the Agent may incur (or which may be
claimed against such Lender, such LC Issuer or the Agent by any Person
whatsoever) by reason of or in connection with the issuance, execution
and delivery or transfer of or payment or failure to pay under any
Facility LC or any actual or proposed use of any Facility LC, including,
without limitation, any claims, damages, losses, liabilities, costs or
expenses which such LC Issuer may incur by reason of or in connection
with (i) the failure of any other Lender to fulfill or comply with its
obligations to such LC Issuer hereunder (but nothing herein contained
shall affect any rights the Borrower may have against any defaulting
Lender) or (ii) by reason of or on account of such LC Issuer issuing any
Facility LC which specifies that the term “Beneficiary” included therein
includes any successor by operation of law of the named Beneficiary, but
which Facility LC does not require that any drawing by any such successor
Beneficiary be accompanied by a copy of a legal document, satisfactory to
such LC Issuer, evidencing the appointment of such successor Beneficiary;
provided that the Borrower shall not be required to indemnify any Lender,
LC Issuer or the Agent for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, caused by (x)
the willful misconduct or gross negligence of such LC Issuer in
determining whether a request presented under any Facility LC complied
with the terms of such Facility LC or (y) such LC Issuer’s failure to pay
under any Facility LC after the presentation to it of a request strictly
complying with the terms and conditions of such Facility LC. Nothing in
this Section 2.19.10 is intended to limit the obligations of the Borrower
under any other provision of this Agreement.

     2.19.11 Lenders’ Indemnification. Each Lender shall, ratably in
accordance with its Pro Rata Share, indemnify each LC Issuer, its
affiliates and their respective directors, officers, agents and employees
(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 such indemnitees’
gross negligence or willful misconduct or such LC Issuer’s failure to pay
under any Facility LC after the presentation to it of a request strictly
complying with the terms and conditions of the Facility LC) that such
indemnitees may suffer or incur in connection with this Section 2.19 or
any action taken or omitted by such indemnitees hereunder.

31

 

     2.19.12 Facility LC Collateral Account. The Borrower agrees that it
will, upon the request of the Agent or the Required Lenders and until the
final expiration date of any Facility LC and thereafter as long as any
amount is payable to any LC Issuer or the Lenders in respect of any
Facility LC, maintain a special collateral account pursuant to
arrangements satisfactory to the Agent (the “Facility LC Collateral
Account”) at the Agent’s office at the address specified pursuant to
Article XIII, in the name of such Borrower but under the sole dominion
and control of the Agent, for the benefit of the Lenders and in which
such Borrower shall have no interest other than as set forth in Section
8.1. The Borrower hereby pledges, assigns and grants to the Agent, on
behalf of and for the ratable benefit of the Lenders and LC Issuers, a
security interest in all of the Borrower’s right, title and interest in
and to all funds which may from time to time be on deposit in the
Facility LC Collateral Account to secure the prompt and complete payment
and performance of the Obligations. The Agent will invest any funds on
deposit from time to time in the Facility LC Collateral Account in
certificates of deposit of Bank One having a maturity not exceeding 30
days. Nothing in this Section 2.19.12 shall either obligate the Agent to
require the Borrower, or require the Borrower, to deposit any funds in
the Facility LC Collateral Account or limit the right of the Agent to
release any funds held in the Facility LC Collateral Account in each case
other than as required by Section 2.20(c) or Section 8.1.

     2.19.13 Rights as a Lender. In its capacity as a Lender, each LC
Issuer shall have the same rights and obligations as any other Lender.

     2.20 Extension of Facility Termination Date. (a) Not more than once in
any fiscal year of the Borrower, the Borrower may request an extension of the
Facility Termination Date to a date not later than the fifth (5th) anniversary
of the date of such request by submitting a request for an extension (the
“Extension Request”) to the Agent not less than 180 days prior to the then
scheduled Facility Termination Date. Promptly upon (but not later than five
Business Days after) the Agent’s receipt and approval of the Extension Request,
the Agent shall deliver to each Lender a copy of, and shall request each Lender
to approve, the Extension Request. Each Lender approving the Extension Request
shall deliver its written approval no later than 60 days after such Lender’s
receipt of the Extension Request. If the written approval of the Extension
Request by Lenders whose Pro Rata Shares equal or exceed 66-2/3% in the
aggregate is received by the Agent within such 60-day period and provided no
Default exists on the last day of such 60-day period, the Facility Termination
Date shall be extended as specified in the Extension Request but only with
respect to the Lenders that have given their written approval. Except to the
extent that a Lender that did not give its written approval to such Extension
Request (“Rejecting Lender”) is replaced as provided in Section 2.21, the Loans
and all interest thereon, fees and other Obligations owed to such Rejecting
Lender shall be paid in full on the Facility Termination Date as determined
prior to such Extension Request (the “Rejecting Lender’s Facility Termination
Date”).

     (b) If Lenders whose Pro Rata Shares equal or exceed 66-2/3% in the
aggregate approve the Extension Request, the Borrower, upon notice to the Agent
and any Rejecting Lender, may, subject to the provisions of the last sentence
of Section 2.20(c), terminate the Commitment of such Rejecting Lender (or such
portion of such Commitment that is not assigned to a Replacement Lender in
accordance with Section 2.21), which termination shall

32

 

occur as of a date set forth in such Borrower’s notice but in no event
more than thirty (30) days following such notice. The termination of a
Lender’s Commitment shall be effected in accordance with Section 2.20(c).

     (c) If the Borrower elects to terminate a Commitment of a Rejecting Lender
as provided in Section 2.20(b), the Borrower shall pay to the Rejecting Lender
all Obligations due and owing to it hereunder or under any other Loan Document,
including, without limitation, the aggregate outstanding principal amount of
the Loans owed to such Rejecting Lender, together with accrued interest thereon
through the date of such termination, amounts payable under Sections 3.1 and
3.2 and the Reimbursement Obligations, Commitment Fees and LC Fees payable to
such Rejecting Lender. Upon request by the Borrower or the Agent, the
Rejecting Lender will deliver to the Borrower and the Agent a letter setting
forth the amounts payable to such Rejecting Lender as set forth above. Upon
the termination of such Rejecting Lender’s Commitment and payment of the
amounts provided for in the immediately preceding sentence, the Borrower shall
have no further obligations to such Rejecting Lender under this Agreement and
such Rejecting Lender shall cease to be a Lender, provided, however, that such
Rejecting Lender shall continue to be entitled to the benefits of Sections
2.19.10, 2.19.11, 2.19.12, 3.1, 3.2, 3.4, 3.5, 6.8(c), 9.6, 9.10 and this
Section 2.20(c), as well as to any fees accrued for its account hereunder not
yet paid, and shall continue to be obligated under Section 10.8 with respect to
obligations and liabilities accruing prior to the termination of such Rejecting
Lender’s Commitment. If, as a result of the termination of the Rejecting
Lender’s Commitment, any payment of a Eurodollar Loan occurs on a day which is
not the last day of the applicable Interest Period, the Borrower shall pay to
the Agent for the benefit of the Lenders (including any Rejecting Lender) any
loss or cost incurred by the Lenders (including any Rejecting Lender) resulting
therefrom in accordance with Section 3.4. Upon the effective date of the
termination of the Rejecting Lender’s Commitment, the Aggregate Commitment
shall be reduced by the amount of the terminated Commitment of the Rejecting
Lender, and each other Lender shall be deemed to have irrevocably and
unconditionally purchased and received (subject to the provisions of the last
sentence of this Section 2.20(c)), without recourse or warranty, from the
Rejecting Lender, an undivided interest and participation in any Facility LC
then outstanding, ratably, such that each Lender (excluding the Rejecting
Lender but including any Replacement Lender that acquires an interest hereunder
from such Rejecting Lender) holds a participation interest in each Facility LC
in proportion to the ratio that such Rejecting Lender’s Commitment (upon the
effective date of such termination of the Rejecting Lender’s Commitment) bears
to the Aggregate Commitment (as reduced by the termination of such Rejecting
Lender’s Commitment or a part thereof). Notwithstanding the foregoing, if,
upon the termination of the Commitment of such Rejecting Lender, the sum of the
outstanding principal balance of the Advances and Swing Line Loans and the LC
Obligations would exceed the Aggregate Commitment (as reduced), the Borrower
may not terminate such Rejecting Lender’s Commitment unless the Borrower, on or
prior to the effective date of such termination, prepays, in accordance with
the provisions of this Agreement, outstanding Advances or Swing Line Loans or
causes to be canceled, released and returned to the applicable LC Issuer
outstanding Facility LCs or deposits cash into the Facility LC Collateral
Account in sufficient amounts in the aggregate such that, on the effective date
of such termination, the sum of the Aggregate Outstanding Credit Exposure and
the amounts held in the Facility LC Collateral Account does not exceed the
Aggregate Commitment (as reduced). In the event that the Borrower makes such
deposit into the Facility LC Collateral Account, such deposits shall be applied
by the Agent to pay to the applicable LC Issuer amounts drawn on any

33

 

Facility LC that are not reimbursed by the Borrower and, provided no
Default has occurred that is continuing, shall be returned to the Borrower when
the Aggregate Outstanding Credit Exposure equals or is less than the Aggregate
Commitment.

     2.21 Replacement of Lender. (a) If the Borrower is required pursuant to
Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any
Lender’s obligation to make or continue, or to convert Floating Rate Loans
into, Eurodollar Loans shall be suspended pursuant to Section 3.3 or a Lender
is a Rejecting Lender (any Lender so affected, an “Affected Lender”), the
Borrower may elect, if such amounts continue to be charged or such suspension
is still effective or if such Affected Lender is a Rejecting Lender, to replace
such Affected Lender as a Lender party to this Agreement, provided that no
Default or Unmatured Default shall have occurred and be continuing at the time
of such replacement, and provided further that, concurrently with such
replacement, (i) another bank or other entity which is reasonably satisfactory
to the Borrower and the Agent shall agree, as of such date, to purchase for
cash the Advances and other Obligations due to the Affected Lender pursuant to
an assignment substantially in the form of Exhibit E and to become a Lender for
all purposes under this Agreement and to assume all obligations of the Affected
Lender to be terminated as of such date and to comply with the requirements of
Section 12.3 applicable to assignments (such bank or other entity, a
“Replacement Lender”), and (ii) the Borrower shall pay to such Affected Lender
in same day funds on the day of such replacement (A) all interest, fees and
other amounts then accrued but unpaid to such Affected Lender by the Borrower
hereunder to and including the date of termination, including without
limitation payments due to such Affected Lender under Sections 3.1, 3.2 and
3.5, and (B) an amount, if any, equal to the payment which would have been due
to such Lender on the day of such replacement under Section 3.4 had the Loans
of such Affected Lender been prepaid on such date rather than sold to the
Replacement Lender. Upon replacement of such Affected Lender and payment of
the amounts provided for in the immediately preceding sentence, the Borrower
shall have no further obligations to such Affected Lender under this Agreement
and such Affected Lender shall cease to be a Lender, provided, however, such
Affected Lender shall continue to be entitled to the benefits of Sections
2.19.10, 2.19.11, 2.19.12, 3.1, 3.2, 3.4, 3.5, 6.8(c), 9.6 and 9.10, as well as
to any fees accrued for its account hereunder and not yet paid, and shall
continue to be obligated under Section 10.8 with respect to obligations and
liabilities accruing prior to such Affected Lender’s replacement..

     (b) In the event that the Affected Lender is a Rejecting Lender, the
Borrower may elect to have a part of the Rejecting Lender’s rights and
obligations under this Agreement and the other Loan Documents assigned pursuant
to this Section 2.21, provided that the Borrower also elects, pursuant to
Section 2.20(b) to terminate the entire amount of such Rejecting Lender’s
Commitment not so assigned, which termination shall be effective on the date on
which such assignment of the Rejecting Lender’s rights and obligations is
consummated under this Section 2.21.

     2.22 Swing Line. (a) The Swing Line Lender agrees, on the terms and
conditions hereinafter set forth, to make loans (“Swing Line Loans”) to the
Borrower from time to time during the period from the date of this Agreement,
up to but not including the Facility Termination Date, in an aggregate
principal amount not to exceed at any time outstanding the lesser of (i) the
Swing Line Commitment or (ii) the Aggregate Available Commitment. The Swing
Line Loan shall be evidenced by a note in the form of Exhibit F hereto (the
“Swing Line

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Note”). Swing Line Loans shall bear interest at the Floating Rate, which
interest shall be payable monthly on each Payment Date.

     (b) Each Swing Line Loan which shall not utilize the Swing Line Commitment
in full shall be in an amount not less than One Million Dollars ($1,000,000)
and, if in excess thereof, in integral multiples of One Hundred Thousand
Dollars ($100,000). Within the limits of the Swing Line Commitment, the
Borrower may borrow, repay and reborrow under this Section 2.22.

     (c) The Borrower shall give the Swing Line Lender notice of any request
for a Swing Line Loan not later than 3:00 p.m. Chicago time on the Business Day
of such Swing Line Loan, specifying the amount of such requested Swing Line
Loan. All notices given by the Borrower under this Section 2.22(c) shall be
irrevocable. Upon fulfillment of the applicable conditions set forth in
Article IV, the Swing Line Lender will make the Swing Line Loan available to
the Borrower in immediately available funds by crediting the amount thereof to
the Borrower’s account with the Swing Line Lender, provided, however, that the
Swing Line Lender shall not make a Swing Line Loan hereunder if it has received
written notice from the Agent, the Borrower or the Required Lenders, prior to
the requested date of such Swing Line Loan, that one or more applicable
conditions contained in Section 4.2 shall not be satisfied.

     (d) Each Swing Line Loan shall be paid in full on or before the fifth
(5th) Business Day following the making of such Swing Line Loan. Payment of a
Swing Line Loan may be effected by an Advance pursuant to Section 2.8. If such
Swing Line Loan is not paid in full by the fifth (5th) Business Day following
the making of such Swing Line Loan, it shall be paid from the proceeds of an
Advance made by the close of the next Business Day pursuant to Section 2.8,
which Advance shall be made by the Lenders upon request by the Agent without
regard to whether a Borrowing Notice is delivered or the conditions to such
Advance under Section 4.2 are satisfied (provided the conditions to the making
of such Swing Line Loan were satisfied). If for any reason such Advance cannot
be made, the Lenders shall, upon notice from the Agent, purchase (without
recourse or warranty) participations equal to their Pro Rata Shares of such
Swing Line Loan.

ARTICLE III

YIELD PROTECTION; TAXES

     3.1 Yield Protection. If, on or after the date of this Agreement, the
adoption of any change in any Requirement of Law or in the interpretation or
administration thereof by any governmental or quasi-governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender or LC Issuer or applicable
Lending Installation with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency:

	 	(i)	 	subjects any Lender or LC Issuer or any
applicable Lending Installation to any Taxes, or changes the
basis of taxation of payments (other than with respect to
Excluded Taxes) to any Lender or LC Issuer in respect of its
Eurodollar Loans, Facility LCs or participations therein, or

35

 

	 	(ii)	 	imposes or increases or deems applicable any
reserve, assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender or LC Issuer
or any applicable Lending Installation (other than reserves
and assessments taken into account in determining the interest
rate applicable to Eurodollar Advances), or
	 
	 	(iii)	 	imposes on such Lender or LC Issuer or any
applicable Lending Installation any other condition,

and the result of any of the foregoing is to increase the cost to such Lender
or LC Issuer or applicable Lending Installation, as the case may be, of making
or maintaining its Eurodollar Loans or Commitment or of issuing or
participating in Facility LCs or to reduce the return received by such Lender
or LC Issuer or applicable Lending Installation, as the case may be, in
connection with such Eurodollar Loans, or Commitment, or Facility LCs or
participations therein, then, within 15 days of demand by such Lender or LC
Issuer, as the case may be, the Borrower shall pay such Lender or LC Issuer, as
the case may be, such additional amount or amounts as will compensate such
Lender or LC Issuer, as the case may be, for such increased cost or reduction
in amount received.

     3.2 Changes in Capital Adequacy Regulations. If a Lender or LC Issuer
determines the amount of capital required or expected to be maintained by such
Lender or LC Issuer, any Lending Installation of such Lender or LC Issuer, or
any corporation controlling such Lender or LC Issuer is increased as a result
of a Change, then, within 15 days of demand by such Lender or LC Issuer, the
Borrower shall pay such Lender or LC Issuer the amount necessary to compensate
for any shortfall in the rate of return on the portion of such increased
capital which such Lender or LC Issuer determines is attributable to this
Agreement, its Outstanding Credit Exposure or its Commitment to make Loans and
issue or participate in Facility LCs, as the case may be, hereunder (after
taking into account such Lender’s or LC Issuer’s policies as to capital
adequacy). The Borrower shall not be required to compensate any Lender
pursuant to this paragraph for any amounts incurred more than 90 days prior to
the date such Lender notifies the Borrower of such Lender’s intention to claim
compensation therefor; provided, however, that if the circumstances giving rise
to such claim have a retroactive effect, then such 90-day period shall be
extended to include the period of such retroactive effect. “Change” means (i)
any change after the date of this Agreement in the Risk-Based Capital
Guidelines or (ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or LC Issuer or any Lending Installation or any
corporation controlling any Lender or LC Issuer. “Risk-Based Capital
Guidelines” means (i) the risk-based capital guidelines in effect in the United
States on the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory authorities outside
the United States implementing the July 1988 report of the Basle Committee on
Banking Regulation and Supervisory Practices Entitled “International
Convergence of Capital Measurements and Capital Standards,” including
transition rules, and any amendments to such regulations adopted prior to the
date of this Agreement.

36

 

     3.3 Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (i) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to Eurodollar Advances does not
accurately reflect the cost of making or maintaining Eurodollar Advances, then
the Agent shall suspend the availability of Eurodollar Advances until the
Lender notifies the Agent and the Borrower that the circumstances giving rise
to such determination no longer exist, and require any affected Eurodollar
Advances to be repaid or converted to Floating Rate Advances, subject to the
payment of any funding indemnification amounts required by Section 3.4, either
on the last day of the Interest Period thereof, if such Lender may lawfully
continue to maintain such Eurodollar Loans, or immediately, if such Lender may
not lawfully continue to maintain such Eurodollar Loans.

     3.4 Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders or there is a failure to make any prepayment on any
date with respect to which a notice of prepayment has been delivered, the
Borrower will indemnify each Lender for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain such Eurodollar
Advance.

     3.5 Taxes. (i) All payments by the Borrower to or for the account of any
Lender, LC Issuer or the Agent hereunder or under any Note or Facility LC
Application shall be made free and clear of and without deduction for any and
all Taxes. If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder to any Lender, LC Issuer or the
Agent, (a) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 3.5) such Lender, LC Issuer or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (b) the Borrower shall make such deductions, (c) the
Borrower shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (d) the Borrower shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within 30 days after
such payment is made.

     (ii) In addition, the Borrower hereby agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under any Note or
Facility LC Application or from the execution or delivery of, or otherwise with
respect to, this Agreement or any Note or Facility LC Application (“Other
Taxes”).

     (iii) The Borrower hereby agrees to indemnify the Agent and each Lender
and LC Issuer for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed on amounts payable under this
Section 3.5) paid by the Agent or such Lender or LC Issuer as a result of its
Commitment, any Loans made by it hereunder, or otherwise in connection with its
participation in this Agreement and any liability (including penalties,

37

 

interest and expenses) arising therefrom or with respect thereto.
Payments due under this indemnification shall be made within 30 days of the
date the Agent or such Lender or LC Issuer makes demand therefor pursuant to
Section 3.6.

     (iv) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof (each a “Non-U.S. Lender”) agrees that it
will, not more than ten Business Days after the date of this Agreement, (i)
deliver to the Agent two duly completed copies of United States Internal
Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such
Lender is entitled to receive payments under this Agreement without deduction
or withholding of any United States federal income taxes, and (ii) deliver to
the Agent a United States Internal Revenue Form W-8 or W-9, as the case may be,
and certify that it is entitled to an exemption from United States backup
withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of
the Borrower and the Agent (x) renewals or additional copies of such form (or
any successor form) on or before the date that such form expires or becomes
obsolete, and (y) after the occurrence of any event requiring a change in the
most recent forms so delivered by it, such additional forms or amendments
thereto as may be reasonably requested by the Borrower or the Agent. All forms
or amendments described in the preceding sentence shall certify that such
Lender is entitled to receive payments under this Agreement without deduction
or withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form or amendment with
respect to it and such Lender advises the Borrower and the Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax.

     (v) For any period during which a Non-U.S. Lender has failed to provide
the Borrower with an appropriate form pursuant to clause (iv), above (unless
such failure is due to a change in treaty, law or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 3.5 with respect to Taxes imposed by the United States; provided
that, should a Non-U.S. Lender which is otherwise exempt from or subject to a
reduced rate of withholding tax become subject to Taxes because of its failure
to deliver a form required under clause (iv), above, the Borrower shall take
such steps as such Non-U.S. Lender shall reasonably request to assist such
Non-U.S. Lender to recover such Taxes.

     (vi) Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Note
pursuant to the law of any relevant jurisdiction or any treaty shall deliver to
the Borrower (with a copy to the Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed
by applicable law as will permit such payments to be made without withholding
or at a reduced rate.

     (vii) If the U.S. Internal Revenue Service or any other governmental
authority of the United States or any other country or any political
subdivision thereof asserts a claim that the Agent did not properly withhold
tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered or properly completed, because such Lender

38

 

failed to notify the Agent of a change in circumstances which rendered its
exemption from withholding ineffective, or for any other reason), such Lender
shall indemnify the Agent fully for all amounts paid, directly or indirectly,
by the Agent as tax, withholding therefor, or otherwise, including penalties
and interest, and including taxes imposed by any jurisdiction on amounts
payable to the Agent under this subsection, together with all costs and
expenses related thereto (including attorneys fees and time charges of
attorneys for the Agent, which attorneys may be employees of the Agent). The
obligations of the Lenders under this Section 3.5(vii) shall survive the
payment of the Obligations and termination of this Agreement.

     3.6 Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of
Eurodollar Advances under Section 3.3, so long as such designation is not, in
the judgment of such Lender, disadvantageous to such Lender. Each Lender shall
deliver a written statement of such Lender to the Borrower (with a copy to the
Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such
written statement shall set forth in reasonable detail the calculations upon
which such Lender determined such amount and shall be final, conclusive and
binding on the Borrower in the absence of manifest error. Determination of
amounts payable under such Sections in connection with a Eurodollar Loan shall
be calculated as though each Lender funded its Eurodollar Loan through the
purchase of a deposit of the type and maturity corresponding to the deposit
used as a reference in determining the Eurodollar Rate applicable to such Loan,
whether in fact that is the case or not. Unless otherwise provided herein, the
amount specified in the written statement of any Lender shall be payable on
demand after receipt by the Borrower of such written statement. The
obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive
payment of the Obligations and termination of this Agreement.

ARTICLE IV

CONDITIONS PRECEDENT

     4.1 Initial Credit Extension. The Lenders shall not be required to make
the initial Credit Extension hereunder unless the Borrower has furnished to the
Agent with sufficient copies for the Lenders:

	 	(i)	 	Copies of the articles or certificate of
incorporation of the Borrower, together with all amendments
thereto, and a certificate of good standing of the Borrower,
each certified by the appropriate governmental officer in its
jurisdiction of incorporation; any other information required
by Section 326 of the USA PATRIOT ACT or necessary for the
Agent or any Lender to verify the identity of Borrower as
required by Section 326 of the USA PATRIOT ACT; and such
comparable documents as Agent may require with respect to the
Guarantors.
	 
	 	(ii)	 	Copies, certified by the Secretary or Assistant
Secretary of the Borrower, of its by-laws and of its Board of
Directors’ resolutions and of resolutions or actions of any
other body authorizing the execution of the Loan

39

 

	 	 	 	Documents to which the Borrower is a party and copies,
certified by the Secretary, Assistant Secretary or comparable
officer of each Guarantor of the Board of Directors’
resolutions and of resolutions or actions of any other party
authorizing the execution of the Guaranty.
	 
	 	(iii)	 	An incumbency certificate, executed by the
Secretary or Assistant Secretary of the Borrower, which shall
identify by name and title and bear the signatures of the
Responsible Officials and any other officers of the Borrower
authorized to sign the Loan Documents to which the Borrower is
a party, upon which certificate the Agent and the Lenders
shall be entitled to rely until informed of any change in
writing by the Borrower; and such comparable certificates as
Agent may require with respect to the Guarantors.
	 
	 	(iv)	 	A certificate, signed by the chief financial
officer of the Borrower, stating that on the initial Credit
Extension Date no Default or Unmatured Default has occurred
and is continuing.
	 
	 	(v)	 	Written opinions of the Borrower’s and
Guarantor’s counsel, addressed to the Lenders in substantially
the forms of Exhibits G-1 and G-2.
	 
	 	(vi)	 	The Swing Line Note and any Notes requested by a
Lender pursuant to Section 2.13 payable to the order of each
such requesting Lender.
	 
	 	(vii)	 	Written money transfer instructions, in
substantially the form of Exhibit H, addressed to the Agent
and signed by a Responsible Official, together with such other
related money transfer authorizations as the Agent may have
reasonably requested.
	 
	 	(viii)	 	Evidence satisfactory to the Agent that all Indebtedness
(other than the Existing LCs) under the Existing Credit
Agreement shall have been simultaneously paid in full and the
Existing Credit Agreement shall have been terminated.
	 
	 	(ix)	 	Such other documents as the Agent or its counsel
may have reasonably requested.

     4.2 Each Credit Extension. The Lenders, LC Issuer and Swing Line Lender
shall not be required to make any Credit Extension unless on the applicable
Credit Extension Date:

	 	(i)	 	There exists no Default or Unmatured Default.
	 
	 	(ii)	 	The representations and warranties contained in
Article V are true and correct as of such Credit Extension
Date except to the extent any such representation or warranty
is stated to relate solely to an earlier date, in which case
such representation or warranty shall have been true and
correct on and as of such earlier date.

40

 

Each Borrowing Notice with respect to each such Advance or request for issuance
of a Facility LC or request for a Swing Line Loan shall constitute a
representation and warranty by the Borrower that the conditions contained in
Sections 4.2(i) and (ii) have been satisfied. Notwithstanding the foregoing,
in the case of a Loan (provided for in Section 2.22(d)) made to repay a Swing
Line Loan, the satisfaction of the foregoing conditions with respect to such
Swing Line Loan shall constitute satisfaction of such conditions with respect
to the Loan to be made to repay such Swing Line Loan as provided for in Section
2.22(d).

ARTICLE V

REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Lenders that:

     5.1 Incorporation, Qualification, Powers and Capital Stock. The Borrower
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Maryland. The Borrower is duly qualified to do
business as, and is in good standing as, a foreign corporation in each
jurisdiction in which the conduct of its business or the ownership or leasing
of its properties makes such qualification necessary except where the failure
to do so would not reasonably be expected to have a Material Adverse Effect.
The Borrower has all requisite power and authority to conduct its business and
to own and lease its properties.

     5.2 Execution, Delivery and Performance of Loan Documents.

          (a) The Borrower has all requisite corporate power and authority to
execute and deliver, and to perform all of its obligations under, the Loan
Documents to which it is a party.

          (b) Each Guarantor has all requisite corporate, partnership or limited
liability company power and authority to execute and deliver, and to perform
all of its obligations under, the Guaranty.

          (c) The execution and delivery by the Borrower of, and the performance by
the Borrower of each of its obligations under, each Loan Document to which it
is a party and the execution and delivery by each Guarantor of, and the
performance by each Guarantor of each of its obligations under, the Guaranty,
have been duly authorized by all necessary action and do not and will not: (1)
require any consent or approval not heretofore obtained of any stockholder,
security holder or creditor of the Borrower, any Subsidiary or any Guarantor;
(2) violate any provision of the articles or certificate of incorporation or
formation or bylaws, partnership agreement or operating agreement of the
Borrower or any Guarantor or any provision of the articles or certificate of
incorporation or formation, bylaws or partnership agreement or operating
agreement of any Subsidiary; (3) result in or require the creation or
imposition of any Lien, claim or encumbrance (except to the extent that any
Lien is created under this Agreement) upon or with respect to any Property now
owned or leased or hereafter acquired by the Borrower, any Subsidiary or any
Guarantor; (4) violate any provision of any Law, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower, any Subsidiary or any Guarantor; or (5) result
in a breach of or constitute a default

41

 

under, or cause or permit the acceleration of any obligation owed under,
any Material Indebtedness Agreement.

          (d) Neither the Borrower nor any Subsidiary or Guarantor is in default
under any Law, order, writ, judgment, injunction, decree, determination or
award described in Section 5.2(c)(4) or any Material Indebtedness Agreement
that in either case has a Material Adverse Effect.

          (e) No authorization, consent, approval, order, license, permit or
exemption from, or filing, registration or qualification with, any Governmental
Authority not heretofore obtained is or will be required under applicable Law
to authorize or permit the execution and delivery by the Borrower or any
Guarantor of, and the performance by the Borrower or any Guarantor of all of
its obligations under, the Loan Documents.

          (f) Each of the Loan Documents to which the Borrower is a party, when
executed and delivered, will constitute the legal, valid and binding
obligations of the Borrower, and the Guaranty, when executed and delivered,
will constitute the legal, valid and binding obligations of each Guarantor,
enforceable against it in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium
or other similar laws relating to or affecting creditors’ rights generally or
equitable principles relating to the granting of specific performance or other
equitable remedies as a matter of judicial discretion.

     5.3 Compliance with Laws and Other Requirements. The Borrower (i) is in
compliance in all material respects with all Laws and other requirements
applicable to its business and (ii) has obtained all material authorizations,
consents, approvals, orders, licenses, permits and exemptions from, and has
accomplished all material filings, registrations or qualifications with, any
Governmental Authority that is necessary for the transaction of its business,
except in the case of either (i) or (ii) where such noncompliance would not
reasonably be expected to have a Material Adverse Effect.

     5.4 Subsidiaries.

          (a) Schedule 5.4 hereto correctly sets forth the names and jurisdictions
of incorporation or formation of all Subsidiaries and joint ventures in which
the Borrower or any of its Subsidiaries has an investment as of the date of
this Agreement, and the Subsidiaries that, as of the date of this Agreement,
are Restricted Subsidiaries are designated as such on Schedule 5.4. Except as
described in Schedule 5.4 (as updated on a quarterly basis pursuant to a notice
given at the same time as the Compliance Certificate pursuant to Section
6.2(b)), the Borrower does not own any capital stock or ownership interest in
any Person other than the Subsidiaries and real estate joint ventures
(including limited liability companies and partnerships) in which the Borrower
or any Guarantor has an interest. All outstanding shares of capital stock or
ownership interests, as the case may be, of each Subsidiary and each such real
estate joint venture that are owned by the Borrower or any Subsidiary are (1)
owned of record and beneficially by the Borrower or by one or more
Subsidiaries, free and clear of all Liens, claims, encumbrances and rights of
others, and (2) duly authorized, validly issued, fully paid, nonassessable
(except for capital calls or contribution requirements in connection with
ownership interests in such joint

42

 

ventures), and issued in compliance with all applicable state and federal
securities and other Laws. The Borrower may update Schedule 5.4 from time to
time by sending written notice to the Agent.

          (b) Each Restricted Subsidiary is a corporation, partnership or limited
liability company duly incorporated or formed, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation or
formation. Each Restricted Subsidiary is duly qualified to do business as, and
is in good standing as, a foreign corporation, partnership or limited liability
company in each jurisdiction in which the conduct of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to do so would not reasonably be expected to result in
a Material Adverse Effect. Each Restricted Subsidiary has all requisite
corporate, partnership or limited liability company power and authority to
conduct its business and to own and lease its properties.

          (c) Each Restricted Subsidiary (i) is in compliance in all material
respects with all Laws and other requirements applicable to its business and
(ii) has obtained all material authorizations, consents, approvals, orders,
licenses, permits and exemptions from, and has accomplished all material
filings, registrations or qualifications with, any Governmental Authority that
are necessary for the transaction of its business, except in the case of either
(i) or (ii) where the failure to do so would not reasonably be expected to
result in a Material Adverse Effect.

     5.5 Financial Statements of the Borrower and its Consolidated
Subsidiaries. The consolidated balance sheets of the Company and its
consolidated Subsidiaries as at December 31, 2003 and the related consolidated
statements of income and cash flows for the fiscal year ended on such date,
reported on by Ernst & Young LLP, copies of which have heretofore been
furnished to each Lender, present fairly the consolidated financial condition
of the Borrower and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and changes in cash flows for the
fiscal year then ended. The unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at March 31, 2004 and the related
unaudited consolidated statements of income and of cash flows for the
three-month period ended on such date, certified by a Responsible Official,
copies of which have heretofore been furnished to each Lender, present fairly
the consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and changes in cash flows for the three-month period then ended (subject to
normal year-end audit adjustments). All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP throughout the periods involved (except as approved by such accountants or
Responsible Official, as the case may be, and as disclosed therein and except
the quarterly statements are unaudited and do not include footnotes as would be
required for audited financial statements).

     5.6 No Material Adverse Change. There has been no change in the
condition, financial or otherwise, of the Borrower and the Subsidiaries, taken
as a whole, from the financial condition of the Borrower and the Subsidiaries,
taken as a whole, since December 31, 2003 which would reasonably be expected to
have a Material Adverse Effect, and the Borrower and the Subsidiaries, taken as
a whole, do not have any material liability or, to the best knowledge of the
Borrower, material contingent liability not reflected or disclosed in the
financial statements

43

 

or notes thereto described in Section 5.5 (or, to the extent that
financial statements have been delivered pursuant to Section 6.1, in the most
recently delivered financial statements), or otherwise disclosed to the Agent
and the Lenders in writing.

     5.7 Tax Liability. The Borrower and each Subsidiary have filed all tax
returns (federal, state and local) required to be filed by them and have paid
all material taxes shown thereon to be due and all property taxes due,
including interest and penalties, if any. To the best knowledge of the
Borrower, there does not exist any substantial likelihood that any Governmental
Authority will assert a tax deficiency against the Borrower or any Subsidiary
that is material to the Borrower and the Subsidiaries, taken as a whole, that
has not been adequately reserved against in the financial statements described
in Section 5.5 (or, to the extent that financial statements have been delivered
pursuant to Section 6.1, in the most recently delivered financial statements).
The Borrower and each Subsidiary have established and are maintaining adequate
reserves for tax liabilities, if any, sufficient to comply with GAAP.

     5.8 Litigation. There are no actions, suits or proceedings pending or, to
the best knowledge of the Borrower, threatened against or affecting the
Borrower or any Restricted Subsidiary, or any Property of the Borrower or any
Restricted Subsidiary, before any Governmental Authority in which there is a
reasonable possibility of a decision adverse to the Borrower or a Restricted
Subsidiary and which, if determined adversely to the Borrower or the Restricted
Subsidiary, could reasonably be expected to have a Material Adverse Effect.

     5.9 ERISA. Neither a Reportable Event nor an “accumulated funding
deficiency” (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan
(based on those assumptions used to fund such Plans) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits to an extent which could reasonably be expected to have a
Material Adverse Effect. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan
which could reasonably be expected to have a Material Adverse Effect, and
neither the Borrower nor any Commonly Controlled Entity would become subject to
any liability under ERISA in an amount which could reasonably be expected to
have a Material Adverse Effect if the Borrower or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. To the knowledge of the Borrower or any Commonly
Controlled Entity, no such Multiemployer Plan for which the Borrower or any
Subsidiary could reasonably be expected to have a material liability is in
Reorganization or Insolvent. The present value (determined using actuarial and
other assumptions which are reasonable in respect of the benefits provided and
the employees participating) of the liability of the Borrower and each Commonly
Controlled Entity for post retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits by an amount in excess of $5,000,000.

44

 

     5.10 Regulations U and X. Neither the Borrower nor any Subsidiary is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of “purchasing” or “carrying” any “margin
stock” within the meanings of Regulation U. No part of the Advances or the
Facility LCs will be used to purchase or carry any margin stock, or to extend
credit to others for that purpose, or for any purpose that violates the
provisions of Regulations U or X.

     5.11 No Default or Unmatured Default. No Default or Unmatured Default has
occurred and is continuing.

     5.12 Ownership of Property; Liens. Each of the Borrower and its
Restricted Subsidiaries has good record and marketable title in fee simple to,
or a valid leasehold interest in, all its real property, and good title to all
its other Property, except for defects in title that do not interfere in any
material respect with its ability to conduct its business as currently
conducted or to utilize such Properties for their intended purposes, and none
of such Property is subject to any Lien except as permitted by Section 6.12.
Each of the Borrower and its Restricted Subsidiaries has good record and
marketable title in fee simple to all Real Estate Inventory included in the
Borrowing Base, except for defects in title that do not interfere in any
material respect with its ability to conduct its business as currently
conducted or to utilize such properties for their intended purposes.

     5.13 Environmental Matters. Except to the extent that all of the
following, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect:

          (a) To the knowledge of the Borrower, no Property of the Borrower or any
of its Subsidiaries contains or has previously contained any Materials of
Environmental Concern in amounts or concentrations which (1) constitute or
constituted a violation of, or (2) could reasonably be expected to give rise to
liability under, any Environmental Law.

          (b) To the knowledge of the Borrower, the Properties of the Borrower and
its Subsidiaries and all operations at such Properties are in compliance, and,
to the extent of the Borrower’s and its Subsidiaries’ involvement with the
Properties, have heretofore been in compliance, in all material respects with
all applicable Environmental Laws, and there is no contamination at, under or
about such Properties or violation of any Environmental Law with respect to
such Properties or the business operated by the Borrower or any of its
Subsidiaries (the “Business”).

          (c) Neither the Borrower nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental Laws
with regard to any of the Properties of the Borrower and its Subsidiaries or
the Business, nor does the Borrower have knowledge or reason to believe that
any such notice will be received or is being threatened.

          (d) To the knowledge of the Borrower, Materials of Environmental Concern
have not been transported or disposed of from the Properties of the Borrower
and its Subsidiaries while owned or operated by the Borrower or any of its
Subsidiaries in violation of, or in a manner or to a location which could
reasonably be expected to give rise to liability under, any

45

 

Environmental Law, nor have any Materials of Environmental Concern been
generated, treated, stored or disposed of at, on or under any of such
Properties in violation of, or in a manner that could reasonably be expected to
give rise to liability under, any applicable Environmental Law.

          (e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be named
as a party with respect to the Properties of the Borrower and its Subsidiaries
or the Business, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
such Properties or the Business.

          (f) To the knowledge of the Borrower, there has been no release or threat
of release of Materials of Environmental Concern at or from the Properties of
the Borrower and its Subsidiaries, or arising from or related to the operations
of the Borrower or any Subsidiary in connection with such Properties or
otherwise in connection with the Business, in violation of, or in amounts or in
a manner that could reasonably give rise to liability under, Environmental
Laws.

     5.14 Investment Company Act. 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.

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

     5.16 Reportable Transaction. The Borrower does not intend to treat the
Advances and the other transactions contemplated hereby as being a “reportable
transaction” (within the meaning of Treasury Regulation Section 1.6011-4). In
the event the Borrower determines to take any action inconsistent with such
intention, it will promptly notify the Agent thereof. The Borrower
acknowledges that the Agent and/or one or more of the Lenders may treat its
Advances and the other transactions contemplated hereby as part of a
transaction that is subject to Treasury Regulation Section 1.6011-4 or Section
301.6112-1, and the Agent and such Lender or Lenders, as applicable, may file
such IRS forms or maintain such lists and other records as they may determine
is required by such Treasury Regulations.

     5.17 Subordinated Indebtedness. The Obligations constitute senior
Indebtedness which is entitled to the benefits of the subordination provisions
of all outstanding Subordinated Indebtedness.

ARTICLE VI

COVENANTS

     During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:

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     6.1 Financial Statements. The Borrower shall cause to be delivered to the
Agent, in form and detail satisfactory to the Agent (for prompt distribution by
the Agent to the Lenders):

          (a) as soon as available, but in any event within 90 days after the end of
each fiscal year of the Borrower, copies of the consolidated balance sheets of
the Borrower and its consolidated Subsidiaries as at the end of such year and
the related consolidated statements of income and retained earnings and changes
in cash flows for such year, setting forth in each case in comparative form the
figures for the previous year, reported on without a “going concern” or like
qualification or exception, or qualification arising out of the scope of the
audit (other than qualifications related to the incorporation of reports by
other independent certified public accountants), by Ernst & Young LLP or other
independent certified public accountants of nationally recognized standing
reasonably acceptable to the Required Lenders; and

          (b) as soon as available, but in any event not later than 45 days after
the end of each of the first three quarterly periods of each fiscal year of the
Borrower, the unaudited consolidated balance sheets of the Borrower and its
consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and retained earnings and changes
in cash flows of the Borrower and its consolidated Subsidiaries for such
quarter and the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures for the previous
year, certified by a Responsible Official as being fairly stated in all
material respects when considered in relation to the consolidated financial
position of the Borrower and its consolidated Subsidiaries (subject to normal
year-end audit adjustments);

all such financial statements to be prepared in accordance with GAAP throughout
the periods reflected therein and with prior periods (except as approved by
such accountants or officer, as the case may be, and disclosed therein).

     6.2 Certificates; Other Information. The Borrower shall cause to be
delivered to the Agent, in form and detail satisfactory to the Agent (for
prompt distribution by the Agent to the Lenders):

          (a) concurrently with the delivery of the financial statements referred to
in Section 6.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or
Unmatured Default, except as specified in such certificate;

          (b) concurrently with the delivery of the financial statements referred to
in Sections 6.1(a) and 6.1(b), a Compliance Certificate in substantially the
form of Exhibit I hereto executed by a Responsible Official, stating that, to
the best of such officer’s knowledge, the Borrower during such period has
observed or performed all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and in the Notes to be observed,
performed or satisfied by it (and containing calculations demonstrating
compliance with Sections 6.17(f), 6.24, 6.25, 6.26, 6.28 and 6.29 and such
other financial information as requested by the Agent), and that such officer
has obtained no knowledge of any Default or Unmatured Default except as
specified in such certificate;

47

 

          (c) not later than 90 days after the end of each fiscal year of the
Borrower, a copy of the projections by the Borrower of the operating budget and
cash flow budget of the Borrower and its Subsidiaries for the succeeding two
fiscal years and the projected consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such succeeding fiscal years, such
projections to be accompanied by a certificate of a Responsible Official to the
effect that while such Responsible Official has no reason to believe such
projections are incorrect or misleading in any material respect, such
projections are based upon assumptions that may not materialize or may change
adversely due to factors related to the Borrower’s business or industry, and
unanticipated events and circumstances may occur subsequent to the date of such
projections, such that the actual results achieved may vary from such
projections, and such variations may be material, and that the Borrower is
under no obligation to update such projections;

          (d) promptly upon their becoming available, but in any event no later than
10 days after the same are sent, copies of all financial statements, reports,
notices and proxy statements sent or made available generally by the Borrower
to its stockholders, or by any Restricted Subsidiary of the Borrower to its
stockholders (other than the Borrower or any Subsidiary of the Borrower), of
all regular and periodic reports and all registration statements (excluding
exhibits thereto and Registration Statements on Form S-8) and prospectuses, if
any, filed by the Borrower or any of its Restricted Subsidiaries with any
securities exchange or with the Securities and Exchange Commission or any
successor or analogous Governmental Authority; and all press releases and other
statements made available generally by the Borrower or any of its Restricted
Subsidiaries to the public concerning material developments in the business of
the Borrower and any of its Restricted Subsidiaries;

          (e) promptly, such additional financial and other information as any
Lender may from time to time reasonably request;

          (f) as soon as practicable, but in no event later than 30 days after the
end of each month, a Borrowing Base Certificate certifying in reasonable detail
the Borrowing Base as of the last day of such month, which certificate shall be
complete and correct as of the date thereof;

          (g) within 270 days after the close of each fiscal year, a statement of
the Unfunded Liabilities of each Single Employer Plan, certified as correct by
an actuary enrolled under ERISA;

          (h) as soon as possible and in any event within 10 days after the Borrower
knows that any Reportable Event has occurred with respect to any Plan, a
statement, signed by the chief financial officer of the Borrower, describing
said Reportable Event and the action which the Borrower proposes to take with
respect thereto; and

          (i) as soon as possible and in any event within 10 days after receipt by
the Borrower, a copy of (i) any notice or claim to the effect that the Borrower
or any of its Subsidiaries is or may be liable to any Person as a result of the
release by the Borrower, any of its Subsidiaries, or any other Person of any
Materials of Environmental Concern into the environment, and (ii) any notice
alleging any violation of any Environmental Law by the

48

 

Borrower or any of its Subsidiaries, which, in either case, could
reasonably be expected to have a Material Adverse Effect.

     If any information which is required to be furnished to the Lenders under
Section 6.1 or this Section 6.2 is required by law or regulation to be filed by
the Borrower with a government body on an earlier date, then the information
required hereunder shall be furnished to the Lenders at such earlier date.

     6.3 Payment of Obligations. The Borrower and each Restricted Subsidiary
shall pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, all obligations of whatever nature which
if not so paid could reasonably be expected to have a Material Adverse Effect,
except where the amount or validity thereof is currently being contested in
good faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Borrower or its
Subsidiaries, as the case may be.

     6.4 Conduct of Business and Maintenance of Existence. The Borrower and
the Restricted Subsidiaries, taken as a whole, shall at all times remain
principally engaged in the business conducted as of the date of this Agreement
by the Borrower and the Restricted Subsidiaries, and, in all respects material
to the business of the Borrower and the Restricted Subsidiaries taken as a
whole, the Borrower shall, and shall cause each of the Restricted Subsidiaries
to, preserve, renew and keep in full force and effect its corporate existence
and take all reasonable action to maintain all rights, privileges and
franchises required for the normal conduct of such business, except (a) as
otherwise permitted pursuant to Section 6.14 and (b) the Borrower shall not be
required to preserve any such right, privilege or franchise if the Borrower
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Borrower or any Subsidiary and that the loss
thereof could not reasonably be expected to have a Material Adverse Effect.
The Borrower shall, and shall cause each Restricted Subsidiary to, comply with
all Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not reasonably be expected to have a Material
Adverse Effect.

     6.5 Maintenance of Property; Insurance.

          (a) The Borrower and each Restricted Subsidiary shall keep in all material
respects all Property useful and necessary in its business in good working
order and condition (provided, however, that nothing in this Section 6.5 shall
prevent the Borrower from discontinuing the operation or maintenance, or both
the operation and maintenance, of any of such Properties if such discontinuance
is, in the judgment of the Borrower, desirable in the conduct of its business
or the business of any Subsidiary and could not reasonably be expected to have
a Material Adverse Effect).

          (b) The Borrower and each Restricted Subsidiary shall maintain insurance
for their respective Properties and businesses, (1) with financially sound and
reputable insurance companies or associations, and (2) of such types (including
insurance against theft and fraud and against loss or damage by fire, flood,
explosion or hazard of or to property and general public liability insurance),
in such amounts and with such deductibles, covering such casualties and
contingencies and otherwise on such terms as those usually carried by companies
of established

49

 

reputations engaged in similar businesses and owning similar properties
and assets in the same general areas in which the Borrower or its applicable
Subsidiary operates or as may otherwise be required by applicable Requirements
of Law. The Borrower shall furnish to each Lender, upon written request,
reasonable information as to the insurance carried.

     6.6 Inspection of Property: Books and Records: Discussions. The Borrower
and each Restricted Subsidiary shall in all material respects keep proper books
of records and account in which full, true and correct entries in conformity
with GAAP and all Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities; and permit
representatives of any Lender, at such Lender’s expense prior to the occurrence
of a Default and at the Borrower’s expense after the occurrence and during the
continuance of a Default, to visit and inspect as reasonably requested any of
its Properties and the Properties of the joint ventures in which the Borrower
or any Guarantor participates or manages and examine and make abstracts from
any of its books and records at any reasonable time and as often as may
reasonably be desired and to discuss the business, operations, Properties and
financial and other condition of the Borrower and its Subsidiaries and such
joint ventures in which the Borrower or any Guarantor participates or manages,
as reasonably requested with officers and employees of the Borrower and its
Subsidiaries and with its independent certified public accountants.

     6.7 Notices. The Borrower will promptly give notice to the Agent and each
Lender of:

          (a) the occurrence of any Default or Unmatured Default;

          (b) any (1) default or event of default under any Contractual Obligation
of the Borrower or any of its Restricted Subsidiaries or (2) litigation,
investigation or, proceeding which may exist at any time between the Borrower
or any of its Restricted Subsidiaries and any Governmental Authority, which, in
the case of either clause (1) or clause (2), reasonably could be expected to
have a Material Adverse Effect;

          (c) any litigation or proceeding affecting the Borrower or any of its
Restricted Subsidiaries (1) in which the amount involved and not covered by
insurance is $10,000,000 or more or (2) in which injunctive or similar relief
is sought which reasonably could be expected to have a Material Adverse Effect;

          (d) the following events, as soon as possible and in any event within 30
days after the Borrower knows or has reason to know thereof: (1) the occurrence
of any Reportable Event with respect to any Plan which must be reported to the
applicable governmental authorities, or any withdrawal from, or the
termination, Reorganization or Insolvency of any Multiemployer Plan; or (2) the
institution of proceedings or the taking of any other action by the PBGC or the
Borrower or any Commonly Controlled Entity or any Multiemployer Plan with
respect to the withdrawal from, or the terminating, Reorganization or
Insolvency of, any Plan; and

          (e) any event or occurrence which has a Material Adverse Effect.

50

 

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Official setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.

     6.8 Environmental Laws.

          (a) The Borrower , each Restricted Subsidiary and each joint venture in
which the Borrower or any Restricted Subsidiary participates or manages shall
comply and insure compliance by all tenants and subtenants, if any, with all
Environmental Laws and obtain and comply in all material respects with and
maintain, and insure that all tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals, registrations or permits required by
Environmental Laws, except in each case to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect.

          (b) The Borrower, each Restricted Subsidiary and each such joint venture
shall conduct and complete all investigations, studies, sampling and testing,
and all remedial, removal and other actions required under Environmental Laws
and promptly comply in all material respects with all lawful orders and
directives of all Governmental Authorities respecting Environmental Laws,
except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings could not
reasonably be expected to have a Material Adverse Effect.

          (c) The Borrower shall defend, indemnify and hold harmless the Agent and
the Lenders, and their respective employees, agents, officers and directors,
from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation by the Borrower or any of its Subsidiaries of or their noncompliance
with, any Environmental Laws, or any orders, requirements or demand of
Governmental Authorities related thereto, including reasonable attorney and
consultant fees, investigation and laboratory fees, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of the party seeking indemnification therefor.
The agreements contained in this clause (c) shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder or under any other Loan Document.

     6.9 Guaranties from Future Subsidiaries; Release of Guarantors. (a) The
Borrower shall promptly secure the execution and delivery of the Guaranty (or a
Supplemental Guaranty) to the Agent for the benefit of the Lenders from each
Subsidiary, whether now existing or formed and organized after the date hereof,
if such Subsidiary is a Wholly-Owned Subsidiary of the Borrower and is included
in the Homebuilding Segment; provided that a Subsidiary whose sole purpose is
to serve as a joint venturer, partner, member or shareholder in a joint
venture, partnership, limited liability company or corporation that includes
one or more joint venturers, partners, members or shareholders that are not
Affiliates of Borrower shall not be required to deliver a Guaranty. Each such
Subsidiary that does not deliver the Guaranty on the Closing Date shall execute
and deliver a Supplemental Guaranty within 30 days after it meets the criteria
set forth in the preceding sentence. Concurrently with the execution and
delivery by such a Subsidiary of a Supplemental Guaranty, the Borrower will
deliver to the Agent such legal

51

 

opinions and evidence of corporate or other action and authority in
respect thereof as shall be reasonably requested by the Agent.

          (b) In the event that any Guarantor ceases to be a Wholly-Owned Subsidiary
of the Borrower in the Homebuilding Segment, the Borrower may request the
release of such Guarantor from its obligations under its Guaranty, and provided
no Default or Unmatured Default exists, the Agent shall deliver to the Borrower
a written release of such Guarantor from its obligations under the Guaranty and
shall so notify the Lenders.

          (c) Borrower shall not cause or permit the voting securities or other
ownership interests of any Subsidiary in the Homebuilding Segment to be less
than 100% owned and controlled, directly or indirectly, by the Borrower except
for a legitimate business purpose unrelated to whether such Subsidiary is
required to be a Guarantor hereunder.

     6.10 Use of Proceeds. The Borrower shall, and shall cause each Subsidiary
to, use the proceeds of the Credit Extensions for repayment of the obligations
under the Existing Credit Agreement and for general corporate purposes,
including Acquisitions (that are not hostile) in the same or similar lines of
business. The Borrower will not, nor will it permit any Subsidiary to, use any
of the proceeds of the Advances to purchase or carry any “margin stock” (as
defined in Regulation U).

     6.11 Taxes. The Borrower shall, and shall cause each Subsidiary to,
timely file complete and correct United States federal and applicable foreign,
state and local tax returns required by law and pay when due all taxes,
assessments and governmental charges and levies upon it or its income, profits
or Property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside in accordance with GAAP.

     6.12 Limitation on Liens. Neither the Borrower nor any Restricted
Subsidiary will create, incur, assume or suffer to exist any Lien of any nature
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, except for:

          (a) Liens for taxes not yet due or which are being contested in good faith
by appropriate proceedings, provided that adequate reserves with respect
thereto are maintained on the books of the Borrower or its Subsidiaries, as the
case may be, in conformity with GAAP;

          (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or
other like Liens arising in the ordinary course of business which are not
overdue for a period of more than 60 days or which are being contested in good
faith by appropriate proceedings;

          (c) pledges or deposits in connection with workers’ compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;

          (d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;

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          (e) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount and which do not in any case materially detract from the
value of the Property subject thereto or materially interfere with the ordinary
conduct of the business of the Borrower or such Subsidiary;

          (f) Liens securing Non-Recourse Indebtedness of the Borrower and its
Subsidiaries incurred to finance the acquisition, construction or development
of Real Estate Inventory or Liens securing Indebtedness of the Borrower and its
Subsidiaries incurred to finance the construction or acquisition of fixed or
capital assets or a Refinancing Indebtedness with respect to any of such
Indebtedness, provided that (1) such Liens shall be created within 180 days
after (A) the acquisition of such Real Estate Inventory or (B) the acquisition
or completion of construction of fixed or capital assets (or, in the case of
Refinancing Indebtedness with respect thereto, such Liens shall be renewals or
replacements of Liens created within such 180-day time period) and (2) such
Liens do not at any time encumber any Property other than the Property financed
by such Indebtedness;

          (g) Liens on the property or assets of a corporation or other entity which
becomes a Subsidiary or which is merged into the Borrower or a Subsidiary after
the date hereof securing Indebtedness of such corporation or other entity,
provided that (1) such Liens existed at the time such corporation or other
entity became a Subsidiary or was so merged and were not created in
anticipation thereof, (2) any such Lien is not spread to cover any additional
Property of such corporation or other entity after the time such corporation or
other entity becomes a Subsidiary or is so merged, and (3) the amount of
Indebtedness secured thereby is not increased;

          (h) Liens on assets of the Financial Services Segment securing
Indebtedness of the Financial Services Segment for which neither the Borrower
nor any Guarantor has any liability except as permitted by clauses (a) and (c)
of Section 6.13; and

          (i) Judgment and other similar Liens arising in connection with court
proceedings except Liens arising from judgments that constitute a Default under
Section 7.9.

     6.13 Limitation on Guarantee Obligations. Neither the Borrower nor any
Restricted Subsidiary will create, incur, assume or suffer to exist any
Guarantee Obligation except:

          (a) the Borrower and any Guarantor may incur Guarantee Obligations, not to
exceed $10,000,000 in the aggregate at any time, in respect of reimbursement
obligations with respect to Letters of Credit and guarantee or surety bonds
issued for the benefit of the Ryland Financial Division in the ordinary course
of business;

          (b) the entities within the Financial Services Segment may incur Guarantee
Obligations;

          (c) the Borrower and any Guarantor may incur Guarantee Obligations in
respect of reimbursement obligations with respect to (i) Letters of Credit and
completion bonds issued for the account of the Borrower or any Guarantor in the
ordinary course of business of the Homebuilding Segment in respect of
construction projects undertaken by it and (ii) Letters of

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Credit issued for the account of the Borrower or any Guarantor for the
benefit of employee benefit or employee insurance programs of the Borrower or
any of its Subsidiaries;

          (d) Subsidiaries of the Borrower may incur Guarantee Obligations in
respect of the Specified Debt, provided that simultaneously with the execution
and delivery of any guaranty in respect thereof by any Subsidiary, such
Subsidiary shall execute and deliver a Supplemental Guaranty if it is not
already a Guarantor; and

          (e) the Borrower and any Guarantor may incur Guarantee Obligations for the
benefit of the Borrower and Subsidiaries, joint ventures and other entities in
each case in the Homebuilding Segment.

     6.14 Limitations on Fundamental Changes. Neither the Borrower nor any
Restricted Subsidiary will enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, all or substantially all of its property, business or
assets, except:

          (a) any Restricted Subsidiary of the Borrower may be merged or
consolidated (i) with or into the Borrower, provided that the Borrower shall be
the continuing or surviving corporation, or (ii) with or into any one or more
Restricted Subsidiaries of the Borrower, provided that the Restricted
Subsidiary or Restricted Subsidiaries shall be the continuing or surviving
entity and that, if either Subsidiary was a Guarantor, the continuing or
surviving entity shall also be a Guarantor or become a Guarantor on the
effective date of such merger or consolidation;

          (b) the Borrower or any Restricted Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any other Restricted Subsidiary of the Borrower;
provided that, if the transferor is the Borrower or a Guarantor, the transferee
shall be the Borrower or shall be a Guarantor or become a Guarantor on the
effective date of such merger or consolidation;

          (c) any Restricted Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets to the Borrower or any Restricted
Subsidiary of the Borrower, whether existing on or created after the date of
this Agreement, provided that if the transferor is a Guarantor, the transferee
shall be the Borrower or a Guarantor; and

          (d) sales, conveyances, leases, assignments, transfers or other
dispositions of property, business or assets permitted under Section 6.15.

     6.15 Limitations on Sales of Assets. Neither the Borrower nor any
Restricted Subsidiary will convey, sell, lease, assign, transfer or otherwise
dispose of any of its Property or business (including stock of Subsidiaries,
receivables and leasehold interests), whether now owned or hereafter acquired,
except:

          (a) obsolete or worn out property disposed of in the ordinary course of
business;

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          (b) the sale of inventory in the ordinary course of business, including
sale-leasebacks of model homes;

          (c) the sale or discount of accounts receivable arising in the ordinary
course of business in connection with the compromise or collection thereof;

          (d) the sale or discount without recourse of mortgage loan receivables;

          (e) the sale by the Financial Services Segment of its rights under loan
servicing portfolios;

          (f) as permitted by Section 6.14 (other than pursuant to clause (d)
thereof);

          (g) the sale of mortgages and mortgage-backed or other securities by the
Financial Services Segment;

          (h) the sale, transfer or other disposition of any stock, property or
assets of the Limited-Purpose Subsidiaries;

          (i) the sale, transfer or other disposition of Cash Equivalents; and

          (j) any other sale or disposition of Property (including stock or Property
of Subsidiaries), provided that the aggregate book value of all assets so sold
or disposed of pursuant to this clause (j) in any period of twelve (12)
consecutive months shall not exceed 10% of the book value of the consolidated
total assets of the Borrower and its Subsidiaries (excluding the assets of the
Limited Purpose Subsidiaries) as at the beginning of such twelve (12) month
period.

     6.16 Limitation on Dividends. The Borrower will not declare or pay any
dividend (other than dividends payable solely in Common Stock of the Borrower)
on, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of stock of the Borrower or any
warrants or options to purchase any such stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary (such declarations, payments, setting apart, purchases,
redemptions, defeasances, retirements, acquisitions and distributions being
herein called “Restricted Payments”), except that the Borrower may make any
Restricted Payment so long as, after giving effect thereto, no Default or
Unmatured Default will be in existence.

     6.17 Limitation on Investments. Neither the Borrower nor any Restricted
Subsidiary will make any Investments, except:

          (a) extensions of trade credit and other payables in the ordinary course
of business and extensions of non-material advances for Improvements to
property not then owned by the Borrower in the ordinary course of business,
provided that the Borrower shall give notice to the Lenders of any such
non-material advances aggregating in excess of $20,000,000 in any fiscal
quarter;

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          (b) Investments in Cash Equivalents;

          (c) Acquisitions by the Borrower or any of its Restricted Subsidiaries
within the Homebuilding Segment of assets constituting a business unit or the
capital stock of any Person, provided that such business unit or Person is
engaged in the same general type of business as conducted by the Borrower or
one of its Restricted Subsidiaries and provided, further, that before any such
Acquisition and after giving effect thereto, no Default or Unmatured Default
shall be in existence and the Borrower shall, at its sole expense, have
delivered to the Agent not less than 10 days prior to the date of such
Acquisition a certificate to such effect, in form and substance satisfactory to
the Agent, signed by a Responsible Official;

          (d) Acquisitions by the Borrower or any of its Restricted Subsidiaries
other than Acquisitions permitted under clauses (c) or (g) of this Section 6.17
of, or investments in, assets constituting a business unit or the capital stock
of any Person; provided, that the aggregate amount of consideration paid by the
Borrower and its Restricted Subsidiaries for all such Acquisitions of assets or
capital stock (including as a part of such consideration any Indebtedness
assumed as a part thereof) does not exceed an aggregate amount equal to
$25,000,000 in any 12-month period; and provided, further, that after giving
effect thereto, no Default or Unmatured Default shall be in existence;

          (e) Investments by the Borrower in any Guarantor or by any Guarantor in
the Borrower or in any other Guarantor;

          (f) Investments by the Borrower or any Guarantor in joint ventures, in
Subsidiaries that are not wholly-owned Subsidiaries, in the Limited-Purposes
Subsidiaries Segment and in the Financial Services Segment, so long as the
aggregate amount of such Investments shall not at any time exceed 30% of
Consolidated Tangible Net Worth; provided, that such limitation shall not apply
to Investments in the Financial Services Segment to the extent made following
termination of the Countrywide Loan Purchase Agreement (or any successor
agreement thereto) and that are repaid in full not later than the first to
occur of: (A) 90 days following the date such termination becomes effective or
(B) the date upon which Ryland Mortgage Company enters into a successor
agreement;

          (g) Investments by entities within the Financial Services Segment in any
Person and Acquisitions of assets constituting a business unit or the capital
stock of any Person by entities within the Financial Services Segment;

          (h) loans and advances to employees of the Borrower or its Subsidiaries
for travel, entertainment and relocation expenses in the ordinary course of
business; and

          (i) other loans and advances to employees of the Borrower in connection
with incentive or stock purchase plans or arrangements in an aggregate amount
not to exceed $3,000,000 at any time outstanding.

     6.18 Limitation on Optional Payments and Modification of Debt Instruments.

          (a) Neither the Borrower nor any Restricted Subsidiary will (1) make any
optional payment or prepayment on or redemption of any Subordinated Debt or (2)
amend,

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modify or change, or consent or agree to any amendment, modification or
change to, any of the terms (including the subordination terms) of any
Subordinated Debt (other than any such amendment, modification or change that
is in form reasonably satisfactory to the Agent), provided that so long as no
Default is in existence or would result therefrom, the Borrower may prepay
Subordinated Debt from the proceeds of other Subordinated Debt.

          (b) No Restricted Subsidiary within the Financial Services Segment will
amend, modify or change, or consent or agree to any amendment, modification or
change to, any of the terms of any debt instrument to which it is a party the
effect of which would be to: (1) impose restrictions on the payment of
dividends, directly or indirectly, to or for the benefit of the Borrower which
would limit such dividends to an aggregate amount for all Restricted
Subsidiaries in the Financial Services Segment in any fiscal year which is less
than the consolidated net income of the Financial Services Segment for the
current fiscal year; or (2) impose restrictions on the making by such
Restricted Subsidiaries of Credit Advances, directly or indirectly, to or for
the benefit of the Borrower which would limit such Credit Advances to an
aggregate amount for all Restricted Subsidiaries in the Financial Services
Segment which is less than $25,000,000 at any time outstanding, provided that
provisions which by their terms would impose such restrictions only in the
event of a default under such debt instrument and solely as a result of such
default shall not be deemed to be included in the restrictions described in the
foregoing clauses (1) or (2).

     6.19 Transactions with Affiliates. Neither the Borrower nor any
Restricted Subsidiary will enter into any transaction, including any purchase,
sale, lease or exchange of property or the rendering of any service, with any
Affiliate (other than the Borrower or a Guarantor) unless such transaction is
otherwise expressly permitted under this Agreement, or is upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary, as the
case may be, than it would obtain in a comparable arm’s-length transaction with
a Person not an Affiliate.

     6.20 Fiscal Year. The Borrower will not permit the fiscal year of the
Borrower to end on a day other than December 31.

     6.21 Compliance with ERISA. Neither the Borrower nor any Restricted
Subsidiary will:

          (a) terminate any Plan so as to result in any material liability to the
PBGC;

          (b) engage in any “prohibited transaction” (as defined in Section 4975 of
the Code or Section 406 of ERISA) involving any Plan which would result in a
material liability for an excise tax or civil penalty in connection therewith;

          (c) incur or suffer to exist any material “accumulated funding deficiency”
(as defined in Section 302 of ERISA), whether or not waived, involving any
Plan; or

          (d) allow or suffer to exist any event or condition which presents a
material risk of incurring a material liability to the PBGC by reason of
termination of any such Plan.

     6.22 Preferred Stock. The Borrower will not permit any Guarantor to issue
preferred stock to any Person other than the Borrower.

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     6.23 No Other Negative Pledges. Neither the Borrower nor any Restricted
Subsidiary will enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or assumption of any Lien
upon its properties or assets, whether now owned or hereafter acquired, or
requiring the grant of any security for such obligation if security is given
for some other obligation except as set forth in (a) the Loan Documents, (b)
any indenture or equivalent instrument (or any amendment or supplement thereto)
relating to any Specified Debt and (c) agreements which evidence or secure
Indebtedness secured by Liens permitted under this Agreement so long as such
prohibition applies only to the Property subject to such Lien.

     6.24 Consolidated Tangible Net Worth. The Borrower shall not permit
Consolidated Tangible Net Worth at any time to be less than the sum of (a)
$645,405,000 plus (b) 50% of the Consolidated Net Income (without deduction for
losses sustained during any fiscal quarter) for each fiscal quarter subsequent
to the fiscal quarter ended March 31, 2004, plus (c) 50% of the net proceeds
from any equity offerings of the Borrower from and after March 31, 2004.

     6.25 Leverage Ratio. The Borrower shall not permit the Leverage Ratio at
any time to exceed 2.0 to 1.0.

     6.26 Minimum Fixed Charge Coverage. The Borrower shall not permit the
ratio of (a) EBITDA to (b) Fixed Charges, for any period consisting of the
preceding four fiscal quarters, to be less than 1.75 to 1.0 at any time.

     6.27 Senior Permitted Debt Not to Exceed Borrowing Base. As of the end of
the first fiscal quarter that is at least thirty days after the date on which
the Borrower does not have an Investment Grade Rating from at least one of
Moody’s or S&P and thereafter for so long as the Borrower does not have an
Investment Grade Rating from at least one of Moody’s or S&P, the Borrower shall
not permit Senior Permitted Debt to exceed the Borrowing Base.

     6.28 Limitation on Housing Inventory. As of the end of the first fiscal
quarter that is at least thirty days after the date on which the Borrower does
not have an Investment Grade Rating from at least one of Moody’s or S&P and
thereafter for so long as the Borrower does not have an Investment Grade Rating
from at least one of Moody’s or S&P, the Borrower shall not permit the
aggregate unit number of Unsold Housing Inventory of the Borrower and
Guarantors on a combined basis at any time to exceed the greater of: (a) 50%
of homes delivered by the Borrower and Guarantors during the immediately
preceding twelve (12) months; or (b) 70% of the homes delivered by the Borrower
and Guarantors during the immediately preceding six (6) months.

     6.29 Limitations on Land Inventory. As of the end of the first fiscal
quarter that is at least thirty days after the date on which the Borrower does
not have an Investment Grade Rating from at least one of Moody’s or S&P and
thereafter for so long as the Borrower does not have an Investment Grade Rating
from at least one of Moody’s or S&P, the Borrower shall not permit the ratio of
(1) the sum of the book value of (A) Unsold Finished Lots, (B) Unsold Land
Under Development, and (C) Unsold Raw Land of the Borrower and Guarantors to
(2) Consolidated Tangible Net Worth to exceed 1.25 to 1 at any time on or
before June 30, 2005 or 1.0 to 1 at any time thereafter.

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ARTICLE VII

DEFAULTS

     The occurrence of any one or more of the following events shall constitute
a Default:

     7.1 Any representation or warranty made or deemed made by or on behalf of
the Borrower or any of its Subsidiaries to the Lenders, any LC Issuer or the
Agent under or in connection with this Agreement, any Credit Extension, or any
certificate or information delivered in connection with this Agreement or any
other Loan Document shall be materially false on the date as of which made.

     7.2 Nonpayment of principal of any Loan or any Reimbursement Obligation
when due; or nonpayment of interest upon any Loan within five (5) days of the
date when due; or nonpayment or of any Commitment Fee, LC Fee or other payment
under any of the Loan Documents within five (5) days after the same becomes due
(following receipt of an accurate invoice).

     7.3 The breach by the Borrower of any of the terms or provisions of
Section 6.14, 6.18, 6.20, 6.22, 6.24, 6.25, 6.26, 6.27, 6.28 or 6.29.

     7.4 The breach by the Borrower (other than a breach which constitutes a
Default under another Section of this Article VII) of any of the terms or
provisions of this Agreement which is not remedied within thirty (30) days.

     7.5 Failure of the Borrower or any of its Restricted Subsidiaries to pay
when due any Material Indebtedness (beyond the applicable grace period (not to
exceed fifteen (15) days) with respect thereto, if any); or the default by the
Borrower or any of its Restricted Subsidiaries in the performance of any term,
provision or condition contained in any Material Indebtedness Agreement or any
other event shall occur or condition exist, the effect of which default, event
or condition is to cause, or to permit the holder(s) of such Material
Indebtedness or the lender(s) under any Material Indebtedness Agreement to
cause, such Material Indebtedness to become due prior to its stated maturity or
any commitment to lend under any Material Indebtedness Agreement to be
terminated prior to its stated expiration date or any Material Indebtedness of
the Borrower or any of its Restricted Subsidiaries shall be declared to be due
and payable or the repurchase, prepayment, defeasance or redemption thereof
shall be required prior to the stated maturity thereof; provided that the
failure by Ryland Mortgage Company or any of its Subsidiaries that is a
Restricted Subsidiary to pay any such Indebtedness in the form of reimbursement
obligations in respect of Letters of Credit issued for the account of Ryland
Mortgage Company or any of its Subsidiaries that is a Restricted Subsidiary
backing obligations under master servicing agreements shall not constitute a
Default under this Section 7.5 until the date which is 90 days after the date
on which such reimbursement obligations become due and payable; or the Borrower
or any of its Restricted Subsidiaries shall not pay, or shall admit in writing
its inability to pay, its debts generally as they become due.

     7.6 The Borrower or any of its Restricted Subsidiaries shall (i) have an
order for relief entered with respect to it under the Federal bankruptcy laws
as now or hereafter in effect, (ii)

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make an assignment for the benefit of creditors, (iii) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any Substantial Portion of
its Property, (iv) institute any proceeding seeking an order for relief under
the Federal bankruptcy laws as now or hereafter in effect or seeking to
adjudicate it a bankrupt or 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, (v) take any
corporate or partnership action to authorize or effect any of the foregoing
actions set forth in this Section 7.6 or (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7.

     7.7 Without the application, approval or consent of the Borrower or any of
its Restricted Subsidiaries, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Borrower or any of its Restricted
Subsidiaries or any Substantial Portion of its Property, or a proceeding
described in Section 7.6(iv) shall be instituted against the Borrower or any of
its Restricted Subsidiaries and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of 60 consecutive
days.

     7.8 Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of, all or any portion of the
Property of the Borrower and its Subsidiaries which, when taken together with
all other Property of the Borrower and its Subsidiaries so condemned, seized,
appropriated, or taken custody or control of, during the twelve-month period
ending with the month in which any such action occurs, constitutes a
Substantial Portion.

     7.9 The Borrower or any of its Subsidiaries shall fail within 30 days to
pay, bond or otherwise discharge one or more judgments or orders for the
payment of money in excess of $10,000,000.

     7.10 Any Change in Control shall occur.

     7.11 The Borrower or any of its Subsidiaries shall (i) be the subject of
any proceeding or investigation pertaining to the release by the Borrower, any
of its Subsidiaries or any other Person of any toxic or Materials of
Environmental Concern into the environment, or (ii) violate any Environmental
Law, which, in the case of an event described in clause (i) or clause (ii),
could reasonably be expected to have a Material Adverse Effect.

     7.12 The occurrence of any “default”, as defined in any Loan Document
(other than this Agreement) or the breach of any of the terms or provisions of
any Loan Document (other than this Agreement), which default or breach
continues beyond any period of grace therein provided.

     7.13 Any Guaranty shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Guaranty, or any Guarantor shall fail to comply with
any of the terms or provisions of any Guaranty to which it is a party, or any
Guarantor shall deny that it has any further liability under any Guaranty to
which it is a party, or shall give notice to such effect.

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     7.14 Any one or more of the following occurs: (1) Any Person shall engage
in any “prohibited transaction” (as defined in Section 406 of ERISA or Section
4975 of the Code) involving any Plan; or (2) any “accumulated funding
deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall
exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall
arise on the assets of the Borrower or any Commonly Controlled Entity; or (3) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Required Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA; or (4) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA; or (5) the Borrower or any Commonly Controlled
Entity shall, or in the reasonable opinion of the Required Lenders is likely
to, incur any liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan; or (6) any other event or condition
shall occur or exist with respect to a Plan; and in each case in clauses (1)
through (6) above, such event or condition, together with all other such events
or conditions, if any, could reasonably be expected to have a Material Adverse
Effect.

     7.15 The Borrower shall cease to own, directly or indirectly and free and
clear of any Lien, 100% of the issued and outstanding capital stock of Ryland
Homes of California, Inc. and Ryland Mortgage Company.

ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

     8.1 Acceleration; Facility LC Collateral Account. (i) If any Default
described in Section 7.6 or 7.7 occurs with respect to the Borrower, the
obligations of the Lenders to make Loans hereunder and the obligation and power
of the LC Issuers to issue Facility LCs shall automatically terminate and the
Obligations shall immediately become due and payable without any election or
action on the part of the Agent or any Lender or LC Issuer and the Borrower
will be and become thereby unconditionally obligated, without any further
notice, act or demand, to pay to the Agent an amount in immediately available
funds, which funds shall be held in the Facility LC Collateral Account, equal
to the difference of (x) the amount of LC Obligations at such time, less (y)
the amount on deposit in the Facility LC Collateral Account at such time which
is free and clear of all rights and claims of third parties and has not been
applied against the Obligations (such difference, the “Collateral Shortfall
Amount”). If any other Default occurs, the Required Lenders (or the Agent with
the consent of the Required Lenders) may (a) terminate or suspend the
obligations of the Lenders to make Loans hereunder and the obligation and power
of LC Issuers to issue Facility LCs, or declare the Obligations to be due and
payable, or both, whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which the Borrower hereby expressly waives, and (b) upon notice to the Borrower
and in addition to the continuing right to demand payment of all amounts
payable under this Agreement, make demand on the Borrower to pay, and the
Borrower will, forthwith upon such demand and without any further notice or
act, pay to the Agent the Collateral Shortfall Amount, which funds shall be
deposited in the Facility LC Collateral Account.

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          (ii) If at any time while any Default is continuing, the Agent determines
that the Collateral Shortfall Amount at such time is greater than zero, the
Agent may, and upon request of the Required Lenders shall, make demand on the
Borrower to pay, and the Borrower will, forthwith upon such demand and without
any further notice or act, pay to the Agent the Collateral Shortfall Amount,
which funds shall be deposited in the Facility LC Collateral Account.

          (iii) The Agent may at any time or from time to time, after funds are
deposited in the Facility LC Collateral Account, apply such funds to the
payment of the Obligations and any other amounts as shall from time to time
have become due and payable by the Borrower to the Lenders or LC Issuers under
the Loan Documents.

          (iv) At any time while any Default is continuing, neither the Borrower nor
any Person claiming on behalf of or through the Borrower shall have any right
to withdraw any of the funds held in the Facility LC Collateral Account. After
all of the Obligations have been indefeasibly paid in full and the Aggregate
Commitment has been terminated, any funds remaining in the Facility LC
Collateral Account shall be returned by the Agent to the Borrower or paid to
whomever may be legally entitled thereto at such time.

          (v) If, within 30 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans and
the obligation and power of the LC Issuers to issue Facility LCs hereunder as a
result of any Default (other than any Default as described in Section 7.6 or
7.7 with respect to the Borrower) and before any judgment or decree for the
payment of the Obligations due shall have been obtained or entered, the
Required Lenders (in their sole discretion) shall so direct, the Agent shall,
by notice to the Borrower, rescind and annul such acceleration and/or
termination.

     8.2 Amendments. Subject to the provisions of this Section 8.2, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving
any Default hereunder; provided, however, that no such supplemental agreement
shall, without the consent of all of the Lenders:

	 	(i)	 	Extend the final maturity of any Loan or extend
the expiry date of any Facility LC to a date after the
Facility Termination Date or forgive all or any portion of the
principal amount of any Loan or Reimbursement Obligation, or
reduce the rate or extend the time of payment of interest or
fees on any Loan or Reimbursement Obligation;
	 
	 	(ii)	 	Reduce the percentage specified in the definition
of Required Lenders;
	 
	 	(iii)	 	Extend the Facility Termination Date (except as
provided in Section 2.20) or increase the amount of the
Aggregate Commitment or of the Commitment of any Lender
hereunder or the commitment to issue Facility LCs (except as
provided in Section 2.5.3), or permit the Borrower to assign
its rights under this Agreement;

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	 	(iv)	 	Amend this Section 8.2;
	 
	 	(v)	 	Release any Guarantor (except as provided in
Section 6.9(b)); or
	 
	 	(vi)	 	Release any collateral from the Facility LC
Collateral Account (except as provided in Section 2.20(c) or
8.1).

No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. No amendment of any
provision of this Agreement relating to the Swing Line Lender shall be
effective without the written consent of the Swing Line Lender. No amendment
of any provision of the Agreement relating to the LC Issuers shall be effective
without the written consent of the LC Issuers affected thereby. The Agent may
waive payment of the fee required under Section 12.3.3 without obtaining the
consent of any other party to this Agreement.

     8.3 Preservation of Rights. No delay or omission of the Lenders, the LC
Issuers or the Agent to exercise any right under the Loan Documents shall
impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Credit Extension notwithstanding the
existence of a Default or the inability of the Borrower to satisfy the
conditions precedent to such Credit Extension shall not constitute any waiver
or acquiescence. Any single or partial exercise of any such right shall not
preclude other or further exercise thereof or the exercise of any other right,
and no waiver, amendment or other variation of the terms, conditions or
provisions of the Loan Documents whatsoever shall be valid unless in writing
signed by the Lenders required pursuant to Section 8.2, and then only to the
extent in such writing specifically set forth. All remedies contained in the
Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent, the Lenders and the LC Issuers until the Obligations
have been paid in full.

ARTICLE IX

GENERAL PROVISIONS

     9.1 Survival of Representations. All representations and warranties of
the Borrower contained in this Agreement shall survive the making of the Credit
Extensions herein contemplated.

     9.2 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender or LC Issuer shall be obligated to extend
credit to the Borrower in violation of any limitation or prohibition provided
by any applicable Law.

     9.3 Headings. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.

     9.4 Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent, the Lenders and the LC Issuers and
supersede all prior agreements and understandings among the Borrower, the
Agent, the Lenders and the LC Issuers relating to the subject matter thereof
other than those contained in the fee letter described

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in Section 10.13 which shall survive and remain in full force and effect
during the term of this Agreement.

     9.5 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any
of its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns, provided, however, that the
parties hereto expressly agree that the Arranger shall enjoy the benefits of
the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set
forth therein and shall have the right to enforce such provisions on its own
behalf and in its own name to the same extent as if it were a party to this
Agreement.

     9.6 Expenses; Indemnification. (i) The Borrower shall reimburse the
Agent and the Arranger for any costs, internal charges and out-of-pocket
expenses (including attorneys’ fees and time charges of attorneys for the
Agent, which attorneys may be employees of the Agent) paid or incurred by the
Agent or the Arranger in connection with the preparation, negotiation,
execution, delivery, syndication, distribution (including, without limitation,
via the internet), review, amendment, modification, and administration of the
Loan Documents. The Borrower also agrees to reimburse the Agent, the Arranger,
the Lenders and the LC Issuers for any costs, internal charges and
out-of-pocket expenses (including attorneys’ fees and time charges of attorneys
for the Agent, the Arranger, the Lenders and the LC Issuers which attorneys may
be employees of the Agent, the Arranger, the Lenders and the LC Issuers) paid
or incurred by the Agent, the Arranger, any Lender or LC Issuer in connection
with the collection and enforcement of the Loan Documents (including any
workout or restructuring). Expenses being reimbursed by the Borrower under
this Section include, without limitation, costs and expenses incurred in
connection with the Reports described in the following sentence. The Borrower
acknowledges that from time to time Bank One may prepare and may distribute to
the Lenders (but shall have no obligation or duty to prepare or to distribute
to the Lenders) certain audit reports (the “Reports”) pertaining to the
Borrower’s assets for internal use by Bank One from information furnished to it
by or on behalf of the Borrower, after Bank One has exercised its rights of
inspection pursuant to this Agreement.

     (ii) The Borrower hereby further agrees to indemnify the Agent, the
Arranger, each Lender, each LC Issuer, their respective affiliates, and each of
their directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not the Agent,
the Arranger, any Lender or LC Issuer or any affiliate is a party thereto)
which any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the transactions contemplated hereby or
the direct or indirect application or proposed application of the proceeds of
any Credit Extension hereunder except to the extent that they are determined in
a final non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of, or breach of its
obligations under this Agreement by, the party seeking indemnification. The
obligations of the Borrower under this Section 9.6 shall survive the
termination of this Agreement.

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     9.7 Numbers of Documents. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders, and the Agent shall
promptly furnish the same to each of the Lenders.

     9.8 Accounting. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with GAAP in a manner consistent with
that used in preparing the financial statements referred to in Section 5.4,
provided, that, for purposes of determining compliance with the financial
covenants contained in Article VI, the application of Financial Accounting
Standards Board Interpretation No. 46 shall be disregarded with respect to
financial consolidation of any Person that is not a Subsidiary. If at any time
any change in GAAP would affect the computation of any financial ratio or
requirement set forth in any Loan Document, and the Borrower, the Agent or the
Required Lenders shall so request, the Agent, the Lenders and the Loan Parties
shall negotiate in good faith to amend such ratio or requirement to preserve
the original intent thereof in light of such change in GAAP (subject to the
approval of the Required Lenders), provided that, until so amended, such ratio
or requirement shall continue to be computed in accordance with GAAP prior to
such change therein and the Borrower shall provide to the Agent and the Lenders
reconciliation statements showing the difference in such calculation, together
with the delivery of quarterly and annual financial statements required
hereunder.

     9.9 Severability of Provisions. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.

     9.10 Nonliability of Lenders. The relationship between the Borrower on
the one hand and the Lenders, the LC Issuers and the Agent on the other hand
shall be solely that of borrower and lender. Neither the Agent, the Arranger
nor any Lender or LC Issuer shall have any fiduciary responsibilities to the
Borrower. Neither the Agent, the Arranger nor any Lender or LC Issuer
undertakes any responsibility to the Borrower to review or inform the Borrower
of any matter in connection with any phase of the Borrower’s business or
operations. The Borrower agrees that neither the Agent, the Arranger nor any
Lender or LC Issuer shall have liability to the Borrower (whether sounding in
tort, contract or otherwise) for losses suffered by the Borrower in connection
with, arising out of, or in any way related to, the transactions contemplated
and the relationship established by the Loan Documents, or any act, omission or
event occurring in connection therewith, unless it is determined in a final
non-appealable judgment by a court of competent jurisdiction that such losses
resulted from the gross negligence or willful misconduct of the party from
which recovery is sought. Neither the Agent, the Arranger nor any Lender or LC
Issuer shall have any liability with respect to, and the Borrower hereby
waives, releases and agrees not to sue for, any special, indirect,
consequential or punitive damages suffered by the Borrower in connection with,
arising out of, or in any way related to the Loan Documents or the transactions
contemplated thereby.

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     9.11 Confidentiality. The Agent and each Lender agrees to hold any
confidential information which it may receive from the Borrower in connection
with this Agreement in confidence, except for disclosure (i) to its Affiliates
and to the Agent and any other Lender and their respective Affiliates, (ii) to
legal counsel, accountants, and other professional advisors to such Lender or
to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested
pursuant to or as required by law, regulation, or legal process, (v) to any
Person in connection with any legal proceeding to which it is a party, (vi) to
its direct or indirect contractual counterparties in swap agreements or to
legal counsel, accountants and other professional advisors to such
counterparties, (vii) permitted by Section 12.4, and (viii) to rating agencies
if requested or required by such agencies in connection with a rating relating
to the Advances hereunder. Without limiting Section 9.4, the Borrower agrees
that the terms of this Section 9.11 shall set forth the entire agreement
between the Borrower and each Lender (including the Agent) with respect to any
confidential information previously or hereafter received by such Lender in
connection with this Agreement, and this Section 9.11 shall supersede any and
all prior confidentiality agreements entered into by such Lender with respect
to such confidential information. Notwithstanding anything herein to the
contrary, confidential information shall not include, and each party to any of
the Loan Documents and their respective Affiliates (and the respective
partners, directors, officers, employees, advisors, representatives and other
agents of each of the foregoing and their Affiliates) may disclose to any and
all Persons, without limitation of any kind, (i) any information with respect
to the U.S. federal and state income tax treatment of the transactions
contemplated hereby and any facts that may be relevant to understanding such
tax treatment, which facts shall not include for this purpose the names of the
parties or any other Person named herein, or information that would permit
identification of the parties or such other Persons, or any pricing terms or
other nonpublic business or financial information that is unrelated to such tax
treatment or facts, and (ii) all materials of any kind (including opinions or
other tax analyses) relating to such tax treatment or facts that are provided
to any of the Persons referred to above, and it is hereby confirmed that each
of the Persons referred to above has been authorized to make such disclosures
since the commencement of discussions regarding the transactions contemplated
hereby.

     9.12 Nonreliance. Each Lender hereby represents that it is not relying on
or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Credit
Extensions provided for herein.

     9.13 Disclosure. The Borrower and each Lender hereby acknowledge and
agree that Bank One and/or its Affiliates from time to time may hold
investments in, make other loans to or have other relationships with the
Borrower and its Affiliates.

     9.14 USA PATRIOT ACT NOTIFICATION. The following notification is provided
to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C.
Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the
government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person or entity that opens an account,
including any deposit account, treasury management account, loan, other
extension of credit, or other financial services product. What this means for
Borrower: When Borrower opens an account, Agent and the Lenders will

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ask for Borrower’s name, tax identification number, business address, and other
information that will allow Agent and the Lenders to identify Borrower. Agent
and the Lenders may also ask to see Borrower’s legal organizational documents
or other identifying documents.

ARTICLE X

THE AGENT

     10.1 Appointment; Nature of Relationship. Bank One, NA is hereby
appointed by each of the Lenders as its contractual representative (herein
referred to as the “Agent”) hereunder and under each other Loan Document, and
each of the Lenders irrevocably authorizes the Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this
Article X. Notwithstanding the use of the defined term “Agent,” it is
expressly understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders’
contractual representative, the Agent (i) does not hereby assume any fiduciary
duties to any of the Lenders, (ii) is a “representative” of the Lenders within
the meaning of the term “secured party” as defined in the Illinois Uniform
Commercial Code and (iii) is acting as an independent contractor, the rights
and duties of which are limited to those expressly set forth in this Agreement
and the other Loan Documents. Each of the Lenders hereby agrees to assert no
claim against the Agent on any agency theory or any other theory of liability
for breach of fiduciary duty, all of which claims each Lender hereby waives.

     10.2 Powers. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided
by the Loan Documents to be taken by the Agent.

     10.3 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is determined in a final non-appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.

     10.4 No Responsibility for Loans, Recitals, etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (a) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered solely to the Agent; (d) the
existence or possible existence of any Default or Unmatured Default; (e) the

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validity, enforceability, effectiveness, sufficiency or genuineness of any
Loan Document or any other instrument or writing furnished in connection
therewith; (f) the value, sufficiency, creation, perfection or priority of any
Lien in any collateral security; or (g) the financial condition of the Borrower
or any Subsidiary.

     10.5 Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall be requested in writing to do so by
the Required Lenders. The Agent shall be fully justified in failing or
refusing to take any action hereunder and under any other Loan Document unless
it shall first be indemnified to its satisfaction by the Lenders pro rata
against any and all liability, cost and expense that it may incur by reason of
taking or continuing to take any such action.

     10.6 Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the
Lenders and all matters pertaining to the Agent’s duties hereunder and under
any other Loan Document.

     10.7 Reliance on Documents; Counsel. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex, electronic mail message, statement, paper or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons, and, in respect to legal matters, upon the opinion of
counsel selected by the Agent, which counsel may be employees of the Agent.
For purposes of determining compliance with the conditions specified in
Sections 4.1 and 4.2, each Lender that has signed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to a Lender unless the Agent shall have received
notice from such Lender prior to the applicable date specifying its objection
thereto.

     10.8 Agent’s Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to
their Commitments immediately prior to such termination) (i) for any amounts
not reimbursed by the Borrower for which the Agent is entitled to reimbursement
by the Borrower under the Loan Documents, (ii) for any other expenses incurred
by the Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents
(including, without limitation, for any expenses incurred by the Agent in
connection with any dispute between the Agent and any Lender or between two or
more of the Lenders) and (iii) for any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or

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asserted against the Agent in any way relating to or arising out of the
Loan Documents or any other document delivered in connection therewith or the
transactions contemplated thereby (including, without limitation, for any such
amounts incurred by or asserted against the Agent in connection with any
dispute between the Agent and any Lender or between two or more of the
Lenders), or the enforcement of any of the terms of the Loan Documents or of
any such other documents, provided that (i) no Lender shall be liable for any
of the foregoing to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the Agent and (ii) any
indemnification required pursuant to Section 3.5(vii) shall, notwithstanding
the provisions of this Section 10.8, be paid by the relevant Lender in
accordance with the provisions thereof. The obligations of the Lenders under
this Section 10.8 shall survive payment of the Obligations and termination of
this Agreement.

     10.9 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Unmatured Default hereunder
(other than the Borrower’s failure to make a payment of principal, interest or
fees required to be made to the Agent hereunder) unless the Agent has received
written notice from a Lender or the Borrower referring to this Agreement
describing such Default or Unmatured Default and stating that such notice is a
“notice of default”. In the event that the Agent receives such a notice, the
Agent shall give prompt notice thereof to the Lenders.

     10.10 Rights as a Lender. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Loans as any Lender and may
exercise the same as though it were not the Agent, and the term “Lender” or
“Lenders” shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent
and its Affiliates may accept deposits from, lend money to, and generally
engage in any kind of trust, debt, equity or other transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with the
Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is
not restricted hereby from engaging with any other Person.

     10.11 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent, the Arranger or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents. Except for any notice, report,
document or other information expressly required to be furnished to the Lenders
by the Agent or Arranger hereunder, neither the Agent nor the Arranger shall
have any duty or responsibility (either initially or on a continuing basis) to
provide any Lender with any notice, report, document, credit information or
other information concerning the affairs, financial condition or business of
the Borrower or any of its Affiliates that may come into the possession of the
Agent or Arranger (whether or not in their respective capacity as Agent or
Arranger) or any of their Affiliates.

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     10.12 Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of
its intention to resign. The Agent may be removed at any time with or without
cause by written notice received by the Agent from the Required Lenders, such
removal to be effective on the date specified by the Required Lenders. Upon
any such resignation or removal, the Required Lenders shall have the right to
appoint, on behalf of the Borrower and the Lenders, a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders within
thirty days after the resigning Agent’s giving notice of its intention to
resign, then the resigning Agent may appoint, on behalf of the Borrower and the
Lenders, a successor Agent. Notwithstanding the previous sentence, the Agent
may at any time without the consent of the Borrower or any Lender, appoint any
of its Affiliates which is a commercial bank as a successor Agent hereunder.
If the Agent has resigned or been removed and no successor Agent has been
appointed, the Lenders may perform all the duties of the Agent hereunder and
the Borrower shall make all payments in respect of the Obligations to the
applicable Lender and for all other purposes shall deal directly with the
Lenders. No successor Agent shall be deemed to be appointed hereunder until
such successor Agent has accepted the appointment. Any such successor Agent
shall be a commercial bank having capital and retained earnings of at least
$100,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the resigning or
removed Agent. Upon the effectiveness of the resignation or removal of the
Agent, the resigning or removed Agent shall be discharged from its duties and
obligations hereunder and under the Loan Documents. After the effectiveness of
the resignation or removal of an Agent, the provisions of this Article X shall
continue in effect for the benefit of such Agent in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent hereunder
and under the other Loan Documents. In the event that there is a successor to
the Agent by merger, or the Agent assigns its duties and obligations to an
Affiliate pursuant to this Section 10.12, then the term “Prime Rate” as used in
this Agreement shall mean the prime rate, base rate or other analogous rate of
the new Agent.

     10.13 Agent and Arranger Fees. The Borrower agrees to pay to the Agent
and the Arranger, for their respective accounts, the fees agreed to by the
Borrower, the Agent and the Arranger pursuant to that certain letter agreement
dated April 21, 2004, or as otherwise agreed from time to time.

     10.14 Delegation to Affiliates. The Borrower and the Lenders agree that
the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate’s directors, officers,
agents and employees) which performs duties in connection with this Agreement
shall be entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles IX and X.

     10.15 Co-Agent, Documentation Agent, Managing Agent, Syndication Agent,
etc. Neither any of the Lenders identified in this Agreement as a co-agent,
documentation agent, managing agent or syndication agent shall have any right,
power, obligation, liability, responsibility or duty under this Agreement other
than those applicable to all Lenders as such. Without limiting the foregoing,
none of such Lenders shall have or be deemed to have a

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fiduciary relationship with any Lender. Each Lender hereby makes the same
acknowledgments with respect to such Lenders as it makes with respect to the
Agent in Section 10.11.

ARTICLE XI

SETOFF; RATABLE PAYMENTS

     11.1 Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender
or any Affiliate of any Lender to or for the credit or account of the Borrower
may be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part thereof, shall then be due.

     11.2 Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Outstanding Credit Exposure (other than payments
received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than
that received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Aggregate Outstanding Credit Exposure held by the
other Lenders so that after such purchase each Lender will hold its Pro Rata
Share of the Aggregate Outstanding Credit Exposure. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for its Obligations or such
amounts which may be subject to setoff, such Lender agrees, promptly upon
demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to their respective Pro Rata
Shares of the Outstanding Credit Exposure. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

     12.1 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and
the Lenders and their respective successors and assigns permitted hereby,
except that (i) the Borrower shall not have the right to assign its rights or
obligations under the Loan Documents without the prior written consent of each
Lender, (ii) any assignment by any Lender must be made in compliance with
Section 12.3, and (iii) any transfer by Participation must be made in
compliance with Section 12.2. Any attempted assignment or transfer by any
party not made in compliance with this Section 12.1 shall be null and void,
unless such attempted assignment or transfer is treated as a participation in
accordance with Section 12.2. The parties to this Agreement acknowledge that
clause (ii) of this Section 12.1 relates only to absolute assignments and this
Section 12.1 does not prohibit assignments creating security interests,
including, without limitation, (x) any pledge or assignment by any Lender of
all or any portion of its rights under this Agreement and any Note to a Federal
Reserve Bank or (y) in the case of a Lender which is a Fund, any pledge or
assignment of all or any portion of its rights under this Agreement and any
Note to its trustee in support of its obligations to its trustee; provided,
however, that no such pledge or assignment

71

 

creating a security interest shall release the transferor Lender from its
obligations hereunder unless and until the parties thereto have complied with
the provisions of Section 12.3. The Agent may treat the Person which made any
Loan or which holds any Note as the owner thereof for all purposes hereof
unless and until such Person complies with Section 12.3; provided, however,
that the Agent may in its discretion (but shall not be required to) follow
instructions from the Person which made any Loan or which holds any Note to
direct payments relating to such Loan or Note to another Person. Any assignee
of the rights to any Loan or any Note agrees by acceptance of such assignment
to be bound by all the terms and provisions of the Loan Documents. Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the owner of the rights to any
Loan (whether or not a Note has been issued in evidence thereof), shall be
conclusive and binding on any subsequent holder or assignee of the rights to
such Loan.

     12.2 Participations.

     12.2.1 Permitted Participants; Effect. Any Lender may at any time
sell to one or more banks or other entities (“Participants”)
participating interests in any Outstanding Credit Exposure owing to such
Lender, any Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under the Loan Documents. In the event
of any such sale by a Lender of participating interests to a Participant,
such Lender’s obligations under the Loan Documents shall remain
unchanged, such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Lender shall
remain the owner of its Outstanding Credit Exposure and the holder of any
Note issued to it in evidence thereof for all purposes under the Loan
Documents, all amounts payable by the Borrower under this Agreement shall
be determined as if such Lender had not sold such participating
interests, and the Borrower and the Agent shall continue to deal solely
and directly with such Lender in connection with such Lender’s rights and
obligations under the Loan Documents.

     12.2.2 Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which would require
consent of all of the Lenders pursuant to the terms of Section 8.2 or of
any other Loan Document.

     12.2.3 Benefit of Certain Provisions. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in
Section 11.1 in respect of its participating interest in amounts owing
under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the
Loan Documents, provided that each Lender shall retain the right of
setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to
share with each Participant, and each Participant, by exercising the
right of setoff provided in Section 11.1, agrees to share with each
Lender, any amount received pursuant to the exercise of its right of
setoff, such amounts to be shared in accordance with Section 11.2 as if
each Participant were a Lender. The Borrower further agrees that each
Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4,
3.5,

72

 

9.6 and 9.10 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.3, provided
that (i) a Participant shall not be entitled to receive any greater
payment under Section 3.1, 3.2 or 3.5 than the Lender who sold the
participating interest to such Participant would have received had it
retained such interest for its own account, unless the sale of such
interest to such Participant is made with the prior written consent of
the Borrower, and (ii) any Participant not incorporated under the laws of
the United States of America or any State thereof agrees to comply with
the provisions of Section 3.5 to the same extent as if it were a Lender.

     12.3 Assignments.

     12.3.1 Permitted Assignments. Any Lender may at any time assign to
one or more banks or other entities (“Purchasers”) all or any part of its
rights and obligations under the Loan Documents. Such assignment shall
be substantially in the form of Exhibit E or in such other form as may be
agreed to by the parties thereto. Each such assignment with respect to a
Purchaser which is not a Lender or an Affiliate of a Lender or an
Approved Fund shall either be in an amount equal to the entire applicable
Commitment and Loans of the assigning Lender or (unless each of the
Borrower and the Agent otherwise consents) be in an aggregate amount not
less than $1,000,000. The amount of the assignment shall be based on the
Commitment or outstanding Loans (if the Commitment has been terminated)
subject to the assignment, determined as of the date of such assignment
or as of the “Trade Date,” if the “Trade Date” is specified in the
assignment.

     12.3.2 Consents. The consent of the Borrower shall be required
prior to an assignment becoming effective unless the Purchaser is a
Lender, an Affiliate of a Lender or an Approved Fund, provided that the
consent of the Borrower shall not be required if a Default has occurred
and is continuing. The consent of the Agent shall be required prior to
an assignment becoming effective unless the Purchaser is a Lender, an
Affiliate of a Lender or an Approved Fund. Any consent required under
this Section 12.3.2 shall not be unreasonably withheld or delayed.

     12.3.3 Effect; Effective Date. Upon (i) delivery to the Agent of an
assignment, together with any consents required by Sections 12.3.1 and
12.3.2, and (ii) payment of a $3,500 fee to the Agent for processing such
assignment (unless such fee is waived by the Agent), such assignment
shall become effective on the effective date specified in such
assignment. The assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the
purchase of the Commitment and Outstanding Credit Exposure under the
applicable assignment agreement constitutes “plan assets” as defined
under ERISA and that the rights and interests of the Purchaser in and
under the Loan Documents will not be “plan assets” under ERISA. On and
after the effective date of such assignment, such Purchaser shall for all
purposes be a Lender party to this Agreement and any other Loan Document
executed by or on behalf of the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent as
if it were an original party thereto, and the transferor Lender shall be
released with respect to the Commitment and Outstanding Credit Exposure
assigned to such Purchaser without any further consent or action by the
Borrower, the Lenders or the

73

 

Agent. In the case of an assignment covering all of the assigning
Lender’s rights and obligations under this Agreement, such Lender shall
cease to be a Lender hereunder but shall continue to be entitled to the
benefits of, and subject to, those provisions of this Agreement and the
other Loan Documents which survive payment of the Obligations and
termination of the applicable agreement. Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply
with this Section 12.3 shall be treated for purposes of this Agreement as
a sale by such Lender of a participation in such rights and obligations
in accordance with Section 12.2. Upon the consummation of any assignment
to a Purchaser pursuant to this Section 12.3.3, the transferor Lender,
the Agent and the Borrower shall, if the transferor Lender or the
Purchaser desires that its Loans be evidenced by Notes, make appropriate
arrangements so that new Notes or, as appropriate, replacement Notes are
issued to such transferor Lender and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their respective Commitments, as adjusted
pursuant to such assignment.

     12.3.4 Register. The Agent, acting solely for this purpose as an
agent of the Borrower, shall maintain at one of its offices in Chicago,
Illinois a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders,
and the Commitments of, and principal amounts of the Loans owing to, each
Lender pursuant to the terms hereof from time to time (the “Register”).
The entries in the Register shall be conclusive, and the Borrower, the
Agent and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower at any
reasonable time and from time to time upon reasonable prior notice.

     12.4 Dissemination of Information. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a “Transferee”) and
any prospective Transferee any and all information in such Lender’s possession
concerning the creditworthiness of the Borrower and its Subsidiaries, including
without limitation any information contained in any Reports; provided that each
Transferee and prospective Transferee agrees to be bound by Section 9.11 of
this Agreement.

     12.5 Tax Treatment. If any interest in any Loan Document is transferred
to any Transferee which is not incorporated under the laws of the United States
or any State thereof, the transferor Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, to comply with the
provisions of Section 3.5(iv).

ARTICLE XIII

NOTICES

     13.1 Notices; Effectiveness; Electronic Communication

74

 

          (a) Notices Generally. Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in paragraph (b) below), all notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopier
as follows:

(i) if to the Borrower, at its address or telecopier number
set forth on the signature page hereof;

(ii) if to the Agent, at its address or telecopier number set
forth on the signature page hereof;

(iii) if to the Issuing Bank, at its address or telecopier
number set forth on the signature page hereof;

(iv) if to a Lender, to it at its address (or telecopier
number) set forth in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient). Notices delivered through electronic communications to the extent
provided in paragraph (b) below, shall be effective as provided in said
paragraph (b).

          (b) Electronic Communications. Notices and other communications to the
Lenders and the Issuing Bank hereunder may be delivered or furnished by
electronic communication (including e-mail and internet or intranet websites)
pursuant to procedures approved by the Agent or as otherwise determined by the
Agent, provided that the foregoing shall not apply to notices to any Lender or
the Issuing Bank pursuant to Article II if such Lender or the Issuing Bank, as
applicable, has notified the Agent that it is incapable of receiving notices
under such Article by electronic communication. The Agent or the Borrower may,
in its respective discretion, agree to accept notices and other communications
to it hereunder by electronic communications pursuant to procedures approved by
it or as it otherwise determines, provided that such determination or approval
may be limited to particular notices or communications.

     Unless the Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication
is not given during the normal business hours of the recipient, such notice or
communication shall be deemed to have been given at the opening of business on
the next Business Day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

75

 

          (c) Change of Address, Etc. Any party hereto may change its address or
telecopier number for notices and other communications hereunder by notice to
the other parties hereto.

ARTICLE XIV

COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION

     14.1 Counterparts; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. Except as provided in Article IV, this
Agreement shall become effective when it shall have been executed by the Agent
and when the Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the parties hereto, and thereafter
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery of
a manually executed counterpart of this Agreement.

     14.2 Electronic Execution of Assignments. The words “execution,”
“signed,” “signature,” and words of like import in any assignment and
assumption agreement shall be deemed to include electronic signatures or the
keeping of records in electronic form, each of which shall be of the same legal
effect, validity or enforceability as a manually executed signature or the use
of a paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, or any other state laws based on the
Uniform Electronic Transactions Act.

ARTICLE XV

CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

     15.1 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET
SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE
STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

     15.2 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE

76

 

VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT
OF THE AGENT OR ANY LENDER OR LC ISSUER TO BRING PROCEEDINGS AGAINST THE
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY
THE BORROWER AGAINST THE AGENT OR ANY LENDER OR LC ISSUER OR ANY AFFILIATE OF
THE AGENT OR ANY LENDER OR LC ISSUER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.

     15.3 WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER AND LC
ISSUER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

77

 

     IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.

	 	 	 	 	 	 	 
	 	 	THE RYLAND GROUP, INC.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Cathey S. Lowe
	 	 	 	 	
 
	 	 	Name:	 	Cathey S. Lowe
	 	 	Title:	 	Senior Vice President and Treasurer
	 
	 	 	 	 	 	 
	 	 	 	 	The Ryland Group, Inc.
	 	 	 	 	24025 Park Sorrento, Suite 400
	 	 	 	 	Calabasas, CA 91302
	 	 	 	 	Attention: Cathey S. Lowe
	 
	 	 	 	 	 	 
	

	 	 	 	Telephone:
	 	(818) 223-7530
	

	 	 	 	FAX:
	 	(818) 223-7685
	 
	 	 	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 	 	 
	 	 	 	 	The Ryland Group, Inc.
	 	 	 	 	24025 Park Sorrento, Suite 400
	 	 	 	 	Calabasas, CA 91302
	 	 	 	 	Attention: Timothy J. Geckle
	 
	 	 	 	 	 	 
	

	 	 	 	Telephone:
	 	(818) 223-7575
	

	 	 	 	FAX:
	 	(818) 223-7685
	 
	 	 	 	 	 	 
	 	 	BANK ONE, NA,
	 	 	Individually and as Agent
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Allison Crayne
	 	 	 	 	
 
	 	 	Name:	 	Allison L. Crayne
	 	 	Title:	 	 Associate Director
	 	 	 	 	Bank One, NA
	 	 	 	 	131 South Dearborn Street
	 	 	 	 	Mail Code IL1 0135
	 	 	 	 	Chicago, Illinois 60670
	 	 	 	 	Attention: Patt Schiewitz
	 
	 	 	 	 	 	 
	

	 	 	 	Telephone:
	 	(312) 325-3132
	

	 	 	 	FAX:
	 	(312) 325-3122

78

 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	Bank of America, N.A.

 	 
	 	By:  	/s/ Kelly Prentiss
 	 
	 	 	Name:  	Kelley Prentiss 	 
	 	 	Title:  	Principal 	 

 

 

	 	 	 	 	 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	Wachovia Bank, National Association

 	 
	 	By:  	/s/ Brian A. Phillips
 	 
	 	 	Name:  	Brian A. Phillips 	 
	 	 	Title:  	Assistant Vice President 	 

 

 

	 	 	 	 	 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	Guaranty Bank

 	 
	 	By:  	/s/ Randall S. Reid
 	 
	 	 	Name:  	Randall S. Reid 	 
	 	 	Title:  	Senior Vice President 	 

 

 

	 	 	 	 	 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	The Royal Bank of Scotland PLC

 	 
	 	By:  	                                         /s/ David Apps
 	 
	 	 	Name:  	David Apps 	 
	 	 	Title:  	Senior Vice President 	 

 

 

	 	 	 	 	 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	Suntrust Bank

 	 
	 	By:  	/s/ W. John Wendler
 	 
	 	 	Name:  	W. John Wendler 	 
	 	 	Title:  	Director 	 

 

 

	 	 	 	 	 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	Washington Mutual Bank, FA

 	 
	 	By:  	/s/ Javier Barrera
 	 
	 	 	Name:  	Javier Barrera 	 
	 	 	Title:  	Vice President 	 

 

 

	 	 	 	 	 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	Amsouth Bank

 	 
	 	By:  	/s/ Ronny Hudspeth
 	 
	 	 	Name:  	Ronny Hudspeth 	 
	 	 	Title:  	SR VP 	 

 

 

	 	 	 	 	 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	PNC Bank, National Association

 	 
	 	By:  	/s/ Douglas G. Paul
 	 
	 	 	Name:  	Douglas G. Paul 	 
	 	 	Title:  	Senior Vice President 	 

 

 

	 	 	 	 	 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	Comerica Bank

 	 
	 	By:  	/s/ Leslie A. Vogel
 	 
	 	 	Name:  	Leslie A. Vogel 	 
	 	 	Title:  	Vice President 	 

 

 

	 	 	 	 	 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	UBS Loan Finance LLC

 	 
	 	By:  	/s/ Salloz Sikka
 	 
	 	 	Name:  	Salloz Sikka 	 
	 	 	Title:  	Associate Director

Banking Products Services, US 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                         /s/ Wilfred V. Saint
 	 
	 	 	Name:  	Wilfred V. Saint 	 
	 	 	Title:  	Director

Banking Products Services, US 	 

 

 

	 	 	 	 	 

SIGNATURE PAGE TO CREDIT AGREEMENT

WITH THE RYLAND GROUP, INC.

	 	 	 	 	 
	 	Manufacturers and Traders Trust

Company

 	 
	 	By:  	/s/ Jennifer G. Erickson
 	 
	 	 	Name:  	Jennifer G. Erickson 	 
	 	 	Title:  	Vice President

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